Inspection, Search, Seizure under GST are undoubtedly those powers assigned to the officers which can make or break it. It deals with powers of officers of CGST & SGST to carry out inspection /reviews or search of any places of business or a transporter or a warehouse where there is a reason to believe that tax evasion has taken place or likely to take place. Keeping in mind the government’s anti –tax evasion scheme, GST has a strict provision to inspect & search places of business of suspected tax evaders.
What is the difference between Search & Inspection?
The Term “Search” denotes an action of a government machinery to go, look through or examine carefully a place, area, person, object etc. In order to find something concealed or for the purpose of discovering evidence of a crime. To make a careful investigation of any person or vehicle or premises etc. can only be done under the proper authority of law. It simply involves an attempt to find something. An officer authorized to conduct a search can seize the goods which are liable to confiscation or seize documents which may be relevant for any proceedings.
It is the act of exploration or examining something. The Inspection of documents relevant to issues in a lawsuit is an important element of discovery. It is a new provision under the CGST/SGST Act. It is a softer provision than search to enable officers to access any place of business of a taxable person & also any place of business of a person engaged in transporting goods or who is an owner/operator of a warehouse. The authorization for inspection or search has to be given in writing by an officer not below the rank of Joint Commissioner. Inspection during transit can be done even without authorization of Joint Commissioner.
In which places Inspection Arrangements turned out to be applicable:
Authorization can be given to an officer of CGST/SGST to carry out inspection of any of the following
- Any place of business of taxable person. Place of Business means where a person usually transacts his affairs or business.
- Any place of business of a person engaged in the business of transporting goods , whether or not he is a registered taxable person.
- Any place of business of an owner or an operator of a warehouse.
Who can give Proclamation for Inspection under GST:
Firstly Inspection is carried out by an officer of CGST/SGST only upon a written authorization given by an officer of the rank of joint commissioner or above. If a joint commissioner or a higher rank officer of CGST/SGST has reasons to believe that the person concerned has done any of the following, then he can authorize any other officer to inspect the places:
- Undisclosed any transaction of stocks in hand or transaction of supply
- Claimed input tax credit in excess
- A transporter or warehouse Controller has kept goods which have escaped payment of tax or has kept his accounts or goods in the manner that is likely to cause evasion of tax.
Basic Requirement/ Essentials during Search Operations under GST :
The Following Principles be observed during Search:
- Search of premises should not be carried out without a valid search warrant issued by the proper officer.
- Register of records of search warrant should be maintained
- The officers before stating the search should disclose their identity by showing their identity cards to person in charge of the premises.
- The search should be made in the presence of at least two independent witnesses of the locality.
- When the search is over, the search warrant duly executed should be returned in original to the issuing officer
Methodology for conducting Search?
Section 67(10) of CGST/SGST Act prescribes that searches must be carried out in accordance with the provisions of Section 100 of the Code of Criminal Procedure, 1973.
Who can give Judicial Pronouncement of Search under GST?
Keeping in mind results of inspection or any other reason, the Joint Commissioner or an officer of higher rank of SGST/CGST can order for a search if he has reasons to believe:
- There are many goods which are liable for confiscation.
- Any documents or books or other things which will be useful during proceedings & are hidden somewhere
NOTE: Search without a valid Search Warrant results in an illegal search without authority of law
What predominance can be exercised by an officer during valid search?
An officer carrying out a search has the power to search & seize goods, documents, books or things from the premises searched. The officer so authorized will have the power to seal the door of the premises. He can also break & open the door of the premises. He can also break & open any cupboard or box in which goods, books, documents etc. are suspected to be concealed.
Seizure under GST
‘Seizure’ is defined as the act of taking in possession of property by an officer under legal process. It generally implies taking possession forcibly against wishes of the owner. If goods are confiscated by an order issued by the competent authority which attains finality then only the ownership is transferred to the government. If it is not confiscated, then the ownership is again transferred to the original owner of the goods. It is to be noted that seizure of goods & documents can be made in relation to an investigation concerning supply of goods but in case of investigation, related to supply of services, only documents will be seized.
What brings to light after Seizure?
- The Person, whose documents are seized, can make copies only in the presence of an officer of CGST/SGST.
- The seized goods will be released, on a provisional basis & after that bond will be filed & furnishing of a security.
- If notice is not issued within 6 months of the seizing the goods, they will be returned.
- If the goods are hazardous or perishable, then the Central or state government will notify to dispose of the goods.
- Such goods which are to be disposed of will be listed by the officer.
What is the difference between Seizure & Detention?
Denial of access to the owner of the property or the person who possesses the property at a particular point of time by a legal order/notice is called detention. Seizure is taking over of actual possession of the goods by the department. Detention order is issued when it is suspected that the goods are liable to confiscation. Seizure can be made only on the reasonable belief which is arrived at after inquiry/investigation that the goods are liable to confiscation.