Section 67: Power Of Inspection, Search And Seizure

What does Section 67 Say?

Section 67 talks about the power of proper officers not below the rank of Joint Commissioner to conduct inspection, search and seizure. The law has been described below:

(1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that -

(a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or

(b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, he may authorize in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place.

(2) Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorize in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things: 

Provided that where it is not practicable to seize any such goods, the proper officer, or any officer authorised by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer: Provided further that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act.

(3) The documents, books or things referred to in subsection (2) or any other documents, books or things produced by a taxable person or any other person, which has not been relied upon for the issue of notice under this Act or the rules made thereunder, shall be returned to such person within a period not exceeding thirty days of the issue of the said notice.

(4) The officer authorised under sub-section (2) shall have the power to seal or break open the door of any premises or to break open any almirah, electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, electronic devices, box or receptacle is denied.

(5) The person from whose custody any documents are seized under subsection (2) shall be entitled to make copies thereof or take extracts therefrom in the presence of an authorized officer at such place and time as such officer may indicate in this behalf except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation.

(6) The goods so seized under sub-section (2) shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be.

(7) Where any goods are seized under sub-section (2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: Provided that the period of six months may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months.

(8) The Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification, specify the goods or class of goods which shall, as soon as may be after its seizure under sub-section (2), be disposed of by the proper officer in such manner as may be prescribed.

(9) Where any goods, being goods specified under sub-section (8), have been seized by a proper officer, or any officer authorised by him under sub-section (2), he shall prepare an inventory of such goods in such manner as may be prescribed.

(10) The provisions of the Code of Criminal Procedure, 1973, relating to search and seizure, shall, so far as may be, apply to search and seizure under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word ―Magistrate‖, wherever it occurs, the word - Commissioner‖ were substituted.

(11) Where the proper officer has reasons to believe that any person has evaded or is attempting to evade the payment of any tax, he may, for reasons to be recorded in writing, seize the accounts, registers or documents of such person produced before him and shall grant a receipt for the same, and shall retain the same for so long as may be necessary in connection with any proceedings under this Act or the rules made thereunder for prosecution.

(12) The Commissioner or an officer authorised by him may cause purchase of any goods or services or both by any person authorised by him from the business premises of any taxable person, to check the issue of tax invoices or bills of supply by such taxable person, and on return of goods so purchased by such officer, such taxable person or any person in charge of the business premises shall refund the amount so paid towards the goods after cancelling any tax invoice or bill of supply issued earlier.

In the above said matter we have discussed about the law which talks about the Section 67. Now let us understand in a simplified manner through some questions and answer format.

Questions and Answers

Q1. Which Proper Officer can issue authorisation for Inspection, Search and Seizure u/s 67?

Ans. Proper Officer not below the rank of Joint Commissioner.

Q2. What circumstances does Section 67 invoke?

Ans. Under certain circumstances section 67 invoke as described below.

1. Suppression of Facts to evade Tax.
2. Excess Claim of Input Tax Credit beyond entitlement.
3. Indulge in Contravention of provision of act to evade tax.
4. Transporting goods with an intent to evade tax.
5. Storage of Goods in godown and warehouse to evade tax.

Q3. What does Suppression of Facts mean?

Ans.  Suppression of Facts shall mean Non-Declaration of Facts or information which a taxable person is required to declare in the return, statement, report and any other documents furnished under this act or rules made there under.

Q4. What does Reason to Believe means?

Ans. Reason to believe means to have knowledge of facts, although not amounting to direct knowledge would cause a reasonable person knowing the same facts to reasonably conclude the same thing.

Q5. What Proper Officer does when goods cannot be moved?

Ans. The proper officer shall serve on the owner or custodian of goods not to remove subject to their permission.

Q6. Can the Proper Officer break open the door, almirah and electronic device if any?

Ans Yes if required.

Q7. When the goods are being seized what taxpayer can do?

Ans. The Taxpayer can make an extract of copies of such documents or inventory of goods being seized.

Q8. Where are the Goods being seized and no notice issued what will happen?

Ans. Goods seized shall be returned if no notice is issued within six months.

Q9. Can Seized Goods be disposed off?

Ans. Yes if goods are perishable or hazardous in nature.

Q10. Whether any receipt shall be given for the seized goods?

Ans. Yes the receipt shall be given for the seized goods by the proper officer.

Judicial Decision

1. Search not an ordinary course of action u/s 67 of GST and does not give unbridled power to fringe upon a citizen fundamental rights.(Sanjay Mukeshbhai Patel vs State of Gujarat).
2. Mere suspicion cannot be sufficient evidence to invoke Section 67.(TVL.Rising international Co. vs Commissioner of Central GST & CE).
3. Officer should have authorisation to conduct search u/67.(PrakashsinhHathisinhUdavat vs State of Gujarat).

Disclaimer:The above said article is author viewpoint only, please refer to respective sections, rules framed under GST.