Inspection, Search and Seizure under GST
Updates on Seizure
1st February 2021Union Budget 2021 Outcome
1. With respect to orders received on detention and seizure of goods and conveyance, 25% of the penalty needs to be paid for making an application for appeals under section 107 of the CGST Act. The date of applicability is yet to be notified.
2. Seizure and confiscation of goods and conveyances in transit are now made a separate proceeding from the recovery of tax from Section 74.
3. Section 129 is delinked from Section 130. Accordingly, proceedings relating to detention, seizure and release of goods and conveyances in transit will be separate from the levy of penalty for the confiscation of goods and conveyance.
Inspection under GST
When does inspection under GST occur?
A Joint Commissioner (or an officer of higher rank) may have “reasons
to believe” that in order to evade tax, any person has done the
following-
- Suppressed any transaction of supply
- Suppressed stock in hand
- Claimed input tax credit in excess
- Violated of any of the provisions
- Any transporter or owner/operator of a warehouse has kept goods that have escaped tax payment or have kept accounts and/or goods in such a way as to evade tax
Then he can authorise any officer in Form GST INS-01 to inspect places of businesses of:
- the taxable person or
- the transporter or
- owner/operator of warehouse
He can also examine any other place if he sees fit.
What is meant by ‘reasons to believe?
Reason to believe’ means having knowledge of facts (although does not
mean having direct knowledge), that would make any reasonable person,
knowing the same facts, reasonably conclude the same thing. As per
the Indian Penal Code, 1860, “A person is said to have ‘reason to
believe a thing, if he has sufficient cause to believe that thing but
not otherwise.” Reason to believe is a determination based on
intelligent examination and evaluation. It is different from a purely
subjective consideration, i.e., an opinion. It is based on facts rather
than an interpretation of facts.
Is it necessary to record the ‘reasons to believe in writing, before issuing orders for Inspection/Search/Seizure?
GST Act does not mention recording the reasons to believe. In fact,
Finance Act 2017 has amended Sec 132(1) & (1A) of Income Tax Act
retrospectively stating, that reason to believe, shall not be disclosed
to any person or any authority or the Appellate Tribunal.
Search under GST
Difference between Search and Inspection
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.
Who can order search under GST and when?
On the basis of results of an inspection or any other reason, Joint
Commissioner of SGST/CGST or a superior officer can order for a search
if he has “reasons to believe” –
- There are goods that are liable for confiscation
- Any documents or books or other things which will be useful during proceedings and are hidden somewhere
He can, on his own or through an authorized officer, search and seize the goods and documents.
There are goods that are liable for confiscation
Any documents or books or other things which will be useful during proceedings and are hidden somewhere
Seizure under GST
The term ‘seizure’ has not been specifically defined in GST. In legal
parlance, a seizure is the act of taking over something or someone
by force through the legal processes, 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.
Difference between Seizure and Detention
Not allowing the owner any access to the seized goods by a legal
order/notice is called detention. However, the ownership &
possession of goods still lies with the owner. It is issued when it is
suspected that the goods are liable to confiscation. Seizure is taking
over or actual possession of the goods by the department. But the
ownership is still with the owner. A seizure can be made only after
inquiry/investigation that the goods are liable to confiscation.
Procedure for seizure
What are the powers of the officer authorized to search?
The officer authorized to search will have the power to seal the door
of the premises. He can also break open the door of any premises if
access is denied. He can also break open any cupboard or box in which
goods, books, documents etc. are suspected to be concealed.
What happens if it is not possible to seize the goods?
If it is not practicable to seize the goods, the proper officer will
order the owner not to remove these goods without prior permission of
the officer. The officer will issue an order of prohibition in FORM GST
INS-03.
What are the powers of the officer authorized to search?
The officer authorized to search will have the power to seal the door
of the premises. He can also break open the door of any premises if
access is denied. He can also break open any cupboard or box in which
goods, books, documents etc. are suspected to be concealed.
What happens if it is not possible to seize the goods?
If it is not practicable to seize the goods, the proper officer will
order the owner not to remove these goods without prior permission of
the officer. The officer will issue an order of prohibition in FORM GST
INS-03.
How long will the books/documents remain with the officer?
The officer will keep the books and documents as long as it is necessary
for examination and inquiry. Other books which are not relevant to the
issue of notice will be returned within 30 days from the date of the notice.
The seized goods can be released on a provisional basis against a bond
for the value of the goods in FORM GST INS-04. The owner must also
furnish security in the form of a bank guarantee for the amount due
(applicable tax, interest and penalty payable). If the owner fails to
produce the provisionally released goods at the appointed date and place
then the security will be encashed and adjusted against the amount due.
What happens after a seizure?
- The person, whose documents are seized, can make copies only in the presence of an officer.
- If notice is not issued within six months (extendable by 6 more months) of the seizing of the goods, they will be returned.
- The Government can issue a list of hazardous or perishable goods which can be disposed of as soon as they are seized.
- All goods seized will be listed properly by the officer.
Does the Code of Criminal Procedure apply in such cases?
The provisions of the Code of Criminal Procedure will apply to search and seizure.
Other ways to check/inspect
The Commissioner or an authorized officer can purchase any goods
and/or services from a taxable person. This will be done to check the
issue of tax invoices, whether they are maintained correctly, and
whether the GST amount is clearly displayed. When the goods are returned,
the amount will have to be refunded by the taxable person and the sales
invoice will be cancelled.
For more information on this, visit TAXAJ
Posted by Aashima
Team TaxaJ
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