CGST Section 67 — Power of inspection, search and seizure

Section 67 of the CGST Act grants GST officers the power to inspect, search, and seize goods, documents, and other items if they suspect tax evasion. This allows the department to investigate potential GST fraud and recover evaded tax.

This section applies to any taxable person, someone engaged in transporting goods, or an owner/operator of a warehouse, godown, or any other place where goods are stored or business is conducted. The powers under this section can be invoked when a Joint Commissioner or higher-ranked officer has "reasons to believe" that:

• A taxable person has suppressed details of any supply of goods or services, suppressed stock, claimed excess input tax credit (ITC), or violated any GST provisions to evade tax.
• Someone transporting goods, or managing a warehouse or godown, is keeping goods on which tax hasn't been paid or is maintaining accounts or goods in a way that is likely to cause tax evasion.

Let's break down the key conditions and exceptions:

• Authorization: The "proper officer" (at least a Joint Commissioner) must authorize the inspection, search, or seizure in writing. They can then delegate the actual action to another central tax officer.
• Reasons to Believe: This is crucial. The officer must have a valid basis for their suspicion, not just a hunch.
• Seizure: If, after inspection, the officer believes that goods liable for confiscation or documents relevant to GST proceedings are hidden, they can seize them. If immediate seizure isn't practical, they can issue an order prohibiting the owner from moving or dealing with the goods without permission.
• Retention of Seized Items: Seized documents must be returned after examination and inquiry, as long as they are no longer necessary for the case.
• Return of Unused Documents: Documents produced by the taxable person but not used for issuing a notice must be returned within 30 days of the notice date.
• Breaking Open Premises: Officers have the power to break open doors, almirahs, electronic devices, or containers if access is denied.
• Right to Copies: The person whose documents are seized can make copies or extracts in the presence of an authorized officer, unless it would prejudice the investigation.
• Provisional Release: Seized goods can be released provisionally upon furnishing a bond and security or paying the applicable tax, interest, and penalty.
• Time Limit for Notice: If goods are seized, a notice related to the seizure must be issued within six months. This period can be extended by another six months with sufficient cause.
• Perishable Goods: The government can specify goods that are perishable or hazardous, which can be disposed of soon after seizure. An inventory of such goods must be created.
• Code of Criminal Procedure: The provisions of the Code of Criminal Procedure related to search and seizure apply to GST searches as well.
• Seizure of Accounts: The officer can seize accounts or documents believed to be linked to tax evasion and must provide a receipt for them.
• Test Purchases: GST officers can conduct test purchases to check if businesses are issuing proper tax invoices.

Practical Examples:

• Example 1: A GST officer receives information that a manufacturer is selling goods off the books to avoid paying tax. Based on this information, the Joint Commissioner authorizes an inspection of the manufacturer's factory. During the inspection, the officer finds a hidden storeroom containing goods that are not recorded in the books. The officer can seize these goods under Section 67.
• Example 2: A transporter is stopped and found to be carrying goods without a valid e-way bill or invoice. If the officer has reason to believe the goods are meant for tax evasion, they can seize the goods and the vehicle under Section 67.
• Example 3: During an audit, a GST officer notices a discrepancy in the ITC claimed by a business. They issue a notice to the business seeking clarification. The business provides some documents, but the officer is not satisfied. The officer can seize the business's records to further investigate the ITC claim under Section 67(11).

While there haven't been major amendments to Section 67 itself, amendments to related rules and procedures regarding search, seizure, and provisional release have been made periodically to streamline the process and address practical challenges. Always consult the latest notifications and circulars issued by the CBIC for the most up-to-date information.