Search and Seizure Under GST Law

The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. To ensure compliance and prevent tax evasion, GST law empowers tax authorities with various investigative and enforcement tools. One such tool is the power of search and seizure. This tool allows authorities to conduct investigations, inspections, and seizures of documents, goods, and assets. This article will delve into the provisions and procedures related to search and seizure under GST law in India.

Legal Framework

Section 67 of the Central Goods and Services Tax Act, 2017 outlines the authority of search and seizure under GST legislation. The provision empowers tax authorities to authorise officers to search any place of business, including premises, automobiles, vessels, or aircraft. Tax authorities can inspect any location where they have grounds to suspect that items, documents, or anything relevant to the inquiry are being kept.

Key Provisions and Procedures

Authorization and Jurisdiction:

Search and seizure actions are carried out only by authorised personnel under the granted authority of the Commissioner of Central Tax or State Tax. Based on particular facts, these officials must have a reasonable belief that a GST law violation occurred. Officers may search any location where they suspect the commodities, papers, or items pertinent to the inquiry happen to be held.

Search Proceedings:

During a search operation, authorized officers can enter and search the premises, seize goods, documents, books of accounts, and any other relevant material. Officers may also record statements, examine persons and inventory the seized goods or documents. The person in charge or in control of the searched premises must assist the officers in the search proceedings.

Seizure of Goods and Documents:

Suppose the authorized officers have reason to believe that any goods are liable for confiscation. In that case, they may seize them. They can also seize any documents relevant to the proceedings. A seizure memo detailing the specifics of the confiscated items must accompany the seized goods and documents. The person whose items or documents were confiscated has the right to a copy of the seizure memo.

Retention and Release of Seized Goods:

Authorized officers may retain the seized goods and documents during the pendency of the proceedings under GST law. The goods are eligible for release on a provisional basis, subject to certain conditions and furnishing of a security deposit.

Recording of Statements:

Authorized officers have the power to examine any person acquainted with the facts and circumstances of the case. Statements recorded during search proceedings are subject to being used as evidence during subsequent legal proceedings.

Legal Remedies:

The person affected by a search and seizure operation under GST law can appeal against any decision or order passed by the tax authorities. The filing of the appeal must take place within the prescribed time limit before the appropriate appellate authority.

Inspection Occurrence

Routine inspections occur randomly or based on risk assessments to ensure ongoing compliance of registered taxpayers. Pre-audit inspections occur before the formal audit process, allowing authorities to assess records and identify potential issues or discrepancies. After completing the audit, post-audit reviews verify the accuracy and compliance of the taxpayer's records and transactions. Specific investigations occur when certain information or intelligence indicates potential non-compliance or fraudulent activities. Suspected non-compliance cases involve targeted inspections of taxpayers suspected of violating GST provisions based on discrepancies or suspicious activities. Follow-up inspections may occur after search and seizure operations to gather additional evidence or information. Verification of refund claims and cross-verification of input tax credit aim to confirm the accuracy and legitimacy of claims made by taxpayers.

Authority and Timing for Ordering a GST Search

Authorized officers, designated by the Commissioner of Central Tax or State Tax, have the power to order a search under GST. A search can be requested when the officer has reasonable grounds to believe that an offense under the GST law has been committed. Such beliefs should be based on specific information or intelligence that points to the commission of an offense. In most cases, prior approval from higher authorities is required before ordering a search, ensuring checks and balances in exercising this power. In urgent situations where prior intimation could defeat the purpose of the investigation, a search warrant from a Magistrate may be obtained.

Post-Seizure Proceedings

After a seizure under GST, a show cause notice is issued to the person from whom the goods or documents were seized. This notice allows the person to present their case and explain why confiscation or penalties are inappropriately imposed. The case then goes over to the adjudicating body for further procedures. During the adjudication proceedings, the authority examines the evidence and arguments the affected person presents. Based on the outcome of the proceedings, the adjudicating authority may order the release or confiscation of the seized goods. If an infringement exists, the authorities may impose penalties in addition to or instead of seizure. The affected person can appeal the decision before the appropriate appellate authority.

Conditions for Arrest

Arrests under GST can occur when there are reasonable grounds to believe that a person has committed a cognizable offense under GST law. Cognizable crimes are those punishable with imprisonment exceeding two years. The decision to arrest is based on the need to prevent the person from evading tax payments, tampering with evidence, or obstructing the investigation. The authorized tax officer follows the arrest procedure prescribed under the Code of Criminal Procedure. This ensures that the person in custody stays informed of the grounds for arrest. The arrested person can seek legal representation and apply for bail. The appropriate judicial authority makes the final decision judgement. Search and seizure operations are a vital tool for tax authorities. They help ensure compliance with the GST law and curb tax evasion. These operations take place under the provisions of Section 67. They aim to empower authorized officers to enter and search premises, seize relevant goods and documents, and record statements. Businesses and individuals must understand the legal framework for search and seizure under GST law. This will prove beneficial in being compliant with the requirements and protecting their rights as business owners.