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Understanding Inspection, Search, Seizure and Arrest under GST

GST is implemented in India for efficient tax collection, for easy inter-state movement of goods and to reduce the corruption. Under GST there are strict provisions to inspect and search places of business for suspected tax evaders.

Inspection Under GST

An inspection is an act that enables the officer to access any place of business of the taxable person. It also enables the officer to access any place of business of an individual who is engaged in transporting goods or the individual who is the owner or operator of a warehouse or go down. In real it is a softer provision than search. Inspection can only be carried out by the officer of Central Goods and Service tax (CGST) or State Goods and Service Tax (SGST) upon a written authorization given by an officer of the rank of Joint Commissioner and above.

An officer higher in rank or Joint Commissioner can give such authorization only if he/she believes that person who is concerned has performed any of the following actions:

  • If the person has claimed excess input tax credit.
  • If any transaction has been suppressed relating to the supply of goods and services or stock in hand.
  • If any provisions of the act or rules to evade tax have been violated.
  • Transporting or keeping the goods, which escaped the payment of tax or manipulate stocks or accounts which cause evasion of taxes.

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Inspection is done for the conveyance and for the consignment whose value exceeds the limit which is already specified. The individual who oversees the conveyance must maintain documents or devices for verification and should allow inspection. Inspection during transit of goods can be done even without the authorization of the Joint Commissioner.

Characterizing Inspection in Movement

  • Any consignment whose value exceeds Rs. 50,000 may be stopped for the verification of documents or devices which have been prescribed for the movements of such consignments at any place.
  • If at the time of verification of the consignment, it is found that some goods have been removed without the prescribed movement and the same goods are being supplied by violating any provisions or rules of the act, then the goods can be detained or seized and also may be subjected to penalty as prescribed.
  • To ensure transparency and accountability in trade, the law states that if during verification, in transit, consignment is held-up for more than 30 minutes then the transporter is required to feed details on the portal.

Search is an attempt to find something. It is an action taken by the government official to go and carefully examine a place, person, object etc. it can be done under a proper and valid authority of law. The term “Seizure” has not been specifically defined under GST law. However, Seizure is an act of taking over something or someone by legal process. It simply means taking over the possession forcibly against the wish of the owner. The provisions of the Code of Criminal Procedure apply to search and seizure.

As per GST law, searching for any place of business can be carried out only under the authorization from an officer who is not below the rank of Joint Commissioner and that concerned business owner has committed any of the following:

  • Hiding away goods or any document or record which are liable to confiscation which might be proved useful or relevant to any proceedings.
  • The hidden goods or record or documents may be seized and if the goods cannot be seized then the goods are detained. The owner of the seized goods is entitled to take the copies of the seized records.
  • The seized goods/documents/things shall be retained until the time they are required for examinations or further proceedings. If the seized item cannot be used as a reliable cause for the case then it must be returned within 30 days from the date of issuance of show cause notice.
  • The goods seized shall be provisionally released on execution of bond or after furnishing the security or after paying the tax, interest, and penalty applicable.
  • A notice must be issued within 6 months after the goods have been in a seizure. If no notice is issued within the 6 months then all such goods shall be returned. The period of 6 months can be increased by the commissioner for next 6 months on sufficient cause.
  • An inventory of the seized goods/record/document is required to be made by the officer. A person whose goods are seized shall be given a copy of the same.

The commissioner of Central Goods and Service Tax (CGST) or State Goods and Service Tax (SGST) or an authorized officer can purchase any goods or services from a taxable person to check the issue of tax invoices whether they are maintained correctly and whether the GST has been clearly displayed. The amount will have to be refunded by the taxable person and sales invoice will be canceled when the goods will be returned.

Difference between Seizure and Detention

Detention means taking access of the goods seized without any legal order or notice. In such case, the ownership still lies with the real owner, unless it has been legally proved. It is generally issued when it is suspected that the goods are liable to confiscation.

Whereas, Seizure is taking away the possession forcibly against the wish of the owner, though with legal force.

Arrest Under GST Law

If a person commits any offense under Section 132, then he or she can be arrested by any Central Goods and Service Tax (CGST) or State Goods and Service Tax (SGST) officer. GST provides inbuilt safeguards for arrests in ensuring that the arrests are only made under the strict authority of the commissioner.

The salient points of this provisions are as follows:

  • These provisions are used only in the exceptional circumstances and with the prior authorization from the Commissioner.
  • Under the law, there is proper criteria and procedure which is to be followed to arrest any person. A person can only be arrested if and only when the criteria stipulated is satisfied. The monetary limit shall not be applicable if the offense is committed again even after being convicted earlier.