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Inspection, Search and Seizure

Power of Inspection, search and seizure are the strong tools in the hands of revenue authority which gives an opportunity to investigate and gather evidence/information to properly identify the contraventions of any provisions under law as well as to identify the evasion of tax.

These provisions are also required to safeguard the Government’s legitimate dues.

Under the GST Act, The provisions related to the powers and procedure of Inspection, Search & Seizure are contained in Section 67 and section 68 of the Central/ State Goods and Services Tax Act 2017.

Inspection under GST

‘Inspection’ is the act of examining something. It enables officers to access and inspect 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 or operator of a warehouse or go-down.

Inspection can be carried out by the proper officer, not below the rank of a Joint Commissioner (or an officer of higher rank), where he may have “reasons to believe” that to evade tax, any taxable person has

  1. Suppressed any transaction of the supply of goods or services
  2. Suppressed stock in hand
  3. Claimed input tax credit in excess of the entitlement
  4. Violated any of the provisions
  5. Any transporter or owner or operator of a warehouse has kept goods which have escaped tax payment or has kept accounts and/or goods in such a way as to evade tax

Powers of Joint commissioner

  • Issuance of an authorization in FORM GST INS-01 to inspect places of businesses of the taxable person or the transporter or owner/operator of the warehouse.
  • Confiscation of goods or any documents or books or things, which is relevant for proceedings and are secreted in any place, he may authorize in writing any other CGST/SGST officer to search and seize or may himself search and seize.
  • To seal or break open the door of any premises or to break open any almirah, box, where access to such premises, almirah, box or receptacle is not allowed.

However, in case where it is not practicable to seize any such goods, the proper officer may serve an order that the inspected persons shall not remove or otherwise deal with the goods except with the previous permission of such officer.

Reason to believe’ means having knowledge of facts that would make any reasonable person, knowing the same facts, to reasonably conclude the same thing.

Search and seizure under GST

Search’ involves an attempt to find something. It is an action of a proper officer to go and look through or examine carefully a place, person, object, etc. to find something concealed. The search proceedings can only be initiated under the proper and valid authority of law.

‘Seizure’ is the act of taking over something or someone by force through a legal process. In the simple words, it implies taking possession forcibly against the wishes of the owner.

Search and seizure proceedings

Search can be initiated by the proper officer, not below the rank of Joint Commissioner has reason to believe on the basis of results of inspection under section 67(1) or any other reason, that

  • The goods are liable for confiscation or
  • Any documents or books or other things relevant for any proceedings are secreted somewhere

He may himself or through an authorized officer initiate the search and seize the goods or documents by giving Authorisation in writing in form GST INS-01 for Search and In case of Seizure, Order of should be in form GST INS-02.

However, If it is not practicable to seize the goods, the proper officer will issue an order of prohibition in FORM GST INS-03 to the owner not to deal with these goods in any manner without prior permission of the officer.

Inspection of goods in movement

The provisions related to inspection during transit are as under:

(a) Any consignment having value exceeding Rs. 50,000 may be stopped at any place for verification of the documents prescribed for movement of such consignments example E-way bill.

(b) Where the goods were removed without a prescribed document or the same are being supplied in contravention of any provisions of the Act during the transit, then the same can be detained or seized.

Release of Seized Books/ Documents

The officer will keep the seized books and documents as long as it is necessary for they are required for verification or examination for inquiry or proceedings under the GST law.

However, after the issue of notice if some documents, books or things seized are not required, the same shall be returned within 30 days from the date of issue of notice.

The person, from whom the documents are seized, can make copies only in the presence of officers at such place and time as such officer may indicate.

Release of Seized Goods

The seized goods can be released on a provisional basis against the execution of a bond for the value of the goods in FORM GST INS-04 and furnishing of a security in the form of a bank guarantee equivalent to the amount of 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 en-cashed and adjusted against the amount due.

If notice is not issued within six months (extendable by 6 more months) of the seizing the goods, they will be returned

The Government can be disposed off the hazardous or perishable as soon as they are seized.

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