Inspection, Search, and Seizure Powers of Tax Authorities under Section 67 of the CGST Act, 2017

Section 67 of the Central Goods and Services Tax (CGST) Act, 2017 deals with the inspection, search, and seizure powers of tax authorities. This section empowers GST officers to conduct inspections, searches, and seizures to prevent tax evasion and ensure compliance with GST laws. Here’s a detailed explanation of Section 67:

Powers of the GST Department/Proper Officer

Under Section 67 of the CGST Act 2017, the GST department and the proper officer have several powers to ensure compliance with tax laws and prevent tax evasion. These powers include:

1. Inspection [Section 67(1)]:

• Authorization Requirement: Inspection can only be carried out by a proper officer upon written authorization from an officer of the rank of Joint Commissioner or above.
• Grounds for Inspection: Inspection can be initiated if there is reason to believe that a taxable person has:
  • • Suppressed any transaction of supply of goods or services.
    • Suppressed stock of goods in hand.
    • Claimed input tax credit in excess of entitlement.
    • Contravened any provision of the Act to evade tax.
    • Any person engaged in transporting goods or an owner/operator of a warehouse has kept goods that have escaped payment of tax or kept accounts/goods likely to causeevasion of tax.

2. Search and Seizure [Section 67(2)]:

• • Reasonable Grounds Requirement: Search andseizure can be conducted if there are reasonable grounds to believe that goods liable for confiscation or relevant documents are concealed.
  • Seizure: Officers can take physical custody of goods, documents, or other assets suspected of being involved in tax evasion.
  • Inventory and Documentation: An inventory ofseized goods must be prepared, and the officer must document the search proceedings.

3. Retention of Seized Goods/Documents (Section 67(3)):

• Conditions for Confiscation: Goods can be confiscated if they are:
  • Seized goods or documents can be retained by the officer for as long as necessary for examination, inquiry, or proceedings.
  • However, the officer must return the seized goods or documents within 6 months unless the period is extended by the proper officer (not below the rank of Joint Commissioner).
  • Supplied or received incontravention of GST Act provisions to evade tax.
  • Not accounted for despite being subject to tax.
  • Supplied without the required registration.
  • Contravening any provisions of the CGST Act or rules made thereunder to evade tax.
  • Transported incontravention of GST Act provisions unless the owner proves no knowledge or connivance.

4. Power to Seal Premises (Section 67(4)):

• • Inspection and Seizure: Officers can inspect premises and seize goods or documents pertinent to proceedings under the Act.
  • Detention: If seizing goods is impractical, officers may detain them and prevent the owner from disposing them of without permission.
  • Access: Officers can forcefully access areas of suspicion and seal premises if access is denied.
  • If the officer has reasons to believe that goods liable to confiscation or documents useful for proceedings are hidden in any place, they can seal the premises for a period not exceeding 15 days.
  • The seal can be broken by the officer if necessary for inspection or investigation.

5. Power to Access Business Premises (Section 67(5)):

A proper officer can access any place of business of a taxable person to inspect:

• • Goods,
  • Books of accounts,
  • Documents, or
  • Computers or other electronic devices

6. Power to Arrest (Section 67(6)):

• • If the officer has reasons to believe that a person has committed an offense under the GST Act that is punishable under Section 132 (e.g., tax evasion, fraud), they can arrestthe person.
  • The arrested person must be informed of the grounds of arrest and produced before a magistrate within 24 hours.

Rights/Powers of the Assessee

While the GST department has significant powers, the CGST Act also provides several safeguards to protect the rights of the assessee during inspections, searches, and seizures:

1. Right to See Warrant or Authorization:

• • The assessee has the right to see the search warrant or written authorization, which must be issued by an officer of the rank of Joint Commissioner or above.

2. Right to Be Informed:

• • The assessee must be informed about the reasons for the search or inspection and the grounds for such action.

3. Presence During Search:

• • The assessee or an authorized representative has the right to be present during the search or inspection process.

4. Right to Copies of Documents:

• • The person from whom documents and books of accounts areseized has the right to take copies of such documents with prior approval of the proper officer. [Section 67(5)]

5. Right to Record Objections:

• • The assessee can record their objections to any action taken by the officers during the search or inspection.

6. Right to Legal Assistance:

• • The assessee can seek legal assistance during the process and have their legal representative present.

7. Timely Release ofseized Items:

• • Seized goods or documents should not be retainedbeyond the period necessary for their examination. Items not utilized as evidence must be returned within 30 days from the issuance of a show-cause notice. [Section 67(3)]

8. Right to Photocopies:

• • The person from whose custody documents areseized is entitled to take photocopies of the documents for their records or legal purposes.

9. Notice Period for Goods:

• • If a notice is not issued within six months of theseizure of goods, they must be returned to the person from whose possession they were seized. This period can be extended for justified reasons for a further maximum period of six months. [Section 67(7)]

10. Application of Criminal Procedure Code:

• • The provisions of the Code of Criminal Procedure 1973 relating to search andseizure apply, with modifications. Instead of sending copies of records made during the search to the nearest Magistrate, they are sent to the Principal Commissioner/Commissioner of CGST. [Section 67(10)]