Vigilance Department’s GST Powers: Search, Seizure and Excess Stock

Summary: The Vigilance and Enforcement Department can visit business premises, verify stock and records and send its findings to the tax authorities, but it does not, merely by virtue of its executive constitution, become the “proper officer” empowered to exercise statutory GST powers such as search, seizure, assessment, penalty or confiscation. The article explains the distinction between a vigilance team and an authorised State tax officer, the significance of Sections 35, 61, 67, 68, 70, 72, 73, 74, 74A, 129 and 130 of the APGST Act, and the documentation required when statutory search or seizure powers are actually exercised. It also examines the practical treatment of excess stock, including the position that mere stock discrepancy should ordinarily be dealt with through the statutory assessment mechanism rather than automatically through confiscation. Judicial decisions including Sudhakar Traders v. State, Maa Mahamaya Alloys Pvt. Ltd. v. State of U.P., Dinesh Kumar Pradeep Kumar v. Additional Commissioner, Vijay Trading Company and Deepak Khandelwal v. Commissioner of CGST are discussed. The article further gives practical guidance on stock verification, statements, DRC-03 payments, seizure documents, provisional release, vehicle checks and the steps a dealer should take during and after a vigilance inspection.

Vigilance and Enforcement Role under the Present Act

Anyone who practises tax law in the districts knows this phone call. It comes a little before noon. The client is speaking in a low voice from the corner of his own office, and all he says is that the vigilance people have come.

By the time one reaches the premises, the godown is open and the counting has begun. There are eight or ten officers. One is from the police, another from commercial taxes, a third from mines, and perhaps one more from civil supplies. Bags are being counted, the stock register is on the table, and somebody is already writing a statement. Before evening the owner will be told that his stock is more than what his books show. He will hear the words seizure, penalty and case in the same sentence. Quite often he will also be told, in a friendly tone, that it is better to pay something now and close the matter.

I have written this article because, in all these years, I have rarely met a dealer who could answer three plain questions at that moment. Who exactly are these officers? What does the law permit them to do inside my premises? And can they really carry away my goods because the stock is in excess?

The short answer, which the rest of this article explains, is this. The Vigilance and Enforcement Department can come, verify and report. It cannot, on its own, seize goods, demand tax, levy penalty or confiscate anything under the GST law. Those powers are with the proper officer of the tax department alone. And even that officer cannot confiscate goods for the simple reason that they are found in excess.

I have tried to keep the language simple so that a trader or an accountant can follow it without a law book. The sections and case law are given for those who need them.

1. Who are the vigilance people?

The first thing to understand is that the Vigilance and Enforcement Department is not a creation of any Act. No law passed by the Legislature set it up. The State Government constituted it by an executive order, G.O.Ms.No.269, General Administration (SC.D) Department, dated 11.06.1985. Twelve years later the Government restated its role in G.O.Ms.No.504, General Administration (V and E) Department, dated 25.11.1997. Please keep this fact in mind, because the whole question of its powers turns on it.

The Department functions under the General Administration Department and is headed by a Director General, who is a senior officer of the Indian Police Service. By an office order of 03.08.1995 its head office was arranged into four wings, namely the Revenue Wing, the Engineering Wing, the Development Works Wing and the Natural Resources Wing, each under a Joint Director or an Additional Director.

What the dealer actually meets is the regional unit, headed by the Regional Vigilance and Enforcement Officer. The officers working under him are not permanent staff of the Department. They are drawn on deputation from Police, Commercial Taxes, Mines, Agriculture, Civil Supplies, Forest, Engineering and other departments, and they go back to their parent departments after their term. That explains why a single team that walks into a rice mill has officers from four or five departments.

The reach of the Department is very wide. It extends over the whole State and covers all Government departments, public sector undertakings, Government companies, municipalities and Zilla Parishads. Every department has been directed to cooperate with it.

2. What is the Department meant to do?

The founding order gives it two tasks. One is to enquire into specific allegations affecting public interest. The other is to take effective measures, through its own machinery, to prevent leakage of revenue due to the Government.

On the ground this translates into a familiar list of activities. The teams look for evasion of commercial taxes, mineral revenue and excise revenue. They check illegal mining and the movement of sand, granite, silica and gravel without permits. They trace ration rice, fertilisers and seeds that have been diverted from the persons for whom they were meant. They test the quality of roads and buildings built with public money, and they enquire into irregularities in Government offices and public undertakings.

Whatever the subject, the work ends in a written report. Where the matter cannot wait, a short alert note goes to the department concerned so that it can act quickly. In other cases a detailed report or appraisal is sent to the Government and to the head of the department. The Department recommends. It does not itself pass a tax order, cancel a licence or impose a fine. That is left to the parent department under its own law.

A word of caution on terminology. People use the word vigilance for at least four different bodies, and they should not be mixed up. The Anti Corruption Bureau investigates bribery and disproportionate assets of public servants under the Prevention of Corruption Act. The Vigilance Commission advises the Government on disciplinary matters of its employees. The Directorate General of GST Intelligence is a Central agency that investigates GST evasion across the country. And the Commercial Taxes Department has its own enforcement wing, whose officers are officers of State tax and act directly under the GST law.

This last distinction is the one that matters to a dealer. An enforcement officer of the tax department acts under the Act. An officer of the Vigilance and Enforcement Department acts under a Government Order.

3. Where does its power come from?

Here lies the real issue. Under our system, an officer of the Government can enter private premises, take away property or demand money only when a law made by the Legislature permits him to do so. A Government Order can allot work to an officer. It cannot clothe him with powers which a statute has reserved for a named authority.

It is worth recalling that the earlier law was different. Under the General Sales Tax Act, 1957, Section 28 itself spoke of Commercial Tax officers working in the Vigilance and Enforcement Department in the context of entry and inspection. In the sales tax days, therefore, such officers stood on a statutory footing.

The GST law made no such provision. The State Goods and Services Tax Act, 2017, which I shall call the APGST Act, vests its powers in the proper officer and in officers of State tax authorised under the Act. The Vigilance and Enforcement Department is not mentioned anywhere in it. Section 72 names the officers who are bound to assist the tax department, such as officers of police, railways, customs and land revenue, and it permits the Government to notify other classes of officers when the Commissioner so requires.

The decision in Sudhakar Traders

The question came up squarely before the Hon’ble High Court in Sudhakar Traders v. State, W.P. Nos. 6599 and 6601 of 2023, decided on 25.04.2023. The facts are typical and worth narrating.

A Regional Vigilance and Enforcement Officer visited the premises of a dealer in iron and steel. His team noticed variation in stock and sales of iron and binding wire without bills. A statement was taken and an alert note was sent to the Deputy Commissioner (ST). Acting on that note, the Deputy Commissioner issued notices in ASMT 10 for the years 2019 to 2020 and 2020 to 2021 alleging suppression of turnover.

The dealer raised three objections. He said the GST law nowhere empowers the Vigilance Department to inspect a registered dealer. He said that, in any case, such officers could assist the tax department only upon a requisition by the Chief Commissioner and a notification by the Government under Section 72(2). And he said there was no authorisation under Section 67.

The Court did not accept these objections. It held that the Department was constituted to safeguard the revenues of the Government and that, in that capacity, its work runs through every department including the tax department. It can therefore share information with the tax authorities without any prior requisition. The Government Orders, the Court said, operate in aid of the tax department and are not in derogation of Section 72(2). As for Section 67, the Court found it had no relevance, since the tax officer had only called for an explanation and no search or seizure had been made.

Yet the dealer succeeded. The Court went on to examine whether the Deputy Commissioner was himself the proper officer to issue a notice under Section 61. It found that he had no authorisation from the Chief Commissioner for that function. The notices were set aside, with liberty to the Department to issue fresh notices through a duly authorised officer.

Two lessons flow from this judgment, and both are important. First, the right of the vigilance team to visit and to send an alert note is no longer open to serious dispute before our High Court. Second, the judgment does not say that vigilance officers are proper officers under the APGST Act, and it does not say that they may seize goods or raise demands. On the contrary, it shows that even the tax officer who acts on their report must hold proper authority, failing which his notice will not survive.

4. What the team can do and what it cannot

For ready reference I have set out the position in the form of a table. The middle column is the vigilance team acting as such. The last column is the proper officer under the APGST Act. A tax officer who happens to be part of a vigilance team gets the powers in the last column only if he personally holds a written authorisation under the Act for that premises.

Action	Vigilance and Enforcement team	Proper officer under APGST Act
Visit the premises and verify stock and records	Yes, as a fact finding exercise	Yes, on authorisation in INS 01 under Section 67(1)
Ask questions and note the replies	Yes, if the person answers willingly	Yes
Send an alert note or report	Yes	Not applicable
Search the premises and seize goods or books	No power of its own under GST	Yes, on authorisation by Joint Commissioner under Section 67(2)
Seal the godown or prohibit removal of goods	No power of its own under GST	Yes, order of prohibition in INS 03
Summon a person to give evidence	No power under GST	Yes, under Section 70
Detain a vehicle and goods in transit	No, must hand over to the proper officer	Yes, under Sections 68 and 129
Issue a show cause notice and decide tax	No	Yes, under Sections 73, 74 and 74A
Levy penalty or order confiscation	No	Yes, under Sections 122, 129 and 130
Collect tax at the spot	No	No forced collection; only voluntary payment in DRC 03
Arrest	No power under GST	Only on authorisation of the Commissioner under Section 69

5. What actually happens during an inspection

Visits are seldom random. In most cases there is a trigger behind them. It may be a complaint from a competitor or from a worker who left on bad terms. It may be market information. More and more, it is data. E way bills that do not match the turnover declared, mineral permits that fall short of dispatches, or electricity consumption that is too high for the production shown will all invite attention.

The team generally arrives without notice. After introducing themselves, the officers go straight to the stock. Raw material, finished goods and goods in process are counted or weighed, and where that is difficult they are estimated. Side by side, another officer works out the book stock. He takes the opening stock, adds the purchases, deducts the sales and arrives at the quantity that ought to be lying in the premises on that day. The two figures are then compared, and the difference is written down as excess or shortage.

The records come next. Invoices, e way bills, stock registers, weighbridge slips, production registers and delivery challans are gone through. Loose slips, pocket notebooks and the data in the office computer receive particular attention, because that is where unrecorded transactions usually surface. In manufacturing units the team often prepares a production account, working backwards from raw material or power consumed, to see whether the declared output is believable.

Towards the end, a statement is recorded from the proprietor, the managing partner or whoever is in charge, and a panchanama or inspection note is drawn up listing the findings. Signatures of the dealer and of witnesses are taken on it. The team then leaves. Its alert note reaches the jurisdictional State tax officer, and any other department concerned, some days or weeks later.

Checks on the road

Vigilance teams also stop goods vehicles on the highways and verify the invoice, the e way bill, the mineral transit permit and the weight of the load. They are within their rights in asking for the documents. But where a contravention of the GST law is suspected, the vehicle has to be handed over to the proper officer. It is he who records the statement of the driver in MOV 01, orders physical verification in MOV 02, passes the order of detention in MOV 06 and determines the penalty under Section 129. A vigilance team cannot keep a lorry standing for days on its own authority, and it cannot quantify or collect a GST penalty.

The statement

I would request every dealer to treat the statement with the greatest care, because cases are won and lost on it. Under Section 70 of the APGST Act only the proper officer can summon a person to give evidence, and a statement given on such summons has a special legal status. A statement given to a vigilance team is not a statement under Section 70. All the same, it is a signed admission, and the assessing officer will certainly rely upon it.

So read every line before you sign. If something is wrongly recorded, write the correct position in your own hand above your signature. If you have signed out of fear or without following what was written, send a letter of retraction or clarification to the officer within a few days, and keep proof that it was delivered. A retraction made months later, for the first time in reply to a show cause notice, carries very little weight.

Payment on the spot

No officer can compel a dealer to pay tax during an inspection. For the Central formations the Board has said this in so many words in Instruction No. 01 of 2022 to 2023 (GST Investigation) dated 25.05.2022, which clarifies that recovery can arise only after adjudication and that any deposit in DRC 03 during search or inspection must be truly voluntary. If that is the discipline expected of tax officers themselves, it applies with greater force to a team which is not a tax authority at all.

6. What is meant by excess stock

Excess stock simply means that the goods physically lying in the premises are more than what the books say should be there. The officer’s line of thinking is easy to follow. If goods are present for which there is no purchase entry, he suspects that they were bought without a bill, or manufactured and kept outside the books, so that they can later be sold without a bill.

The reverse situation is shortage, where the goods on hand are less than the book stock. There the suspicion is that the missing quantity has already gone out without a bill.

Now, a difference in stock is not by itself proof of evasion, and in my experience there is an ordinary explanation in a good number of cases. A load received the previous evening may not yet have been entered because the accountant comes only in the morning. Material received from a principal for job work belongs to somebody else and will never appear in the purchase register. Goods already billed may be waiting for the buyer’s lorry. A customer may have returned goods for which the credit note is still to be raised. A sister concern may be using the same godown. Then there are differences which arise from the method of verification itself, such as counting bags and converting them into tonnes at an assumed weight, estimating a heap by the eye, or ignoring moisture, scrap and byproducts.

Whatever the reason is, it must be told to the team then and there, and the dealer should see that it finds a place in the panchanama. An explanation that appears for the first time six months later is always looked at with doubt.

An illustration

Let me take a simple example. A dealer in steel at Nellore is visited in the middle of the year. The position on that day is as below.

Particulars	Quantity in tonnes
Opening stock on 1 April	40
Add: purchases as per books up to the date of visit	260
Less: sales as per books up to the date of visit	210
Book stock that should be on hand	90
Physical stock found by the team	102
Excess stock	12

At ₹55,000 a tonne, the 12 tonnes are worth ₹6,60,000, and GST at 18 percent on that value comes to ₹1,18,800. The same 12 tonnes can be dealt with in three different ways under the Act, and the financial result is very different in each.

Route	What the dealer may have to pay
Section 35(6) read with Section 73 (no fraud)	Tax Rs. 1,18,800, interest, and penalty of 10 percent of tax, that is Rs. 11,880
Section 35(6) read with Section 74 (fraud or suppression alleged)	Tax Rs. 1,18,800, interest, and penalty up to Rs. 1,18,800, reduced if paid early
Section 130 (confiscation)	Tax, penalty and in addition a fine in place of confiscation that can come close to the value of the goods, Rs. 6,60,000

These figures are only by way of illustration, and for the year 2024 to 2025 onwards Section 74A takes the place of Sections 73 and 74 with penalties on similar lines. But the comparison brings out the point. Confiscation is several times harsher than assessment. That is why it matters a great deal which provision the officer chooses, and why the dealer must know which one the law requires.

7. Can the excess goods be seized?

I now come to the question that is asked most often. My answer is in two parts. A vigilance team has no authority of its own to seize goods under the GST law. And even the proper officer cannot confiscate goods merely because they are in excess of the books.

Before going further, three words need to be understood, since they are used loosely at the time of inspection. Detention is a temporary stopping of goods or a vehicle, and it applies mainly to goods in transit under Section 129. Seizure means the officer takes the goods into departmental custody while the enquiry is pending, though the ownership continues with the dealer. Confiscation is the final step under Section 130, by which the ownership itself passes to the Government unless the dealer redeems the goods by paying a fine.

Who can seize

Seizure of goods under the GST law is possible only under Section 67(2) of the APGST Act, and the section is hedged with conditions. An officer not below the rank of Joint Commissioner must have reasons to believe that goods liable to confiscation, or documents useful for any proceedings, are secreted in some place. He must then authorise an officer of State tax, in writing, in Form INS 01, to search and seize. And the seizure must be recorded in an order in Form INS 02 with an inventory of what is taken.

A Government Order which constitutes an executive agency cannot take the place of this authorisation. It follows that a tax officer in a vigilance team can seize only if he carries a valid INS 01 for that very premises. The police officer, the mines officer and the Regional Vigilance and Enforcement Officer himself have no power to seize goods under the GST law.

What the Act provides for unaccounted goods

Section 35(1) requires every registered person to maintain a true and correct account of his stock. Section 35(6) then deals with the consequence of failure. Where goods are not accounted for, the proper officer shall determine the tax payable on them as if they had been supplied, and the provisions of Section 73 or Section 74 shall apply to such determination.

Put simply, the Act has itself told the officer what he should do when the stock does not tally with the books. He is to issue a notice, hear the dealer and assess the tax. The Act does not tell him to remove the goods.

How the courts have read these provisions

The Hon’ble Allahabad High Court has had occasion to consider this issue repeatedly, and its view has been consistent. In Metenere Ltd. v. Union of India, decided on 17.12.2020, it held that unaccounted goods have to be brought to tax through Section 35(6) read with Sections 73 and 74. In Maa Mahamaya Alloys Pvt. Ltd. v. State of U.P., decided on 23.03.2023, it held that Section 130 requires an intent to evade tax and it disapproved of valuing stock by eye estimation. The same view was taken in Dinesh Kumar Pradeep Kumar v. Additional Commissioner, Writ Tax No. 1082 of 2022, decided on 25.07.2024. Finally, in Vijay Trading Company v. Additional Commissioner, the Court stated in clear terms that proceedings under Section 130 cannot be pressed into service where excess stock is found at the time of survey.

The Revenue carried the Vijay Trading Company matter to the Hon’ble Supreme Court. By order dated 04.04.2025 in SLP (Civil) Diary No. 5881 of 2025, the Supreme Court declined to interfere and dismissed the petition.

A note of caution

It would be wrong to tell a dealer that excess stock can never end in confiscation, and I do not wish to leave that impression. The decisions cited above are of the Allahabad High Court, and the order of the Supreme Court is a brief dismissal without a discussion of the law. Before our authorities these decisions carry strong persuasive value, but they are not a binding pronouncement of the jurisdictional High Court. Moreover, clause (ii) of Section 130(1) continues to list failure to account for goods as a ground of confiscation. Where the Department is able to show an intention to evade through independent material, such as a second set of books, bogus invoices or clandestine removals, it will certainly invoke that clause, and the defence will then have to be on facts.

Cash found in the premises

A connected doubt is about cash found in the cash box or the almirah. In Deepak Khandelwal v. Commissioner of CGST, decided on 17.08.2023, the Hon’ble Delhi High Court held that the power under Section 67 is not meant for seizing unaccounted cash or assets which have no bearing on proceedings under the Act. The Revenue’s challenge to that judgment before the Supreme Court did not succeed. Some other High Courts have taken a different view on cash, and so the last word may not have been said.

Goods governed by other laws

One exception must be mentioned. Where the excess goods are of a kind regulated by another law, the position changes. Ration rice and other essential commodities, minerals, fertilisers, seeds and packaged commodities are the usual examples. The officers of Civil Supplies, Mines, Agriculture or Legal Metrology who accompany the team may seize such goods under their own enactments. That power comes from those enactments. It does not come from the vigilance Government Orders, and it is not a seizure under the GST law.

8. When goods or records are in fact seized

A lawful seizure always leaves papers behind. If the officers take away goods or books and leave no paper with the dealer, there is every reason to question the legality of what was done. The requirements of the Act and the Rules at each stage are given below.

Stage	What the law requires	Form or provision
Before the search	Written authorisation by an officer of the rank of Joint Commissioner or above	INS 01, Section 67 and Rule 139
During the search	Search in the presence of independent witnesses, with a list of everything found	Section 67(10)
Taking the goods or books	A written order of seizure with an inventory	INS 02
Where goods cannot be moved	An order that the dealer shall not remove or deal with the goods	INS 03
Copies of seized records	The dealer may take copies or extracts in the presence of the officer	Section 67(5)
Getting the goods back for the time being	Provisional release on a bond for the value of goods and security for tax, interest and penalty	INS 04, Section 67(6) and Rule 140
Perishable or hazardous goods	Release on payment of market price or the tax, interest and penalty, whichever is lower	Rule 141
Time limit	Goods to be returned if no notice is issued within six months, extendable by six more months	Section 67(7)
Records not relied upon	To be returned within thirty days of the issue of notice	Section 67(3)

In practical terms, the dealer should first ask for a copy of the INS 01 and note the name and rank of the officer who has signed it. He should not allow goods or books to leave the premises without an order in INS 02 and a signed inventory. Once the seizure is made, an application for provisional release under Section 67(6) should be filed without delay, because stock lying under seizure means capital locked up and customers lost.

Where goods are removed without any authorisation or seizure order, a written protest should be lodged the same day with the jurisdictional Joint Commissioner and an acknowledgment obtained. If that brings no relief, the remedy is a writ petition before the High Court under Article 226 of the Constitution, since seizure of property without authority of law is a matter the Court will readily examine.

9. After the team leaves

Many dealers believe that the matter is decided on the day of inspection. It is not. The vigilance report is only a piece of information. No tax becomes payable on its strength. Liability arises only when the proper officer issues a notice, considers the reply, gives a hearing and passes a reasoned order.

On receiving the alert note, the jurisdictional officer usually follows one of three courses. He may scrutinise the returns and issue a notice in ASMT 10 under Section 61, as was done in Sudhakar Traders. He may obtain authorisation and make his own inspection under Section 67. Or he may send an intimation in DRC 01A and follow it with a show cause notice in DRC 01 under Section 73, Section 74 or, for recent years, Section 74A. The dealer files his reply and is heard, and the order is communicated with a summary in DRC 07. An appeal lies to the Appellate Authority under Section 107 within three months, and a further appeal to the GST Appellate Tribunal.

At this stage I would ask the dealer and his representative to keep three things in view.

The first is authority. The notice must come from the officer who is the proper officer for that particular function. Sudhakar Traders is a good reminder that an alert note may be perfectly valid and yet the notice founded on it may fail for want of authorisation.

The second is independent application of mind. The assessing officer is expected to examine the books and the reply and arrive at his own conclusion. The vigilance officer is not the assessing authority and his figures are not binding. An order which merely reproduces the alert note, without dealing with the dealer’s explanation, is vulnerable in appeal.

The third is supply of material. The dealer is entitled to copies of the alert note, the stock inventory, the working sheets and the statements which are relied upon against him. Without them no effective reply is possible, and an order passed without furnishing them offends the principles of natural justice. A written request for these copies should be the first step on receipt of the notice.

Lastly, the arithmetic in the report deserves a close look. Very often the quantity has been estimated by the eye, a standard yield or a power consumption norm has been assumed, or the difference noticed on one day has been multiplied over three or four years. Each of these is an assumption, and each can be met with evidence.

10. Some practical advice for the day of inspection

The advice I give to clients is to cooperate fully and, at the same time, to see that the record is true. The two are not opposed to each other.

Receive the officers courteously and do not obstruct them. Ask for their identity cards and write down their names, designations and the time of arrival. Enquire politely whether any officer holds an authorisation in INS 01 under Section 67, and if so, ask for a copy. Inform your tax practitioner at once.

Be present, or keep a responsible person present, throughout the stock taking. Ask that the goods be actually counted or weighed, and if the team insists on estimating by the eye, give your objection in writing. Explain every difference as it is noticed and see that the explanation goes into the panchanama.

Do not sign any paper that you have not read, and never sign a blank paper. If the statement contains an admission of suppression which is not true, do not sign it as it is. Write what you have to say in your own hand above your signature. Ask for copies of whatever you sign.

Do not allow books or goods to be taken out without a seizure order and an inventory. Do not pay tax or penalty under pressure on that day. If, after seeing the working, you find that some tax is really due, it can always be paid through DRC 03 a day or two later with proper advice. And on no account should any record be removed, hidden or destroyed after the team arrives, for that is an offence by itself and will damage an otherwise good case.

The best protection, however, lies in what is done before any inspection. Purchases should be entered on the day the goods come in. Goods received for job work and goods belonging to others should be kept and marked separately. Physical stock should be reconciled with the books at least once a month. Most cases of excess stock that I have seen arose from entries that were pending and not from any design to evade.

11. Questions that dealers commonly ask

Can I refuse to allow the vigilance team inside?

Please do not. The High Court has accepted that the Department may visit a dealer and report to the tax authorities. Refusal will only invite a harsher report. Let them verify, remain present, and make sure what is written is correct.

Do they need any written authorisation?

For a visit and verification they act on the strength of the Government Orders. But for a search of the premises, or for seizing goods or books under the GST law, an authorisation in INS 01 from an officer of the rank of Joint Commissioner is essential.

Can they take away my account books, computer or phone?

Only an authorised officer of State tax can seize them, and he must give an order in INS 02. There is no harm in giving photocopies. Where originals are seized, Section 67(5) allows you to take copies or extracts.

They say my stock is in excess. Will the goods be taken?

Not on that ground alone. Section 35(6) requires the tax on unaccounted goods to be assessed after notice, and the courts have held that confiscation under Section 130 is not the remedy for mere excess stock. Give your explanation immediately and have it recorded.

What if they find shortage and not excess?

Shortage leads to a suspicion of sale without bill, and the same procedure applies. The proper officer has to issue a notice and assess the tax after hearing you. Loss by theft, fire or wastage, and goods given as samples, are acceptable explanations when supported by records.

I was asked to pay the tax immediately. Should I?

There is no provision for collection of tax during an inspection. Payment through DRC 03 is voluntary. Check the working, take advice, and then decide.

I signed a statement out of fear. What now?

Write to the officer concerned within a few days stating what is incorrect in the statement and the circumstances in which you signed it. Keep proof of delivery, and repeat the point in your reply to the notice.

Can they stop my lorry on the road?

They do stop vehicles and check documents. For any action under the GST law, the vehicle has to be produced before the proper officer, who alone can detain it in MOV 06 and fix the penalty under Section 129.

Will every vigilance visit end in a demand?

No. The alert note is information for the tax officer. If the books and the reply explain the difference, he can drop the matter.

I am a small trader and I have no GST registration. Can action be taken?

The team can report that you are liable to be registered, and the tax officer can then make an assessment under Section 63 after notice. Supplying taxable goods without registration where it is required can also attract Section 130. It is wiser to check the turnover and register in time.

Is there a time limit for the tax notice?

Yes. The show cause notice must be issued within the period laid down in Sections 73, 74 and 74A for the year in question. A vigilance report does not extend that period.

12. To sum up

The Vigilance and Enforcement Department serves as the eyes and ears of the Government in the matter of revenue leakage, and the Hon’ble High Court has upheld its right to visit a dealer and to report what it finds. There its role ends.

Search, seizure, assessment, penalty and confiscation are statutory powers. They are exercisable by the proper officer under the APGST Act and by no one else, and they have to be exercised in the manner laid down in Sections 67, 73, 74, 74A and 130, which means a written authorisation, a written order and an opportunity of hearing.

Excess stock noticed in the course of a visit is a matter for assessment under Section 35(6) after notice. Standing alone, it is not a ground to seize or confiscate the goods. A dealer who understands where this line is drawn can cooperate with an inspection without fear, and can still protect what the law gives him.

Provisions and decisions referred to

• State Goods and Services Tax Act, 2017 (APGST Act): Sections 35, 61, 63, 67, 68, 70, 72, 73, 74, 74A, 107, 129 and 130
• State Goods and Services Tax Rules, 2017: Rules 139, 140 and 141
• G.O.Ms.No.269, General Administration (SC.D) Department, dated 11.06.1985 and G.O.Ms.No.504, General Administration (V and E) Department, dated 25.11.1997
• Sudhakar Traders v. State, W.P. Nos. 6599 and 6601 of 2023, decided on 25.04.2023
• Additional Commissioner Grade 2 v. Vijay Trading Company, SLP (Civil) Diary No. 5881 of 2025, order dated 04.04.2025
• Deepak Khandelwal v. Commissioner of CGST, Delhi High Court, decided on 17.08.2023
• Instruction No. 01 of 2022 to 2023 (GST Investigation) dated 25.05.2022
• General Sales Tax Act, 1957, Section 28

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Disclaimer: The views expressed are personal and are meant for general awareness. They are based on the law as understood on the date of writing and should not be treated as legal advice. Readers are requested to seek professional advice on the facts of their own case.

About the author: Suneel Kumar Kota is an Advocate practising in GST and indirect taxation at Kota Associates, Gudur, SPSR Nellore District.