Search and seizure proceedings under GST are among the most intrusive powers available to tax authorities. Section 67 of the CGST Act, 2017, grants officers the power to inspect premises, search for goods and documents, and seize items relevant to an investigation. These powers are subject to strict conditions, and taxpayers have specific rights that must be respected.
This article explains the legal framework of Section 67, the powers of officers, and the rights of taxpayers during search and seizure proceedings.
Inspection Under Section 67(1)
Section 67(1) empowers a proper officer not below the rank of Joint Commissioner to authorize inspection of premises where there is reason to believe that:
- A taxable person has suppressed transactions relating to supply of goods or services.
- A person has claimed input tax credit in excess of entitlement.
- A person has contravened provisions of the Act with intent to evade tax.
The inspection must be authorized in writing, and the officer must record the reasons in writing.
Search and Seizure Under Section 67(2)
Section 67(2) empowers a proper officer not below the rank of Joint Commissioner to authorize search and seizure where there is reason to believe that:
- Goods liable to confiscation are secreted at a place.
- Documents or books relevant to proceedings are secreted at a place.
The search must be conducted in accordance with the Code of Criminal Procedure (now the Bharatiya Nagarik Suraksha Sanhita), and the officer must have valid authorization.
Supreme Court Ruling on Seizure of Unaccounted Valuables
The Supreme Court has held that GST officers cannot seize unaccounted valuables such as cash, gold, and jewellery merely because they are found during a search. There must be a clear nexus between the seized items and a GST offence. Officers must demonstrate a relationship between the goods seized and the alleged violation, failing which the goods must be released.
The Bombay High Court has similarly ruled that cash credit accounts cannot be treated as property that can be provisionally attached under Section 83.
Taxpayer Rights During Search
During a search and seizure operation, taxpayers have the following rights:
- Right to see the authorization: The officer must produce the authorization letter in Form GST INS-01.
- Right to a copy of the authorization: The taxpayer is entitled to a copy of the search authorization.
- Right to be present: The taxpayer or their representative has the right to be present during the search.
- Right to legal counsel: The taxpayer can contact legal counsel.
- Right to copies of seized documents: The taxpayer is entitled to copies of seized documents and a list of seized items.
- Right against coercion: Statements must be voluntary.
- Right to silence: The taxpayer is not obligated to make self-incriminating statements.
Practical Steps During a Search
- Stay calm and cooperate with the officers.
- Verify the identity and authorization of the officers.
- Request a copy of the search authorization.
- Note the time of arrival and departure of the officers.
- Ensure that a panchnama is prepared and signed by witnesses.
- List all seized items and obtain a copy of the seizure memo.
- Contact your GST professional or legal counsel immediately.
- Do not sign any statement without reading and understanding it.
Conclusion
Search and seizure under Section 67 is a serious enforcement action. Taxpayers must understand their rights and cooperate with the investigation while protecting their interests. The Supreme Court's ruling on seizure powers provides important safeguards against overreach.
At Anuj Desai & Associates, we provide expert representation services during GST search and seizure operations. Our team can help you protect your rights and respond effectively.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.