Inspection, Search & Seizure under GST

Chapter XIV of the Central Goods and Services Tax Act, 2017 deals with the provisions of Inspection, Search & Seizure under GST. Notably, the basic purpose of the provisions Inspection, Search & Seizureis to keep a watch on the tax evaders which would have a deterrence effect on others to evade the taxes.

All the provisions relating to Inspection, Search & Seizure is briefly explained in the present article.

Power of inspection vested to the departmental officer [Section 67(1)]

The proper officer can authorize any officer of central tax to carry out the inspection of a person engaged in the goods transportation business or inspection of the place of business/ warehouse/ godown/ any other place, under any of the following circumstances-

• The person is involved in the act which is contradicting any provisions of the Act or rules made thereunder with a purpose to evade tax.
• The person has claimed an excess amount of Input Tax Credit.
• There is a suppression of any transaction relating to the supply of goods/ services or stock-in-hand.
• The person is either engaged in the business of transporting goods or the person is an owner or operator of a warehouse/ godown/ any other place, wherein, the goods which have escaped payment of tax or are likely to escape payment of tax are kept.

However, for carrying out an inspection, it is mandatory to give written authorization in Form GST INS-01 by the proper officer (not below the rank of the Joint Commissioner) to the concerned central tax officer authorized to conduct inspection.

Provisions relating to Inspection of goods in movement [Section 68]

The provisions of section 68 of the Central Goods and Services Tax Act, 2017 bestows power to the proper officer to intercept/ inspect any vehicle carrying goods. Such a vehicle can be intercepted for-

• Verification of documents; or
• Inspection of goods.

The proper officer will verify the documents like E-way bill; tax invoice etc.

Notably, once the physical verification of the goods in movement is done at one state/ union territory, the proper officer cannot undertake physical verification for the second time at any other state/ union territory. However, physical verification for the second time will be possible only if the proper officer possesses any specific information relating to tax evasion.

Provisions of search & seizure

The provisions relating to search & seizure are explained hereunder-

• The proper officer can authorize any officer of central tax to search the place where the goods liable to confiscation or documents/ books/ things/ records (useful/ relevant to any proceedings) are secreted.
• In case the admission of the officer is denied, the proper officer is vested with the power to seal or break open the following-
  • The door of any premises; or
  • Any almirah; box; electronic devices; receptacle.
• Likewise, all such relevant goods/ documents/ books/ things/ records can be seized. However, in case the seizure of any goods is practically not possible, the same will be detained.
• The seized documents/ things/ books can be retained by the officer only till the time it is required for examination or inquiry or proceedings under the Act.
• But, the documents/ things/ books which are not relied upon in the show cause notice should be returned within a period not exceeding 30 days from the date of issuance of notice.
• The seized goods will be returned if no show cause notice is issued within a period of 6 months (extendable to a further 6 months).
• The seized goods will be released, on a provisional basis, on-
  • Execution of bond in Form GST INS-04 and furnishing of a security; or
  • Payment of applicable tax along with interest and penalty.
• The proper officer is required to make an inventory of the seized goods/ documents/ books/ things/ records and get it signed by the concerned person. A copy of the said inventory will also be given to the concerned person.
• The search and seizure will be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973.

It is important to note that the proper officer (not below the rank of the Joint Commissioner) can authorize the concerned central tax officer to conduct a search via written authorization in Form GST INS-01. Whereas, the proper officer will make an order of seizure in Form GST INS-02.

Resultant of seized goods

The proper officer will deal with the seized goods in the following manner [rule 141 of the CGST Act, 2017]-

Summary of procedure of inspection, search and seizure

Short summary of procedure of inspection, search and seizure is provided hereunder-

• Written authorization in Form GST INS-01 will be issued by a proper officer (not below Joint Commissioner) to the concerned officer authorizing him to conduct the inspection or search or seizure of goods/ documents/ books/ things liable to confiscation.
• An order of seizure in Form GST INS-02 will be issued in case the goods/ documents/ books/ things are liable for seizure.
• However, if it is practically not possible to seize the goods, a prohibition order in Form GST INS-03 will be issued. Accordingly, the person will not remove, part with or deal with such goods except prior permission.
• The officer seizing the goods/ documents/ books/ things will prepare an inventory of the same and get it signed by the concerned person.

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