Sections 67 to 72 of Central Goods and Services Tax Act, 2017 deals with the provisions related to inspection, search, seizure and arrest. Section 67 of CGST 2017 provides for power of inspection, search and seizure. This article help to understand powers of GST official under section 67 of GST Act 2017, and whether cash can be seized and Property can be sealed and whether they can force to deposit cash during the search.
INTRODUCTION
‘Search’ involves an attempt to find something. Search, in tax/legal parlance, is an action of a government official (a tax officer or a police officer, depending on the case) to go and look through or examine carefully a place, person, object etc. in order to find something concealed or to discover evidence of a crime. The search can only be done under the proper and valid authority of law.
‘Inspection’ is the act of examining something, often closely. In tax/legal language, it is a softer provision than search. It enables officers to access any place of business of a taxable person and also any place of business of a person engaged in transporting goods or who is an owner/operator of a warehouse or godown.
The term ‘seizure’ has not been specifically defined in GST. In legal parlance, seizure is the act of taking over something or someone by force through legal process, such as the seizure of evidence found at the scene of a crime. It generally implies taking possession forcibly against the wishes of the owner.
POWER OF GST OFFICIALS FOR INSPECTION, SEARCH AND SEIZURE
Section 67(1): Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that––
(a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or
(b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, he may authorize in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place.
Section 67(2): Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorize in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things:
Provided that where it is not practicable to seize any such goods, the proper officer, or any officer authorised by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer:
Provided further that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act.
Section 67(3): The documents, books or things referred to in sub-section (2) or any other documents, books or things produced by a taxable person or any other person, which have not been relied upon for the issue of notice under this Act or the rules made thereunder, shall be returned to such person within a period not exceeding thirty days of the issue of the said notice.
Section 67(4): The officer authorised under sub-section (2) shall have the power to seal or break open the door of any premises or to break open any almirah, electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, electronic devices, box or receptacle is denied.
Section 67(5): The person from whose custody any documents are seized under subsection (2) shall be entitled to make copies thereof or take extracts therefrom in the presence of an authorised officer at such place and time as such officer may indicate in this behalf except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation.
Section 67(6): The goods so seized under sub-section (2) shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be.
Section 67(7): Where any goods are seized under sub-section (2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized:
Provided that the period of six months may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months.
Section 67(8): The Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification, specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (2), be disposed of by the proper officer in such manner as may be prescribed.
Section 67(9): Where any goods, being goods specified under sub-section (8), have been seized by a proper officer, or any officer authorised by him under sub-section (2), he shall prepare an inventory of such goods in such manner as may be prescribed
Section 67(10): The provisions of the Code of Criminal Procedure, 1973, relating to search and seizure, shall, so far as may be, apply to search and seizure under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word “Magistrate”, wherever it occurs, the word “Commissioner” were substituted.
Section 67(11): Where the proper officer has reasons to believe that any person has evaded or is attempting to evade the payment of any tax, he may, for reasons to be recorded in writing, seize the accounts, registers or documents of such person produced before him and shall grant a receipt for the same, and shall retain the same for so long as may be necessary in connection with any proceedings under this Act or the rules made thereunder for prosecution.
Section 67(12): The Commissioner or an officer authorised by him may cause purchase of any goods or services or both by any person authorised by him from the business premises of any taxable person, to check the issue of tax invoices or bills of supply by such taxable person, and on return of goods so purchased by such officer, such taxable person or any person in charge of the business premises shall refund the amount so paid towards the goods after cancelling any tax invoice or bill of supply issued earlier.
CAN GST OFFICIALS SEIZE CASH DURING SEARCH & SEIZURE
If GST Officials seize cash during the Proceedings conducted in terms of the provisions of the section 67(2) of the CGST Act/SGST Act then the same is illegal as well as beyond the provisions of section 67 of the CGST Act/SGST Act. It is also need to be appreciated here that seizure of cash may be considered as collection of tax without assessment i.e. without authority and the same shall be violative of Article 265 of the constitution of India as well as section 79 of the CGST Act/SGST Act, which provides that tax can be recovered when it is payable and without assessment department cannot determine how much amount is payable.
At this juncture, it is imperative to note here that the Hon’ble Madhya Pradesh High Court in the case of Smt. Kanishka Matta v. Union of India and Others (Writ Petition no 8204/2020) after relying upon the judgment of Hon’ble Supreme Court in the case of D. Vinod Shivappa v. Nanda Belliappa (2006) 6 SCC 456 held that Cash/money qualifies the definition of ‘things’. It is relevant to note here that in this case the Hon’ble Madhya Pradesh Uphold the Cash seizure of INR 66,43,130/- was seized along with goods from the residential premises of petitioner. In this case, the Hon’able Madhya Pradesh High Court upholds the cash seizure merely on the ground that husband of the Petitioner, made a voluntary statement stating categorically that the said cash of INR 66,43,130/-was the sale proceeds of the illegally sold Pan Masala without payment of GST and therefore subsequent retraction of such confessional statement is not permissible in terms of the settled position of the law.
The Hon’ble Madhya Pradesh High Court has relied upon the judgment of Sumedha Dutta V Union of India (Writ Petition no 23680/2018), decided on 04/04/2019-Madhya Pradesh High Court):Director General of Income Tax (Investigation) v Space-wood Furnishers Pvt ltd 2015 (374) ITR 595 (SC); Aditya Narayan Mahasupakar v Chief Commissioner of Income Tax 2017 (392) ITR 131 (Orissa), wherein it has been held that Court’s interference under article 226 of the Constitution of India under search and seizure matter is very limited in view of the complete & detailed mechanism has been provided for such matters under the relevant statute’s. Accordingly,in the said case Hon’ble Madhya Pradesh High Court allowed the seizure of cash by the Respondent department, until the investigation is carried out and the matter is finally adjudicated.
In Recently decided case of ARVIND GOYAL CA Vs UNION OF INDIA & ORS. (Delhi HIgh Court), Case Number: W.P.(C) 12499/2021 Date of Judgement: 19.01.2023 CITATION: 2023 TAXSCAN (HC) 199
A Division Bench of the Delhi High Court recently directed to return the amount taken in possession by GST Officers with interest, noting that the GST Officers cannot take possession of cash found during search, under Goods and Services Tax Act, 2017 During the course of the search, at the residence of the petitioners, the he bank guarantee furnished by petitioner no.1 for release of currency is directed to be released forthwith.
CAN GST OFFICIALS FORCE FOR DEPOSIT OF GST AT THE TIME OF SEARCH AND SEIZURE OR ASK FOR POST DATED CHEQUES
It is imperative to mention here that GST officials cannot force the Assessee for deposit of tax at the time of search and seizure proceedings. Similarly, departmental authorities cannot ask for Post dated cheque from the Assessee at the time of search and seizure proceeding. Such kind of collection/recovery of tax is illegal and the same is violative to Article 265 of the Constitution of India which provides that no tax can be recovered without authority of Law.
The Hon’ble Gujrat High Court in the case of M/s Remark Flour Mills Private Limited V State of Gujrat (R/Special Civil Application No 4835/2018) has slammed the practice of collecting post dated cheques during inspection/search & seizure proceedings. The Hon’ble High Court held that the practice of collecting post-dated cheques during the raid is not permissible means of collection of revenue.
The similar view was earlier taken by the Hon’ble Gujarat High Court in VAT regime as well in the case of Atul Motors v State of Gujarat (R/Special Civil Application no 959/2015) and Automark Industries (i) Ltd v State of Gujrat (2014) SCC online Gujarat 14217.
CAN SEARCH WARRANT BE ISSUED AGAINST A DEAD PERSON
No Search Warrant /Search authorization/warrant of authrisation for search can be issued in name of dead person. Similarly, Panchnama Cannot be prepared in name of dead person. If search warrant and/or Panchnama is against a dead person then such search and seizure proceedings shall be illegalinvalid,void and liable to be quashed.
IS IT NECESSARY TO SUPPLY TO COPY OF SEARCH WARRANT
There is no provision either in the CGST/SGST Act and/or the rules made there under for providing of the supply of a copy of the warrant of authorization. All that the law requires is that the authority must be produced before the commencement of the search and/or the seizure.
CAN GST OFFICIAL SEAL THE PREMISES UNDER GST ACT
In practical aspects sometimes it happened during the search after considering all the facts but GST has not deposited by the Assessee, GST officials initiate the sealing proceeding of premises due to uncompleted of proceeding. There are many cases where assessee reach to court for direction and court clear that COMPLETE SEALING OF PREMISES UNDER GST ACT IS ILLEGAL: HC
In case of M/s. Napin Impex Pvt. Ltd. Vs Commissioner of DGST Delhi (Delhi High Court) High Court held that Given the plain text of the statute i.e. especially Section 69(4), which merely authorizes the concerned officials to search the premises and if resistance is offered, break-open the lock or any other almirah, electrical device, box, etc. containing books and documents, the complete sealing of the premises, in the opinion of the court is per se illegal. Even if it were assumed that the respondents temporarily restrained the petitioner from using its premises, for a few hours, till the books of accounts are made available in order to secure the evidence available in the premises that could not have assumed the life on “its own”, at least indefinitely. In these given circumstances, this petition has to succeed. Since the premises have been in the possession of the respondents for over a month, a direction is issued to remove the seal forthwith – within the next 12 hours and hand over the premises to the petitioner.
In case of Anopsinh Kiritsinh Sarvaiya Vs State of Gujarat (Gujarat High Court) Court held that we are still not able to understand why the authorities, under the GST Act, are insisting for proof of ownership and rent agreement. We are of the view that the authorities cannot insist for such documents. If they want to proceed against the five dealers, they may proceed. They should be concerned with the goods or other articles stored in the godown which may be liable to confiscation. There is no point in keeping the godown closed with a seal affixed on it.
CONCLUSION
It is well settled law that search and seizure being an inroad on fundamental right of citizen which adversely affects his reputation and paralyze his business. Therefore while exercising such powers, the authorities should be rather careful and cautious and must exercise it strictly under the authority of the law.
Thus, to ensure that these provisions are used properly, effectively and the rights of tax payers are also protected, it is stipulated that Inspection, Search or Seizure can only be carried out by a proper officer as envisaged by legislature, only when such proper officer has ‘reason to believe’ regarding the existence of such exceptional circumstances.
******
CA (Dr) Piyush Kapoor | EMail: [email protected]
Disclaimer: These are author’s personal views and cannot be construed to be the views of the ICAI. It shall not be used for any legal advice/opinion and shall not be used to render any professional opinion/advice. The information contained in the article is for the purpose of spreading information / knowledge/ awareness and shall not be treated as solicitation in any manner or for any other purpose.
Author Bio
