Introduction:
Section 67 of the Central Goods and Services Tax (CGST) Act, 2017, deals with the power of inspection, search, and seizure under the GST regime. This provision grants authorities the power to inspect, search, and seize goods, documents, or other assets in specific situations to prevent tax evasion and ensure compliance with the law.. This article provides an in-depth analysis of Section 67, examining its scope, authority, and legal implications.
Bare Provisions and Analysis shall go hand in hand-
“(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 authorise 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.”
As per Section 2(107) of the CGST Act, 2017 Taxable person has been defined to mean a person who is registered or liable to be registered under section 22 or section 24;
Rule 139(1) states that-
Where the Proper officer not below the rank of a Joint Commissioner has reasons to believe that a Place of business or any other place is to be visited for the purposes of inspection or search or, as the case may be, seizure in accordance with the provisions of Section 67, he shall issue an authorisation in FORM GST INS-01 authorising any other officer subordinate to him to conduct the inspection or search or, as the case may be, seizure of goods, documents, books or things liable to confiscation.
“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 authorise 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 authorized 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.
(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.”
Rule 139(2), (3) & (4) states that-
(2) Where any goods, documents, books or things are liable for seizure under sub-section (2) of Section 67, the Proper officer or an authorised officer shall make an order of seizure in FORM GST INS-02.
(3) The Proper officer or an authorised officer may entrust upon the the owner or the custodian of goods, from whose custody such goods or things are seized, the custody of such goods or things for safe upkeep and the said person shall not remove, part with, or otherwise deal with the goods or things except with the previous permission of such officer.
(4) Where it is not practicable to seize any such goods, the Proper officer or the authorised officer may serve on the owner or the custodian of the goods, an order of prohibition in FORM GST INS-03 that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.
“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.
(5) The person from whose custody any documents are seized under sub-section (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.
(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. [See Rule 140]
(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.
(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. [See Rule 141]
(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.
(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.
(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) is an interesting provision which allows authorised officers to mock purchase goods and services to verify that the Taxable person is issuing Tax Invoices/Bill of Supply or not.
“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.”
Key Provisions of Section 67
Section 67 is divided into several sub-sections, each outlining specific powers and procedures:
Section 67(1): Power to Inspect
- Authority: Any officer of the CGST/SGST department, not below the rank of Joint Commissioner, can authorize an officer to inspect any place of business of a taxable person.
- Purpose: Inspection can be conducted if the officer has reasons to believe that the taxable person has:
- Suppressed transactions to evade tax.
- Claimed excess input tax credit (ITC).
- Violated any provisions of the GST Act to evade tax.
- Procedure: The officer must issue an authorization in writing (Form GST INS-01) for the inspection.
Section 67(2): Power to Search and Seize
- Authority: An officer, authorized by a proper officer not below the rank of Joint Commissioner, can search and seize goods, documents, books, or other things.
- Conditions: The officer must have reasons to believe that:
- Goods liable to confiscation or documents relevant to proceedings are hidden in any place.
- Procedure:
- The officer must issue a search authorization (Form GST INS-02).
- A panchnama (inventory of seized items) must be prepared.
- Seized goods can be released on payment of tax, interest, and penalty or upon furnishing a bond.
Section 67(3): Custody of Seized Goods
- Seized goods can be released on a provisional basis upon execution of a bond and furnishing security.
- If the goods are perishable or hazardous, the officer may dispose of them after giving notice to the owner.
Section 67(4): Retention of Seized Documents
- Documents seized can be retained for as long as necessary for examination, inquiry, or prosecution.
- The person from whom documents are seized is entitled to receive copies of the documents.
Section 67(5): Notice for Seized Goods
- If goods are seized, the officer must issue a notice within six months (extendable by another six months) specifying the tax, interest, and penalty payable.
- If no notice is issued within the stipulated time, the goods must be returned to the person from whom they were seized.
Section 67(6): Confiscation of Goods
- If the person fails to pay the tax, interest, and penalty within the specified time, the seized goods may be confiscated.
Section 67(7): Prohibition on Unauthorized Access
- No person is allowed to tamper with or remove any goods, documents, or things seized without the permission of the proper officer.
Section 67(8): Power to Break Open
- If access to any place is denied, the officer has the power to break open the door or any other barrier to conduct the search.
Section 67(9): Assistance from Police
- The officer can request assistance from the police or any other authority if necessary.
Section 67(10): Safeguards
- The officer must ensure that the search and seizure are conducted in a reasonable manner and with due respect to the rights of the person being searched.
