Inspection, Search, Seizure and Arrest

Q 1. What is the meaning of the term “Search”?

Ans. As per law dictionary and as noted in different judicial
pronouncements, the term ‘search’, in simple language,
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.

Q 2. What is the meaning of the term “Inspection”?

Ans. ‘Inspection’ is a new provision under the CGST/SGST
Act. It is a softer provision than search to enable officers to
access any place of business of a taxable person 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.

Q 3. Who can order for carrying out “Inspection” and under what circumstances?

Ans. As per Section 67 of CGST/SGST Act, Inspection
can be carried out by an officer of CGST/SGST only upon a
written authorization given by an officer of the rank of
Joint Commissioner or above. A Joint Commissioner or an
officer higher in rank can give such authorization only if
he has reasons to believe that the person concerned has
done one of the following:

i. suppressed any transaction of supply;

ii. suppressed stock of goods in hand;

iii. claimed excess input tax credit;

iv. contravened any provision of the CGST/SGST
Act to evade tax;

v. a transporter or warehouse owner 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.

Q 4. Can the proper officer authorize Inspection of any assets/premises of any person under this Section?

Ans. No. Authorization can be given to an officer of CGST/
SGST to carry out inspection of any of the following:

i. any place of business of a taxable person;

ii. any place of business of a person engaged in the
business of transporting goods whether or not
he is a registered taxable person;

iii. any place of business of an owner or an operator
of a warehouse or go down.

Q 5. Who can order for Search and Seizure under the provisions of CGST Act?

Ans. An officer of the rank of Joint Commissioner or above
can authorize an officer in writing to carry out search and
seize goods, documents, books or things. Such authorization
can be given only where the Joint Commissioner has reasons
to believe that any goods liable to confiscation or any
documents or books or things relevant for any proceedings
are hidden in any place.

Q 6. What is meant by ‘reasons to believe’?

Ans. 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 reasonably conclude the same thing. As per
Section 26 of the IPC, 1860, “A person is said to have
‘reason to 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 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.

Q 7. Is it mandatory that such ‘reasons to believe’ has to be recorded in writing by the proper officer, before issuing authorization for Inspection or Search and Seizure?

Ans. Although the officer is not required to state the
reasons for such belief before issuing an authorization
for search, he has to disclose the material on which his
belief was formed. ‘Reason to believe’ need not be
recorded invariably in each case. However, it would be
better if the materials / information etc. are recorded
before issue of search warrant or before conducting
search.

Q 8. What is a Search Warrant and what are its contents?

Ans. 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:

i. the violation under the Act,

ii. the premise to be searched,

iii. the name and designation of the person
authorized for search,

iv. the name of the issuing officer with full
designation along with his round seal,

v. date and place of issue,

vi. serial number of the search warrant,

vii. period of validity i.e. a day or two days etc.

Q 9. When do goods become liable to confiscation under the provisions of CGST/SGST Act?

Ans. As per section 130 of CGST/SGST 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;

(iv) contravenes any of the provisions of the
CGST/ SGST Act or rules made thereunder
with intent to evade payment of tax.

Q 10. What powers can be exercised by an officer during valid search?

Ans. An officer carrying out a search has the power to search
for and seize goods (which are liable to confiscation) and
documents, books or things (relevant for any proceedings
under CGST/SGST Act) from the premises searched. 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.

Q 11. What is the procedure for conducting search?

Ans. Section 67(10) of CGST/SGST Act prescribes that
searches must be carried out in accordance with the
provisions of Code of Criminal Procedure, 1973. Section
100 of the Code of Criminal Procedure describes the
procedure for search.

Q 12. What are the basic requirements to be observed during Search operations?

Ans. 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.

• 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 in-
  charge/owner of the premises being searched
  under acknowledgement.

Q 13. Can a CGST/SGST officer access business premises under any other circumstances?

Ans. Yes. Access can also be obtained in terms of Section
65 of CGST/SGST Act. This provision of law is meant to
allow an audit party of CGST/SGST or C&AG or a cost
accountant or chartered accountant nominated under
section 66 of CGST/SGST Act, access to any business
premises without issuance of a search warrant for the
purposes of carrying out any audit, scrutiny, verification
and checks as may be necessary to safeguard the interest
of revenue. However, a written authorization is to be
issued by an officer of the rank of Commissioner of CGST or
SGST. This provision facilitates access to a business
premise which is not registered by a taxable person as a
principal or additional place of business but has books of
accounts, documents, computers etc. which are required
for audit or verification of accounts of a taxable person.

Q 14. What is meant by the term ‘Seizure’?

Ans. The term ‘seizure’ has not been specifically defined
in the Model GST Law. In Law Lexicon Dictionary, ‘seizure’
is defined as the 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.

Q 15. Does GST Act(s) have any power of detention of goods and conveyances?

Ans. Yes, under Section 129 of CGST/SGST Act, an officer
has power to detain goods along with the conveyance
(like a truck or other types of vehicle) transporting the
goods. This can be done for such goods which are being
transported or are stored in transit in violation of the
provisions of CGST/SGST Act. Goods which are stored or
are kept in stock but not accounted for can also be
detained. Such goods and conveyance shall be released
after payment of applicable tax or upon furnishing
security of equivalent amount.

Q 16. What is the distinction in law between ‘Seizure’ and ‘Detention’?

Ans. Denial of access to the owner of the property or the
person who possesses the property at a particular point
of time by a legal order/notice is called detention. Seizure
is taking over of actual possession of the goods by the
department. Detention order is issued when it is suspected
that the goods are liable to confiscation. Seizure can be
made only on the reasonable belief which is arrived at
after inquiry/investigation that the goods are liable to
confiscation.

Q 17. What are the safeguards provided in GST Act ( s ) in respect of Search or Seizure?

Ans. Certain safeguards are provided in section 67 of
CGST/SGST Act in respect of the power of search or seizure.
These are as follows:

i. Seized goods or documents should not be
retained beyond the period necessary for their
examination;

ii. Photocopies of the documents can be taken by
the person from whose custody documents are
seized;

iii. 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. This period of six months can be
extended on justified grounds up to a further
period of maximum six months;

iv. An inventory of seized goods shall be made by
the seizing officer;

v. Certain categories of goods to be specified under
CGST Rules (such as perishable, hazardous etc.)
can be disposed of immediately after seizure;

vi. 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/ Commissioner of SGST.

Q 18. Is there any special document required to be carried during transport of taxable goods?

Ans. Under section 68 of CGST /SGST Act, a person in
charge of a conveyance carrying any consignment of
goods of value exceeding a specified amount may be
required to carry a prescribed document as may be
prescribed.

Q 19. What is meant by the term “arrest”?

Ans. The term ‘arrest’ has not been defined in the
CGST/SGST Act. However, as per judicial
pronouncements, it denotes ‘the taking into custody of a
person under some lawful command or authority’. In other
words, a person is said to be arrested when he is taken and
restrained of his liberty by power or colour of lawful
warrant.

Q 20. When can the proper officer authorize ‘arrest’ of any person under CGST / SGST Act?

Ans. The Commissioner of CGST/SGST can authorize a
CGST/SGST officer to arrest a person if he has reasons to
believe that the person has committed an offence attracting
a punishment prescribed under section 132(1) (a), (b), (c),
(d) or Sec 132(2) of the CGST/SGST Act. This essentially
means that a person can be arrested only where the tax
evasion is more than 2 crore rupees or where a he has
been convicted earlier under CGST Act.

Q 21. What are the safeguards provided under CGST /SGST Act for a person who is placed under arrest?

Ans. There are certain safeguards provided under section
69 for a person who is placed under arrest. These are:

a. If a person is 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
hours of his arrest;

i. If a person is arrested for a non-
cognizable and bailable offence, the
Deputy/ Assistant Commissioner of
CGST/SGST can release him on bail
and he will be subject to the same
provisions as an officer in-charge of a
police station under section 436 of the
Code of Criminal Procedure, 1973;

ii. All arrest must be in accordance with
the provisions of the Code of Criminal
Procedure,1973 relating to arrest.

Q 22. What are the precautions to be taken during arrest?

Ans. The provisions of the Code of Criminal Procedure,
1973 (2 of 1974) relating to arrest and the procedure
thereof must be adhered to. It is therefore necessary that
all field officers of CGST/SGST be fully familiar with the
provisions of the Code of Criminal Procedure, 1973.

One important provision to be taken note of is section 57 of
Cr.P.C., 1973 which provides that a person arrested without
warrant shall not be detained for a longer period than,
under the circumstances of the case, is reasonable but this
shall not exceed twenty four hours (excluding the journey
time from place of arrest to the Magistrate’s court). Within
this period, as provided under section 56 of Cr.P.C., the
person making the arrest shall send the person arrested
without warrant before a Magistrate having jurisdiction
in the case.

In a landmark judgment in the case of D.K. Basu v. State
of West Bengal reported in 1997 (1) SCC 416, the Hon’ble
Supreme Court has laid down specific guidelines required
to be followed while making arrests. While this is in relation
to police, it needs to be followed by all departments having
power of arrest. These are as under:

i. The police personnel carrying out the arrest and
handling the interrogation of the arrestee should
bear accurate, visible and clear identification
and name tags with their designations. The
particulars of all such police personnel who
handle interrogation of the arrestee must be
recorded in a register.

ii. The police officer carrying out the arrest shall
prepare a memo of arrest at the time of arrest
and such memo shall be attested by at least one
witness, who may be either a member of the
family of the arrestee or a respectable person of
the locality from where the arrest is made. It
shall also be counter signed by the arrestee and
shall contain the time and date of arrest.

iii. A person who has been arrested or detained and
is being held in custody in a police station or
interrogation center or other lock up, shall be
entitled to have one friend or relative or other
person known to him or having interest in his
welfare being informed, as soon as practicable,
that he has been arrested and is being detained at
the particular place, unless the attesting witness of
the memo of arrest is himself such a friend or a
relative of the arrestee.

iv. The time, place of arrest and venue of custody of an
arrestee must be notified by the police where the
next friend or relative of the arrestee lives outside
the district or town through the Legal Aid
Organization in the District and the police station
of the area concerned telegraphically within a
period of 8 to 12 hours after the arrest.

v. An entry must be made in the diary at the place of
detention regarding the arrest of the person which
shall also disclose the name of the next friend of
the person who has been informed of the arrest
and the names and particulars of the police
officials in whose custody the arrestee is.

vi. The arrestee should, where he so requests, be
also examined at the time of his arrest and major
and minor injuries, if any present on his/her
body, must be recorded at that time. The
‘Inspection Memo’ must be signed both by the
arrestee and the police officer effecting the arrest
and its copy provided to the arrestee.

vii. The arrestee should be subjected to medical
examination by the trained doctor every 48
hours during his detention in custody by a doctor
on the panel of approved doctors appointed by
Director, Health Services of the concerned State
or Union Territory, Director, Health Services
should prepare such a panel for all Tehsils and
Districts as well.

viii. Copies of all the documents including the memo
of arrest, referred to above, should be sent to the
Magistrate for his record.

ix. The arrestee may be permitted to meet his lawyer
during interrogation, though not throughout
the interrogation.

x. A police control room should be provided at
all district and State headquarters where
information regarding the arrest and the place
of custody of the arrestee shall be communicated
by the officer causing the arrest, within 12 hours
of effecting the arrest and at the police control
room it should be displayed on a conspicuous
notice board.

Q 23. What are the broad guidelines for arrest followed in CBEC?

Ans. Decision to arrest needs to be taken on case-to-
case basis considering various factors, such as, nature
and gravity of offence, quantum of duty evaded or credit
wrongfully availed, nature and quality of evidence,
possibility of evidences being tampered with or witnesses
being influenced, cooperation with the investigation,
etc. Power to arrest has to be exercised after careful
consideration of the facts of the case which may include:

i. to ensure proper investigation of the offence;

ii. to prevent such person from absconding;

iii. cases involving organized smuggling of goods or
evasion of customs duty by way of concealment;

iv. master minds or key operators effecting proxy/
benami imports/exports in the name of dummy
or non-existent persons/IECs, etc.;

v. where the intent to evade duty is evident and
element of mensrea/guilty mind is palpable;

vi. prevention of the possibility of tampering with
evidence;

vii. intimidating or influencing witnesses; and

viii. large amounts of evasion of duty or service tax
at least exceeding one crore rupees.

Q 24. What is a cognizable offence?

Ans. Generally, as per Cr. PC, cognizable offence means serious
category of offences in respect of which a police officer has
the authority to make an arrest without a warrant and to
start an investigation with or without the permission of a
court. However, GST being a special legislation, only the
officers, duly empowered under the Act can act as above.

Q 25. What is a non-cognizable offence?

Ans. Non-cognizable offence means relatively less serious
offences in respect of which a police officer does not have
the authority to make an arrest without a warrant and an
investigation cannot be initiated without a court order,
except as may be authorized under special legislation.

Q 26. What are cognizable and non-cognizable offences under CGST Act?

Ans. In section 132 of CGST Act, it is provided that the
offences relating to taxable goods and /or services where
the amount of tax evaded or the amount of input tax
credit wrongly availed or the amount of refund wrongly
taken exceeds Rs. 5 crore, shall be cognizable and non-
bailable. Other offences under the act are non-cognizable
and bailable.

Q 27. When can the proper officer issue summons under CGST Act?

Ans. Section 70 of CGST/SGST Act gives powers to a duly
authorized CGST/SGST officer to call upon a person by
issuing a summon to present himself before the officer
issuing the summon to either give evidence or produce a
document or any other thing in any inquiry which an
officer is making. A summons to produce documents or
other things may be for the production of certain specified
documents or things or for the production of all
documents or things of a certain description in the
possession or under the control of the person summoned.

Q 28. What are the responsibilities of the person so summoned?

Ans. A person who is issued summon is legally bound to
attend either in person or by an authorized representative
and he is bound to state the truth before the officer who has
issued the summon upon any subject which is the subject
matter of examination and to produce such documents
and other things as may be required.

Q 29. What can be the consequences of non- appearance to summons?

Ans. The proceeding before the official who has issued
summons is deemed to be a judicial proceeding. If a
person does not appear on the date when summoned
without any reasonable justification, he can be
prosecuted under section 174 of the Indian Penal Code
(IPC). If he absconds to avoid service of summons, he can
be prosecuted under section 172 of the IPC and in case
he does not produce the documents or electronic records
required to be produced, he can be prosecuted under
section 175 of the IPC. In case he gives false evidence, he
can be prosecuted under section 193 of the IPC. In
addition, if a person does not appear before a CGST/
SGST officer who has issued the summon, he is liable to a
penalty up to Rs 25,000/- under section 122(3)(d) of
CGST/SGST Act.

Q 30. What are the guidelines for issue of summons?

Ans. The Central Board of Excise and Customs (CBEC)
in the Department of Revenue , Ministry of
Finance has issued guidelines from time to time to
ensure that summons provisions are not misused in the
field. Some of the important highlights of these
guidelines are given below:

i. summons are to be issued as a last resort where
assesses are not co-operating and this section
should not be used for the top management;

ii. the language of the summons should not be harsh
and legal which causes unnecessary mental
stress and embarrassment to the receiver;

iii. summons by Superintendents should be issued
after obtaining prior written permission from
an officer not below the rank of Assistant
Commissioner with the reasons for issuance of
summons to be recorded in writing;

iv. 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;

v. in all cases, where summons are issued, the
officer issuing summons should submit a report
or should record a brief of the proceedings in
the case file and submit the same to the officer
who had authorized the issuance of summons;

vi. senior management officials such as CEO, CFO,
General Managers of a large company or a Public
Sector Undertaking should not generally be
issued summons at the first instance. They should
be summoned only when there are indications
in the investigation of their involvement in the
decision making process which led to loss of
revenue.

Q 31. What are the precautions to be observed while issuing summons?

Ans. The following precautions should generally be
observed when summoning a person: –

(i) A summon should not be issued for appearance
where it is not justified. The power to summon
can be exercised only when there is an inquiry
being undertaken and the attendance of the
person is considered necessary.

(ii) Normally, summons should not be issued
repeatedly. As far as practicable, the statement
of the accused or witness should be recorded in
minimum number of appearances.

(iii) Respect the time of appearance given in the
summons. No person should be made to wait
for long hours before his statement is recorded
except when it has been decided very consciously
as a matter of strategy.

(iv) Preferably, statements should be recorded
during office hours; however, an exception could
be made regarding time and place of recording
statement having regard to the facts in the case.

Q 32. Are there any class of officers who are required to assist CGST/SGST officers?

Ans. Under section 72 of CGST/SGST Act, the following
officers have been empowered and are required to assist
CGST/SGST officers in the execution of CGST/SGST 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.