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1. INTRODUCTION

What is the need for

inspection, search,
seizure & arrest?

In any tax administration the provisions for Inspection, Search, Seizure and
Arrest are provided to protect the interest of genuine tax payers (as the Tax
evaders, by evading the tax, get an unfair advantage over the genuine tax
payers) and as a deterrent for tax evasion. These provisions are also required to
safeguard Government’s legitimate dues. Thus, these provisions act as a
deterrent and by checking evasion provide a level playing field to genuine tax
payers.
It may be mentioned that the options of Inspection, Search, Seizure and Arrest
are exercised, only in exceptional circumstances and as a last resort, to protect
the Government Revenue.
Chapter XIV – Inspection, Search, Seizure and Arrest [Sections 67 to 71] of the
CGST Act stipulates the provisions relating to inspection, search, seizure and
arrest. State GST laws also prescribe identical provisions in relation to
inspection, search, seizure and arrest.

Provisions of inspection, search, seizure and arrest under CGST Act have also
been made applicable to IGST Act vide section 20 of the IGST Act.

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 2. POWER OF INSPECTION, SEARCH AND
SEIZURE [SECTION 67]
‘Inspection’ is a new provision under the Act. It is
a softer provision than search to enable officers to
access any place of business of a taxable person Inspection
and also any place of business of a person
engaged in transporting goods or who is an owner
or an operator of a warehouse or godown.
As per Section 67 of CGST Act, inspection can be carried out by proper officer only
upon a written authorization given by an officer of the rank of Joint Commissioner or
above.

Circumstances for carrying out inspection

A Joint Commissioner or an officer higher in rank can give such authorization only if
he has reasons to believe that
(a) taxable person has done one of the following:-
i. suppressed any transaction of supply of goods or services;
ii. suppressed stock of goods in hand;
iii. claimed excess input tax credit;
iv. contravened any provision of the Act to evade tax;
(b) any person engaged in transporting of goods has kept goods which have
escaped payment of tax or has kept his accounts or goods in a manner that
is likely to cause evasion of tax, whether or not he is a taxable person.
(c) an owner or an operator of a warehouse or a godown has kept goods which
have escaped payment of tax or has kept his accounts or goods in a manner
that is likely to cause evasion of tax.
Reason to believe is to have knowledge of facts which,
although not amounting to direct knowledge, would
cause a reasonable person, knowing the same facts, to Meaning of
reasonably conclude the same thing. As per Section 26 Reasons to
of the IPC, 1860, “A person is said to have ‘reason to believe
believe’ a thing, if he has sufficient cause to believe
that thing but not otherwise.” ‘Reason to believe’
contemplates an objective determination based on intelligent care and
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evaluation as distinguished from a purely subjective consideration. It has to be and

must be that of an honest and reasonable person based on relevant material and
circumstances.
Any tax law should provide powers to the enforcing officers, to check the
evasion of tax. As per the dictionary meanings and
as noted in different judicial pronouncements, the
term ‘search’, in simple language, denotes an action
Meaning of Search
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.
The term ‘seizure’ has not been specifically defined in the GST Act. In Law
Lexicon Dictionary, ‘seizure’ is defined as the
act of taking possession of property by an
officer under legal process. It generally Meaning of Seizure
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.
During such inspection, if any goods which are liable for 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 demand of tax, Search & Seizure
the officers conducting the inspection could search
and seize such goods/documents and books.

Confiscation of goods
As per section 130 of CGST Act, goods become liable to confiscation when any
person does the following:
(i) supplies or receives any goods in contravention of any of the provisions of
this Act or rules made thereunder 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 without having applied for the
registration;

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(iv) contravenes any of the provisions of the CGST Act or rules made thereunder
with intent to evade payment of tax.
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, subject
to the approval of the Proper Officer.
Powers of officer during search
An officer carrying out a search has the power to search for and seize goods
(which are liable to confiscation) and documents/books/things (relevant for any
proceedings under the Act) from the premises searched. However, if it is not
practicable to seize any such goods then the same may be detained. The person
from whom these are seized shall be entitled to take copies/extracts of seized
records. During search, the officer has the power to break open the door of the
premises authorized to be searched 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,
account, registers or documents are suspected to be concealed. He can also seal the
premises if access to it denied.
The seized documents/books/things shall be retained only till the time the same
are required for examination/enquiry/proceedings and if these are not relied on
for the case then the same shall be returned within 30 days from the issuance
of show cause notice
Manner of release of confiscated goods, documents
 Provisional basis:-The seized goods shall be released on a provisional basis,
on execution of bond and furnishing of prescribed amount of security or on
payment of applicable tax, interest and penalty.
 Actual return of goods:- In case of seizure of goods, a notice has to be
issued within six months, if no notice is issued within a period of six months
then all such goods shall be returned. However, this period of six months can
be extended by Commissioner for another six months on sufficient cause.
 Disposal of goods:-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, notify the goods which shall be disposed by the
proper officer in the prescribed manner. The inventory of such goods shall
also be prepared in the prescribed manner.
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Procedure for conducting search

To ensure that the provisions for search and seizure are implemented in a proper
and transparent manner, the Act stipulates that the searches and seizures shall
be carried out in accordance with the provisions of Criminal Procedure Code,
1973. Section 100 of the Code of Criminal Procedure describes the procedure
for search.

Basic requirements to be observed during search operations

The following principles should be observed during Search:
 No search of premises should be carried out without a valid search warrant issued
by the proper officer.
 There should invariably be a lady officer accompanying the search team to
residence.
 The officers before starting the search should disclose their identity by showing
their identity cards to the person in-charge of the premises.
 The search warrant should be executed before the start of the search by showing
the same to the person in-charge of the premises and his signature should be taken
on the body of the search warrant in token of having seen the same. The signatures
of at least two witnesses should also be taken on the body of the search warrant.
 The search should be made in the presence of at least two independent witnesses
of the locality. If no such inhabitants are available /willing, the inhabitants of any
other locality should be asked to be witness to the search. The witnesses should
be briefed about the purpose of the search.
 Before the start of the search proceedings, the team of officers conducting the
search and the accompanying witnesses should offer themselves for their personal
search to the person in-charge of the premises being searched. Similarly, after the
completion of search all the officers and the witnesses should again offer
themselves for their personal search.
 A Panchnama / Mahazar of the proceedings of the search should necessarily be
prepared on the spot. A list of all goods, documents recovered and
seized/detained should be prepared and annexed to the Panchnama/Mahazar.
The Panchnama / Mahazar and the list of goods/ documents seized/detained
should invariably be signed by the witnesses, the in-charge/ owner of the premises
before whom the search is conducted and also by the officer(s) duly authorized
for conducting the search.

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 After the search is over, the search warrant duly executed should be
returned in original to the issuing officer with a report regarding the
outcome of the search. The names of the officers who participated in the
search may also be written on the reverse of the search warrant.
 The issuing authority of search warrant should maintain register of records
of search warrant issued and returned and used search warrants should be
kept in records.
 A copy of the Panchnama / Mahazar along with its annexure should be given
to the person incharge/owner of the premises being searched under
acknowledgement.

Search Warrant and its contents.

The written authority to conduct search is generally called search warrant. The
competent authority to issue search warrant is an officer of the rank of Joint
Commissioner or above. A search warrant must indicate the existence of a
reasonable belief leading to the search. Search Warrant should contain the
following details:
 the violation under the Act,
 the premise to be searched,
 the name and designation of the person authorized for search,
 the name of the issuing officer with full designation along with his round seal,
 date and place of issue,
 serial number of the search warrant,
 period of validity i.e. a day or two days etc.
Safeguards provided for in respect of Search or Seizure
Certain safeguards are provided in section 67 of CGST Act in respect of the power
of search or seizure. These are as follows:
 Seized goods or documents should not be retained beyond the period
necessary for their examination;
 Photocopies of the documents can be taken by the person from whose
custody documents are seized;
 For seized goods, if a notice is not issued within six months of its seizure,
goods shall be returned to the person from whose possession it was seized.
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This period of six months can be extended on justified grounds up to a further

period of maximum six months;
 An inventory of seized goods shall be made by the seizing officer;
 Certain specified categories of goods such as perishable, hazardous etc. can
be disposed of immediately after seizure. For instance, newspapers and
periodicals, menthol, camphor, saffron, petroleum products, red sander,
cells, batteries and rechargeable batteries, Re-fills for ball-point pens, etc.
 Provisions of Code of Criminal Procedure 1973 relating to search and seizure
shall apply. However, one important modification is in relation to sub-
section (5) of section 165 of Code of Criminal Procedure – instead of sending
copies of any record made in course of search to the nearest Magistrate
empowered to take cognizance of the offence, it has to be sent to the
Principal Commissioner/ Commissioner of CGST.

3. INSPECTION OF GOODS IN MOVEMENT

[SECTION 68]
Inspection can also be done of the conveyance, carrying a consignment of value
exceeding specified limit. The 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. The same has already been
discussed in detail in Chapter-11: Accounts and Records. Inspection during
transit can be done even without authorisation of Joint Commissioner.

4. ACCESS TO BUSINESS PREMISES [SECTION 71]

During the course of any enquiry under this Act, the duly empowered officer can
have access to any business premises, which may be required for the purpose
of such enquiry. During such access, the officers can inspect the books of
accounts, documents, computers, computer programs, computer software and
such other things as may be required.
It is the duty of the persons in charge of such premises to furnish the required
documents. Similarly, the persons in charge of business premises are also duty
bound to furnish such documents to the audit party deputed by the proper
officer or the Chartered Accountant or Cost Accountant, who has been deputed
by the Commissioner to carry out special audit. The following records are
covered by this provision and are to be produced, if called for.
(i) the records prepared and maintained by the registered person and declared
to the proper officer in the prescribed manner.
(ii) trial balance or its equivalent.
(iii) statements of annual financial accounts, duly audited.
(iv) cost audit report, if any.
(v) the income - tax audit report, if any.
(vi) any other relevant record.

5. OFFICERS TO ASSIST PROPER OFFICERS

[SECTION 72]
Under section 72 of CGST Act, the following officers have been empowered and are
required to assist CGST officers in the execution of CGST Act. The categories specified
are as follows:
i. Police;
ii. Railways
iii. Customs;
iv. Officers of State/UT/ Central Government engaged in collection of GST;
v. Officers of State/UT/ Central Government engaged in collection of land
revenue;
vi. All village officers;
vii. Any other class of officers as may be notified by the Central/State
Government.