In any Taxation law Inspection, Search and Seizure provisions are formulated in order to penalize the defaulters and to enable the government to get their legitimate dues from them. Inspection, search and Seizure provisions are covered under Chapter XIV of the CGST Act. We will discuss these terminologies in a detailed manner in this article.
Inspection is a lighter provision than a search. It enables the proper officers to enter into any place of business of a taxable person and also the place of business of the person who is engaged in transportation or storage of goods in the warehouse or godown.
As per Section 67 of the CGST Act, Inspection can be done by the proper officer only if he has written authorization of the officer of Joint Commissioner or above.
As per Section 67(1), such authorization by the higher authority shall be given only if they have reason to believe that:-
- A taxable person has suppressed any transaction of supply of goods/ services, suppressed stock details, the incorrect claim of Inputs or contravened any other provision of the act.
- Any person involved in the transportation of goods or storage of goods and has kept goods which have escaped from payment of tax irrespective of the fact that a such person is a Taxable person or not.
Inspection can also be done during transit by the proper officer and the person carrying and in charge of a consignment of a value of more than Rs. 50,000 shall on demand provide prescribed documents and devices such as Invoice or Bill of supply or delivery challan as the case may be and a copy of E-way bill either in physical form or mapped to an RFID embedded on conveyance to the proper officer. Such Inspection in transit can be done even without the authorization of the Joint Commissioner.
In any taxation law, enforcing authority should have been provided the right of entering into and examining any place, area, person, etc in order to find anything concealed with the intention of tax evasion. To ensure search and seizure under GST should be conducted in a transparent manner, the act adopts the provisions of the Criminal Procedure Code, 1973 to conduct Search and seizure under GST.
No search operation can be conducted by any officer without proper authority. Proper Authority to Issue Search Warrant under GST is an officer of the rank of Joint Commissioner or above. A search warrant issued must contain Violation under the act, Name of the person authorized to search, Premises to be search, Period for which anytime search can be done, etc.
The seizure has not been specifically described under the act but the general meaning of seizure is to take into custody of any property by fulfilling legal requirements. A seizure is generally performed by the enforcement team during Inspection and Search operations if they have found something, which may be useful for the department for calculating Tax demand or helpful in tax proceedings for the officer.
Power of Officer conducting Search
- An officer carrying out search has the power to search and Seize any goods which are liable to confiscated and Books/things which they feel relevant for any proceedings under the act.
- If access to the premises has been denied to the officer, He has the power to break the lock and perform search operations.
- Also, if during search access of any almirah/box/ room is denied and it is suspected that there are some goods or documents are concealed then also He has the power to get access of the same.
- If it is not practicable to seize goods such as goods of perishable, Hazardous Nature, Arms, and ammunition or goods of very high volume, then he can detain such goods and in such case of detention Custodian or owner of the goods shall not remove, or otherwise deal with the goods without prior permission of such officer. [First proviso to section 67(2)]
The person from whom any documents and books are seized has the right to take extract or copy of seized records before its seizure. The seized records should be kept in custody only till the time they are required for proceedings and if these have not relied on the case then the same shall be returned within 30 days from the issue of SCN.
As per section 122(1) If any person disposes of or tampers any goods detained or seized under this act, he shall be liable to pay a penalty of Rs. 10,000 or amount of tax evaded whichever is higher and also as per section 129(1) where any person transports any goods or stores any goods while they are in transit in contravention of this act then all such goods and conveyance shall be liable to be detention or seizure.
Goods or conveyance seized or detained under Section 129 shall be released:-
Where the owner of goods accepting his default and comes forward to pay applicable tax and penalty, then after payment of applicable tax and penalty which shall be equal to 100 % of tax or if he furnishes such security of amount equivalent to such tax and penalty.
However, if goods are exempted then on the payment of 5% of the value of goods or Rs. 25000 whichever is lower or upon furnishing a security equivalent to such penalty.
Where the owner of goods is not accepting his default within 14 days and does not come forward to pay applicable tax and penalty, then after payment of applicable tax and penalty equivalent to 50% of value of goods reduced by the tax amount paid thereon or upon furnishing a security of equivalent value of tax and penalty.
However, in the case of exempted goods, the penalty shall be the same as in Case 1.