Inspection, Search, Seizure & Arrest

Contents

Access to Business Premises – Section 71 ...................................................................................295

Officers to assist proper officers – Section 72 ..............................................................................295
INSPECTION ...........................................................................................................................295
Relevant Authority for Inspection ...........................................................................................295
Circumstances for carrying out inspection................................................................................295
Inspection of Goods in movement – Section 68 ........................................................................296
SEARCH AND SEIZURE .........................................................................................................296
Procedure for conducting Search .............................................................................................296
Search Warrant ......................................................................................................................297
Powers of Officers during Search ............................................................................................298
CONFISCATION -....................................................................................................................298
Manner of Release .................................................................................................................299
SUMMON ................................................................................................................................299
Responsibilities of the person summoned.................................................................................299
Consequences of non-appearance to summons .........................................................................299
Guidelines for issuing summons..............................................................................................299
Precautions to be observed......................................................................................................300
ARREST...................................................................................................................................300
ARREST - Meaning ...............................................................................................................302
Safeguards for a person arrested – Section 69...........................................................................302
Guidelines for arrest ...............................................................................................................302

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Access to Business Premises – Section 71

➢ Any officer authorized by proper officer (not below the rank of JC), in the interest of revenue, shall
have access to any business premises.

➢ During such access, officer can inspect Books of A/c, documents, computers, computer programs,
computer software and such other things as may be required.

➢ It’s the duty of the persons in charge of such premises to furnish the required documents.

➢ Person in charge is also duty bound to furnish such documents to the audit party deputed by the
proper officer or CA / CMA who has been deputed by commissioner to carry special audit.

➢ The documents that needs to be produced, if called for, are as under:

i. Records prepared and maintained and declared to the proper officer in prescribed manner
ii. Trial Balance or its equivalent
iii. Statement of annual financial accounts, duly audited
iv. Cost audit report, if any
v. Tax audit report [ 3CACD / 3CBCD], if any
vi. Any other relevant record

Officers to assist proper officers – Section 72

The following officers have been empowered and are required to assist CGST officers

i. Police;
ii. Railways;
iii. Customs
iv. Officers of State / UT / CG engaged in collection of GST;
v. Officers of State / UT / CG engaged in collection of land revenue;
vi. All village officers;
vii. Any other class of officers as may be notified by CG / SG.

Inspection

Relevant Authority for Inspection

Legal Power ➔ Section 67 of CGST Act

Who can conduct? ➔ Inspection can be carried out by a Proper Officer

Pre - Condition ➔ Only upon a written authorization by

Who can
➔ Officer of the rank of Joint Commissioner (JC) or above
authorize?
In Form GST INS -01

Circumstances for carrying out inspection

JC / above can give such authorization only if he has reasons to believe that:
a) Taxable person has done one of the following:
o suppressed any transaction of supply of goods or services
o suppressed stock of goods in hand
o claimed excess ITC
o contravened any provision of the Act to evade tax

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 Inspection, Search, Seizure & Arrest

b) Transporter , whether registered or not, who engaged in the business of transporting goods :
o which have escaped payment of tax, or
o has kept his accounts / goods in a manner that is likely to cause evasion of
tax

c) Warehouse owner / Godown operator, who:

o has kept goods which have escaped payment of tax, or
o has kept his accounts / goods in a manner that is likely to cause evasion of
tax

Inspection of Goods in movement – Section 68

➢ Inspection can also be done of the conveyance, carrying a consignment of value exceeding
specified limit
➢ Person-in-charge of the conveyance has to produce prescribed documents / devices for
verification and allow inspection.
➢ E-way bill has been prescribed for the said purpose
➢ Inspection during transit can be done even without authorization of JC.

SEARCH AND SEIZURE

Search ➢ The term Search denotes an action of a government machinery to go, look through or
examine carefully a place, area, person, object etc in order to find something concealed
or for the purpose of discovering evidence of a crime.
➢ The search of a person or vehicle or premises etc, can only be done under proper and valid
authority of law

Seizure ➢ It has not been specifically defined in GST Act

➢ Act of taking possession of property by an officer under legal process
➢ It generally implies taking possession forcibly contrary to the wishes of the owner of the
property or who has the possession and who was unwilling to part with the possession.

Search & Seizure -During such inspection,

• if any goods which are liable for the confiscation under the Act are found, or
• any documents / books of accounts are found,
• which may be useful for the department in the proceedings for the demand of tax,
• the officers conducting the inspection could search and seize such goods/documents and
books

Procedure for conducting Search

In accordance with Section 100 of Criminal Procedure Code

Describes the procedure for Search

✓ No search without a valid search warrant

✓ Atleast one lady officer in the search team

✓ Disclosing identity by showing ID cards prior to commencement of search

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✓ Acknowledgement from person-in-charge by way of a signature on the body of search warrant

✓ Signature of atleast 2 witnesses should also be taken on the body of search warrant

✓ Minimum 2 independent witnesses of the locality

If not available, inhabitants of any other locality can be the witness to the search
Witnesses should be briefed about the purpose of the search

✓ Search team and witnesses must offer themselves for their personal search pre and post search

✓ A Panchnama / Mahazar to be prepared on the spot

It must be annexed with a list of all goods, documents recovered and seized / detained
Both must be signed by the following persons:
• Witnesses
• Person-in-charge / owner of the premises
• Officers conducting the search
✓ On completion:
• Search warrant should be returned in original to the issuing officer
• Report regarding the outcome of the search
• The names of the officers participated in the search may also be written on the reverse of
the search warrant.

✓ Issuing authority must maintain register of records of:

• search warrant issued and returned, and
• Used search warrants should be kept in records

✓ Person-in-charge / Owner of the premises being searched under acknowledgement to be given

a copy of:
• Panchnama / Mahazar
• Annexures

Search Warrant
What is Search warrant? ➔ Written authority to conduct search

Competent Authority? ➔ Officer of the rank of JC / above in FORM GST INS -01

What should it indicate? ➔ It must indicate the existence of a reasonable belief leading to Search

Contents? ➔ o violation under the Act

o premise to be searched
o name and designation of the person authorized for search
o name of issuing officer with full designation along with his round seal
o date and place of issue
o serial number of the search warrant
o period of validity i.e. a day or two days etc

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Safeguards provided for in respect of Search or Seizure - Section 67 of CGST Act

o An inventory of seized (in FORM GST INS -02) goods and documents shall be made by the
seizing officer

o Seized goods / documents should not be retained beyond the period necessary for their
examination

o Photocopies of the documents can be taken by the person from whose custody documents are
seized

o For seized goods, if a notice is not issued within 6 months of its seizure, goods shall be returned
to the person from whose possession it was seized. This period of 6 months can be extended on
justified grounds up to a further period of max 6 months

o Certain specified categories of goods such as perishable, hazardous etc, can be disposed of
immediately after seizure

o Copies of any record made in the course of search should be sent to Principal Commissioner /
Commissioner of CGST instead of Magistrate as per Cr. Pr. Code

Powers of Officers during Search

• To search for and seize goods (which are liable for confiscation) and relevant
documents/books/things
• If not practicable to seize, the same may be detained (in FORM GST INS -03)
• The officer has the power to break open the door of the premises, if access to the same is
denied.
• Similarly, while carrying out search within the premises, he can break open any almirah or
box if access to such almirah or box is denied and in which any goods, accounts or documents
are suspected to be concealed.
• He can also seal the premises if access to it is denied.
• Seized documents/goods/records, to be returned within 30 days from the issuance of SCN, if
these are not relied on for the case.

CONFISCATION - Section 130 of CGST Act

Confiscation is not defined in the Act. It is a term that has its origin in Roman law meaning 'seizing'
or 'taking into the hands of the Emperor and transferring it to the Emperors Fiscus or Treasury'. The
essence of the concept of confiscation is that the confiscated goods are taken by the State as its own
property, depriving the true owner of the title to the said goods.

Goods are liable to confiscation when any person does the following:
i. supplies / receives any goods in contravention of this Act / rules leading to evasion of tax
ii. does not account for any goods on which he is liable to pay tax under this Act
iii. supplies any goods liable to tax under this Act w/o having applied for the registration
iv. contravenes any of the provisions of GST Act / rules with intent to evade payment of tax

Remedy available:
✓ The person from whom documents and books of accounts are thus seized,
✓ shall have the right to take copies of such documents and books of accounts,

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✓ subject to the approval of the proper officer
Manner of Release
Manner of release of confiscated goods, documents

Provisional Basis Actual return of goods Disposal of goods

• Government may in certain

• The seized goods shall be • In case of seizure of goods, a circumstances* notify the goods
released on a provisional notice has to be issued within 6 which shall be disposed by the
basis, months Proper officer in the prescribed
manner.
• on Execution of Bond (in • If no notice is issued within 6 • Inventory of such goods shall
FORM GST INS -04), and months, then all such goods shall also be prepared in the
• furnishing of prescribed be returned. prescribed manner.
amount of security, or
• on payment of applicable • 6 months period can be extended * circumstances to notify:
Tax + Interest + Penalty • By Commissioner • perishable or hazardous nature
• for another 6 months of any goods (in FORM GST
• on sufficient cause INS -05)
• depreciation in the value of
goods with the passage of time
• constraints of storage space
• any other relevant considerations

SUMMON under Section 70 of the CGST Act

➢ The proper officer may summon any person to appear before him and give evidence or
produce documents.
➢ The person to whom such summon has been issued is duty bound to appear either in person or
by an authorised representative, as such officer may direct.
➢ The person so appearing shall state the truth during examination or make statements or produce such
documents and other things as may be required .

Responsibilities of the person summoned

➢ Legally bound to attend either in person or by an authorized representative
➢ Bound to state the truth before the officer who has issued the summon
➢ To produce such documents and other things as may be required

Consequences of non-appearance to summons

➢ If not appeared without any reasonable justification, he can be prosecuted u/s 174 of IPC
➢ If absconded to avoid service of summons, he can be prosecuted u/s 172 of IPC
➢ If he does not produce the documents / electronic records required to be produced. he can be
prosecuted u/s 175 of IPC
➢ If he gives false evidence, he can be prosecuted u/s 193 of IPC
➢ Further, a penalty of Rs. 25,000/- u/s 122(3)(d) of CGST Act, if a person does not appear
before CGST / SGST officer who has issued the summon

Guidelines for issuing summons

➢ Summons
• to be issued as a last resort
• where assesses are not co-operating
• this section should not be used for the top management

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• The Hon’ble Bombay High Court in FSM Education Private Limited v. Union of India, & Ors.
[Writ Petition (L) No.30974 of 2021 dated January 10, 2022] set aside the summons issued by
the Revenue Department without any details of the inquiry, wherein the assessee was co-
operating in furnishing the documents as requisitioned and to provide further details. Held
that, summons is a last resort and are not to be issued in a casual manner.

➢ Senior management officials such as CEO / CFO / GM’s of large companies or PSUs
• not generally be issued summons at the first instance.
• should be summoned only when there are indications of their involvement

➢ Language of summons
• should not be harsh and legal
• which causes unnecessary mental stress and embarrassment to the receiver

➢ Summons by superintendent to be issued

• after obtaining prior written permission from an officer not below the rank of AC
• with reasons for issuance of summons to be recorded in writing

➢ If obtaining prior permission is not possible due to operational reasons

• oral / telephonic permission must be obtained, and
• the same should be reduced to writing and intimated to the officer at the earliest

➢ In all cases where summon is issued

• officer issuing summons should submit a report, or
• should record a brief of the proceedings in the case file and submit to the authorizing
officer

Precautions to be observed
➢ If it is not justified, no issuance of summon
➢ Power to summon can be exercised only when
• there is an inquiry being undertaken, and
• attendance of the person is considered necessary
➢ Summons should not be issued repeatedly
➢ Statement of the accused / witness should be recorded in minimum number of appearances
➢ Respect the time of appearance given in summons. No person should be made to wait for long
hours before his statement is recorded.
Exception: when it has been decided very consciously as a matter of strategy
➢ Preferably, statements should be recorded during office hours
Exception: Based on the facts in the case, exception could be made regarding time
and place of recording statement

Fresh Guidelines on Issuance of Summons Under Section 70 Of The CGST Act, 2017 – via
Instruction No. 03/2022-23 (GST-Investigation) dt 17-08-2022 - in matters related to
investigation under CGST: (Only for Practical Aspect & Not Relevant For Exam)
(i) Power to issue summons are generally exercised by Superintendents, though higher
officers may also issue summons. Summons by Superintendents should be issued after
obtaining prior written permission from an officer not below the rank of Deputy/ Assistant
Commissioner with the reasons for issuance of summons to be recorded in writing.
(ii) Where for operational reasons it is not possible to obtain such prior written permission,
oral/telephonic permission from such officer must be obtained and the same should be
reduced to writing and intimated to the officer according such permission at the earliest
opportunity.

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(iii) In all cases, where summons are issued, the officer issuing summons should record in file
about appearance/ non-appearance of the summoned person and place a copy of statement
recorded in file.
(iv) Summons should normally indicate the name of the offender(s) against whom the case is
being investigated unless revelation of the name of the offender is detrimental to the cause of
investigation, so that the recipient of summons has prima-facie understanding as whether he
has been summoned as an accused, co- accused or as witness.
(v) Issuance of summons may be avoided to call upon statutory documents which are
digitally/ online available in the GST portal.
(vi) Senior management officials such as CMD/ MD/ CEO/ CFO/ similar officers of any
company or a PSU should not generally be issued summons in the first instance. They should
be summoned when there are clear indications in the investigation of their involvement in the
decision making process which led to loss of revenue.
(vii) Attention is also invited to Board's Circular No. 122/41/2019-GST dated 5th November,
2019 which makes generation and quoting of Document Identification Number (DIN)
mandatory on communication issued by officers of CBIC to tax payers and other concerned
persons for the purpose of investigation. Format of summons has been prescribed under
Board's Circular No. 128/47/2019-GST dated 23rd December, 2019.
(viii) The summoning officer must be present at the time and date for which summons is
issued. In case of any exigency, the summoned person must be informed in advance in
writing or orally.
(ix) All persons summoned are bound to appear before the officers concerned, the only
exception being women who do not by tradition appear in public or privileged persons. The
exemption so available to these persons under Section 132 and 133 of CPC, may be kept in
consideration while investigating the case.
(x) Issuance of repeated summons without ensuring service of the summons must be avoided.
Sometimes it may so happen that summoned person does not join investigations even after
being repeatedly summoned. In such cases, after giving reasonable opportunity, generally
three summons at reasonable intervals, a complaint should be filed with the jurisdictional
magistrate alleging that the accused has committed offence under Sections 172 of Indian
Penal Code (absconding to avoid service of summons or other proceedings) and/or 174 of
Indian Penal Code (non-attendance in obedience to an order from public servant), as inquiry
under Section 70 of CGST Act has been deemed to be a "judicial proceedings" within the
meaning of Section 193 and Section 228 of the Indian Penal Code. Before filing such
complaints, it must be ensured that summons have adequately been served upon the intended
person in accordance with Section 169 of the CGST Act. However, this does not bar to issue
further summons to the said person under Section 70 of the Act.

These instructions may be brought to the notice of all the field offices/formations under your
charge for strict compliance. Non-observance of the instructions will be viewed seriously.
Difficulties, if any, in implementation of the aforesaid instructions may be brought to the
notice of the Board.

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ARREST

ARREST - Meaning
➢ Means “ The taking into custody of a person under some lawful command or authority ”
➢ A person is said to be arrested when he is taken and restrained of his liberty by power or
colour of lawful warrant
➢ Arrests can be carried out only where the person is accused of offences specified for this
purpose and the tax amount involved is more than specified limit
➢ Arrests under GST Act can be made only under authorization from the Commissioner
➢ Offences u/s 132 committed in connection with evasion of tax are also punishable with
imprisonment upon prosecution before appropriate court.

Safeguards for a person arrested – Section 69

➢ If a person arrested for a cognizable offence:
• He must be informed in writing of the grounds of arrest, and
• He must be produced before a magistrate within 24 hrs of his arrest
➢ If a person arrested for a non-cognizable offence:
• DC / AC can release him on bail, and
• He will be subject to the same provisions as an officer in-charge of a police station u/s
436 of Cr. Pr. Code
➢ All arrest must be in accordance with the provisions of Cr. Pr. Code, 1973 relating to arrest

Guidelines for arrest

➢ Decision to arrest needs to be taken on case-to-case basis depending on the following:
• Nature and gravity of offence,
• Quantum of tax evaded / credit wrongfully availed,
• Nature and quality of evidence,
• Possibility of evidences being tampered with / witnesses being influenced,
• Cooperation with investigation, etc

➢ Before exercising power to arrest the following must be considered (Precautions to Arrest) :
• to ensure proper investigation of the offence;
• to prevent such person from absconding;
• master minds or key operators effecting proxy / benami imports / exports in the name
of dummy or non-existent persons / IECs, etc;
• where the intent to evade duty is evident and element of mensrea (presence of guilty
mind);
• prevention of the possibility of tampering with evidence;
• intimidating or influencing witnesses; and
• large amounts of evasion of tax

Note for Practice – Kindly refer to Instruction No. 02/2022-23 [GST – Investigation] - Guidelines for Arrest and
Bail to the offences punishable Under The CGST Act, 2017 dated 17 th August, 2022

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