Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017 has been implemented w.e.f 19th December 2017

The Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Rules, 2018, Notified on 23rd March 2018, replaces the erstwhile Maharashtra Shops and Establishments Rules, 1961.

The Rules are applicable to all commercial establishments in Maharashtra State, which employ 10 or more employees (not covered under the Factories Act).

Definition of Establishment 
[Sec. 2(4)]

“establishment” means an establishment which carries on, any business, trade, manufacture or any journalistic or printing work, or business of banking, insurance, stocks and shares, brokerage or produce exchange or profession or any work in connection with, or incidental or ancillary to, any business, trade or profession or manufacture;

and includes establishment of any medical practitioner (including hospital, dispensary, clinic, polyclinic, maternity home and such others), architect, engineer, accountant, tax consultant or any other technical or professional consultant;

and also includes a society registered under the Societies Registration Act, 1860, and a charitable or other trust, whether registered or not, which carries on, whether for purposes of gain or not, any business, trade or profession or work in connection with or incidental or ancillary thereto;

and includes shop, residential hotel, restaurant, eating house, theatre or other place of public amusement or entertainment; to whom the provisions of the Factories Act, 1948 does not apply ;

and includes such other establishment as the State Government may, by notification in the Official Gazette, declare to be an establishment for the purposes of this Act;

In Earlier Act : It was not applicable to Chartered Accountants, Medical Practitioners and Legal Practitioners

Registration & Renewal of License

The provisions of the act shall be applicable on establishments employing 10 or more employees. Therefore the registration under the act shall not be applicable for establishments having less than 10 employees ( However the same shall not be applicable for the establishments already registered and having the valid S&E and till the expiry of the said registration. (Only Online Registration).

Intimation of Commencement of business by such employer engaging less than ten employees

The employer of every establishment engaging less than ten employees shall submit an online intimation in Form ‘’F” of commencement of the business along with the required documents.

Issue of Receipt of Intimation – After receiving an intimation in Form “F” alongwith all the documents, a receipt of such intimation in Form “G” shall be issued to the applicant online.

In Earlier Act : Registration was applicable even for zero head count

• Maharashtra Shops and Estb., Act, 2017 :- The application for registration under the Act should be filed within 60 days from the commencement of operation.

In Earlier Act : it was Within 30 days from the commencement of operation

Maharashtra Shops and Estb., Act, 2017: The renewal of registration need to be applied online, not less than 30 days before the date of expiry of registration.

In Earlier Act : it was 15 days prior to the expiry

No Fees payable for S&E License

There will be no fees charged for the following: application for registration, renewal of certificate of registration, and changes in the certificate of registration. However, the employer may have to pay the electronic transaction or service charges as periodically fixed by the state government for availing e-services under the 2017 Act and the 2018 Rules.

In Earlier Act : Fees payable as per the Schedule on the basis of Employees strength.

Working Hours

Maximum 9 hours/day (excluding lunch hours) & 48 hours/ week

Interval / Rest: An employee must be allowed an interval of rest of at least 1/2 hour after 5 hours of continuous work

Every Six Days work perform Seventh day should be the paid holiday.

Spread over

The spread-over of an employee in establishment shall not exceed 10.5 hours in any day.

In Earlier Act : Earlier 11 hours in any day.

Overtime

The total number of overtime hours shall not exceed 125 hours in a period of 3 months. It has to be paid double the ordinary rate of salary / wages.

In Earlier Act : Earlier 6 hours in a week

Identity Card

The employer of an establishment shall furnish to every employee an identity card. Such card shall contain the following and such other particulars as may be prescribed, namely :—

the name of the employer ;the name, if any, and the postal address, of the establishment;the name and age of the employee;date of joining, department, nature of work, designation;the signature (with date) of the employer or manager;Blood Group;Aadhaar Card Number.

In Earlier Act : There was no such provision

Earned Leave

Earned Leave – One day earned leave for every 20 days of work.

Maximum accumulation of Earned Leaves shall not exceed 45 days.

Further the employee is allowed to encash leave in excess of 45 days, if the employer refuses to sanction the leave.

In Earlier Act : it was 21 days in year for the 240 days work performed, maximum accumulation of 42 days.

Casual Leave

Casual Leave : 8 days (8 days in a year which shall be credited into the account of the employee on a quarterly basis, i.e. per quarter 2 days).

In Earlier Act : Earlier there was no provision for casual leave

Earlier (Existing) Benefits will be continued in Case of Earned Leave, Sick Leave, Casual Leave and any other benefits

Any Benefit, Law, Contract, Custom or Usage applicable before the commencement of this Act is not affected. Such benefits shall 
remain unaffected. (Such benefits shall be continued)

National and Festival holidays

Employees shall be entitled for holidays on 26-Jan, 1-May, 15-Aug, & 2-Oct and 4 such other festival holidays, agreed by the employer and employees.

In Earlier Act :- No provision of Festival holidays

Women Employees

No women shall be discriminated in the matter of recruitment, training, transfers, promotion or wages.

Women employees with their consent shall be allowed to work between 9:30 p.m. and 7 a.m., in any establishment only after obtaining her consent in Form “L”.

In which adequate protection of their dignity, honour and safety, protection from sexual harassment and their transportation from the establishment to the doorstep of their residence as may be prescribed are provided by the employer or his authorised representative or manager or supervisor.

Hiring women security guards

Employing woman security guards is now mandatory in establishments employing not less than 10 women employees. The 2018 Rules specify the number of such security guards required, depending on the size of the workforce.

The establishment must also undertake mandatory police verification of the candidates who are recruited as women security guards.

Additional paid holiday for women employees

Every women employee who works during the night as per her shift schedule is entitled to one additional paid holiday for every two months in a year.

Maternity leave for night shift women employees

The Rules provide that women employees cannot work night shifts during a period of 12 weeks before and after child birth, of which at least 12 weeks must be before childbirth, and any further period that as may be specified in her medical certificate.

Safety of women in the workplace

Every employer has to submit an annual undertaking stating their provision of all the facilities mentioned under Rule 13 of the Rules. These include conditions for the employment of women in general as well as during night shifts.

In Earlier Act : There was no such provision for women Employees

Provision of Creche or Suitable Room for the use of Children

Establishment wherein fifty or more employees are employed, there shall be provided and maintained a suitable room or rooms as crèche for the use of children of such Employees. Provided that, if a group of establishments, so decide to provide a common crèche within a radius of one kilometre, then, the same shall be permitted by the Chief Facilitator, subject to such conditions as may be specified in the order.

In Earlier Act : There was no such provision

Part time employment

Wages payable to a part time employee is calculated by dividing the per day rate of ‘minimum wages’ applicable to that category of employment by eight hours plus a fifteen percent rise on it or by dividing the prevailing daily wage rate for permanent employees doing similar nature of work in that establishment by eight hours plus a fifteen percent rise on it, whichever is higher.

No part time employee should be allowed to work overtime under any circumstances. This is to prevent the misuse or exploitation of part time employees.

In Earlier Act : There was no such provision for Part Time Employment.

Health, Safety, and Welfare Committee

A Health, Safety and Welfare Committee must be formed in establishments with 10 or more employees, under the 2018 Rules; it should consist of an equal number of employer and employee representatives, respectively.

The committee must also have a sufficient number of women representatives, wherever women employees are employed.

In Earlier Act : There was no such provision.

Fire and safety framework

Every employer has to adopt and implement all the safety measures mentioned, suggested, and recommended in the government’s Fire and Safety Policy, which may be further updated periodically.

Information regarding persons discharging managerial function

This relates to the information provided to the facilitator in Form ‘T’ on the names, designation, and brief nature of the duties of persons who perform management functions. It must be submitted annually and whenever there is any change, during the year.

In Earlier Act : There was no such provision

Information regarding persons doing confidential work

The information in Form ‘U’ relates to the names of persons who provide confidential information to the establishment. This needs to be submitted annually and whenever there is any change, during the year.

In Earlier Act : There was no such provision

Complaint box and display of numbers

Every employer must maintain a complaint box and display the phone numbers of the local police station, police control room, and women area helpline prominently in the establishment.

In Earlier Act : There was no such provision

Name Board in Marathi

The Name Board – Marathi in Devnagari Script

Along with Marathi, other Language may be use

Provided also that, no establishment where liquor is served or sold shall have a Name Board in the name of legends or fort.

Preservation of records

Every employer or manager must preserve the inspection records of the local facilitator (official seeking compliance) for a period of three years.

Cancellation of Registration Certificate / License

Where the Facilitator proposes to take action under Section 8 for cancellation of registration he shall, –

i) by a notice require the employer to submit his say as to why the registration shall not be cancelled.

ii) if, within 10 days from the date of the receipt of the notice, the employer fails to submit his say alongwith relevant documents, the facilitator may cancel the registration.

If within the period of ten days, the employer submits his say alongwith all relevant documents the facilitator may, after considering the say and the documents either withdraw the notice or cancel the registration as he may deem fit.

Filing annual return

Every employer must upload the annual return online in Form ‘R’ on the website within two months for the year ending on December 31, instead of the financial year ending on 31st December.

In Earlier Act : There was no such provision

Penalty on compounding of offence

The maximum fees for compounding of an offence (making a settlement to avoid prosecution) may be imposed by the compounding officer shall not be less than 50 percent of the maximum fine specified for such offence under the 2017 Act.

Penalty for contravention of the Act

The penalty for contravention of the Act and the rules has been enhanced to INR 100,000 and in case of continuing contravention an additional fine which may extend to INR 2000 for every day during which the contravention continues. Further, for repeated offenders the fine may extend to INR 2,00,000.

In Earlier Act : The Earlier Act provides for a minimum fine of INR 1,000 and a maximum fine of INR 5,000.

Copies of documents

Query

My client is a dealer registered under MVAT Act, 2002 and Goods & Services Tax Act, 2017.

He requires certified copy of entire file of assessment, recovery proceeding and prosecution proceeding including proceeding sheet.

But the authority is of the opinion that certified copy of proceeding sheet cannot be issued as the same is confidential.

In the circumstances, I may be enlightened as to whether certified copy of proceeding sheet is confidential and if not then under what provisions of law, it can be issued ?

In past, I read somewhere in one of the seminar book that the same can be issued under 
Civil Procedure Code read with relevant Taxation Law.

Kindly enlighten me as to whether the same can be issued or not along with provisions of law and case laws, if any.

Early reply is awaited in the matter.

Reply

Proceeding sheet cannot be said to be confidential. It is signed by dealer also. It is maintained as regular document in assessment file. In fact issues of hearing are covered by proceeding sheet and dealer is entitled to take its copy to know the issues raised. It is within Common Law.

Reference can be made to Rule 73 of Maharashtra Value Added Tax Rules, 2005 wherein fees for obtaining documents are mentioned. Documents will include proceeding sheets also. Therefore, the said sheets can be obtained by paying applicable fees.

You can also ask the same under Right to Information Act.

Cancellation vis-à-vis filing of returns

Query

I am Insurance & Mutual Fund agent. I have migrated my service tax registration into GST. However as my PAN India turnover is below ₹ 20 Lakhs, I have applied on 16-4-2018 for cancellation w.e.f. 1-4-2018. However two days back I have received a SMS from department asking me to file GSTR – 3B for April, 2018. As I have already applied for cancellation w.e.f. 1-4-2018, still I have to file GSTR – 3B for April 2018? Kindly note that my cancellation application is not yet processed by department as it is showing pending for processing on website. Whether this could be the reason for department to ask me to file GSTR – 3B for April, 2018? If so, how long I should keep on filing returns?

Reply

Once the application for cancellation of registration is filed it is to be held as effective from the given date i.e. in your case from 1-4-2018, till it is disposed of. If the application is accepted then there will not be any requirement of filing returns from 1-4-2018 itself and your not filing returns from 1-4-2018 will be as per law. If at the application is rejected then returns will be required to be filed.

Under above circumstances, at present there is no need to file returns from 1-4-2018. It appears that the SMS has come since the number is still live on the system. You can write to your jurisdictional officer to note the fact of filing of application because of which the returns are not filed. Thus any consequences for non-filing of returns can be avoided.

Quite often, a manufacturing unit is disposed by an entrepreneur as going concern along with assets and liabilities to another company and the transferee intends to carry on the manufacturing activities in such existing unit. The question arises whether on transfer of various immovable and movable assets of the unit, as going concern i.e., stock-in-trade, consumables, loans and advances, deposits, sundry creditors including outstanding liabilities for a lump sum amount without stipulating any price for individual items i.e. “slump sale” will attract the tax under VAT Act?. As regards, transfer of immovable property i.e. plot of land, factory shed and other structures constructed thereon, its ownership can be transferred only by execution of registered sale deed in favour of the transferee after payment of stamp duty hence it will not attract any liability to pay VAT or GST Law. Attempts are being made by the assessing authority to levy tax on transfer of entire undertaking as a going concern under VAT Act and same question will also arise under 
Goods & Services Tax Act, hence it is discussed hereunder :-

Whenever, a company decides to transfer its industrial unit as “slump sale” to another company, separate agreement is executed for transfer of all movable assets such as plant and machinery, DG Set, electrical installation, furniture & fixtures, air conditioners, computers, factory and office equipments, inventories, tools and consumables, vehicles etc. along with liabilities which remained on the date of transfer along with liabilities. It can be safely claimed that the transferor shall not be liable to pay VAT under MP VAT Act on such transfer on following grounds :-

i) Sale of plant & machinery embedded or fixed in the earth

The word “goods” has been defined u/s. 2(m) of MP VAT Act and u/s. 2(52) of Central Goods & Service Tax Act. It covers all kinds of movable property including computer software, all growing crops, grass, trees, plants and things attached to or forming part of the land which are agreed to be severed before the sale or under the contract of sale. When the plant and machineries, electrical installation, D.G. Set, Air conditioners, Humidification plant etc. are transferred, it will continue to remain in the same status i.e. installed, because such transfer is “on a going concern basis” it cannot be covered within the meaning of “goods” and will not attract any tax under MP VAT Act.

It has consistently been held by Apex Court as well many High Courts that anything which is embedded or fixed in the earth is not covered within the definition of “goods” since goods means movable property only. Reference can be made to judgments of Supreme Court in the case of Mittal Engineering Works Pvt. Ltd. v. CCE (1997) 106 STC 201 (SC).

Duncans Industries Ltd v. State of UP (2001) 1 SCC 633 (SC) & TTJ Industries Ltd. v. CCE (2004) 4 STJ 1 (SC).

ii) “Tax Incidence in case of “Slump Sale” i.e. entire business

The term ‘slump sale’ connotes the sale of an entire business undertaking, comprising of various assets net of liabilities for a lump sum consideration. Though the term has not been defined under any of the State VAT laws or under the CST Act but section 2(42C) of the Income tax Act, 1961 recognises “slump sale” as a transfer of an undertaking and defines the word ‘slump sale’ as under :-

“Slump sale means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to individual assets and liabilities in such sales”.

Explanation – 2 to aforesaid section further provides that “For the removal of doubts it is hereby declared that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees, or other small similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities”.

Next question for consideration is, whether Sale of business undertaking i.e. “Slump sale” can be considered as sale of goods ? Obviously, the answer would be that transfer of entire “business undertaking” to another registered dealer of M.P., as a going concern, i.e. “slump sale”, is neither covered within the definition of “Business” nor “sale” nor “goods” hence the transferor cannot be subjected to tax.When ‘Business’ or ‘Undertaking’ will not fall within the meaning of ‘goods’, VAT implication would not trigger on the transactions involving the transfer of business as a going concern.

In the case of Sri Ram Sahai v. CST [1963] 14 STC 275 (Allah.) it was held that “business” is not a movable property and therefore, it is not covered within the meaning of “goods”. Transfer of entire business undertaking, is not frequently done. It cannot be treated that the seller is engaged in any business activity in disposing of the entire undertaking including movables and immovables and all other properties.

The object of the seller is normally to close down the activity hence it cannot be covered within the meaning of “sale of goods”. [Refer – Monsanto Chemicals of India (P) Ltd. v. The State of Tamilnadu (1982) 51 STC 278 (Mad.) and Sealants and Gasket Industries v. State of Maharashtra (2006) 9 STJ 389 (Mah-Trib)]. It is also worthwhile to note that retention of certain liabilities while transferring entire business by the transferor would not devoid the transaction to be categorized as sale of “business” as held in the case of Zacharia v. State of Kerala (1977) 39 STC 221 (Kerala).

iii) Slump sale – In the course of business :

Any sale of goods can be subject to tax only when it is effected in the course of business of the dealer. Full Bench of A.P. High Court in the case of M/s. Coromandal Fertilizers Limited (1999) 112 STC 1 had held that disposal of entire business as a slump sale is not covered in the course of business even if it involves sale of certain movables hence it is not covered by the definition of “goods”. It further held that the transfer of property in goods as an integral part of the agreement to sell is not “in the course of business” for the obvious reason that the seller wants to put an end to its entire business. An activity directed towards the end or termination of business is not a transaction “in the course of business”.

iv) “Slump sale” is not “sale”

Pursuant to the “slump sale” of the undertaking, entire assets of the company vests in the new company by execution of sale deed. Vesting of business of the undertaking “as a going concern” does not involve any “sale”. The High Court of MP in the case of STI India Ltd (Biplus Division) v. CCT, MP (2007) 10 STJ 657 followed the judgment of M/s. Coromandal Fertilizers Limited (1999) 112 STC 1 (supra) and held that “the sale of movable assets by the petitioner on closure of business, by no stretch of imagination or reasoning can be said to have taken place during the course of business as dealer – the impugned orders levying tax and penalty cannot be sustained”. Even transfer of one unit by a dealer out of many undertakings, as a going concern having separately identifiable assets, liabilities, income and expenditure, will also be considered a transfer of said business as a “going concern” and will not attract any VAT liability. Reference may be made to following judgments :–

a) The Dy. C.S.T. v. Dat Pathe (1985) 59 STC 374 (Kerala);

b) The Dy. CCT v. K. Behanan Thomas (1977) 39 STC 325 (Madras);

c) Lohia Machines Ltd v. CST U.P. (1998) 110 STC 305 (Allahabad).

In substance, a transaction of “sale” attracts tax under VAT Act only if it is carried out (a) in the course of business and (b) if it is a “sale” of movable property and (c) it is a sale of “goods”. As discussed above, transfer of entire business as a going concern is outside the ambit of “goods”, “sale” and “in the course of business”. Therefore, transfer of plant & machinery, electric installations, furnitures and other equipments may be partially covered within the meaning of immovable asset and partially movable assets but when the agreement between the parties is to effect sale of entire business undertaking, as a going concern, the consideration received cannot be covered within the definition of “goods” so as to levy tax as sale consideration under VAT Act.

v) Tax incidence on Slump Sale under GST

The Central Goods and Services Tax Act (CGST Act) does not clearly stipulate the law vis-à-vis transfer of business as a going concern or slump sale. There being no clarity whether the transactions involving slump sale would be taxable under the new CGST Act or not, the provisions of the Act need to be analysed so as to reach a view on the applicability of GST on Slump Sale, though premature.

Charging Section 9 (Levy and Collection) and Section 12 (Time of Supply of Goods) of CGST Act shall be applicable on supplies of all intra-state goods or services or both which shall include transfer of business as a going concern also subject to given exemptions. The scope of “Supply” under Section 7(1) of the CGST Act is wider than the definition of “Slump Sale” under Section 2(42C) of the Income Tax Act, 1961, as it includes any sale, transfer, disposal, lease/license or exchange of goods or services and hence it includes any sale or transfer of goods within its ambit. Section 7(1)(d) includes the activities to be treated as supply of goods or supply of services as referred to Schedule-II. Para-4 of Schedule-II deals with transfer of business assets and Sub-clause (c) excludes the activity by person when business is transferred as a going concern to another person. Consequently, based on the judicial views under Sales tax or VAT regime, it can be safely argued that GST may not be applicable on Slump Sales considering “business as a going concern” to be outside the scope of section 7 i.e. scope of “Supply”.

It will not be out of place to state that section 18(3) of CGST Act read with Rule 41 of CGST Rules provides for availability of input credit on transfer of business which remain unutilised in electronic credit ledger of the transferor by submitting return in Form ITC-02. However, any unutilised balance in electronic cash ledger of the transferor will have to be claimed as refund by the transferor. Such provisions will equally apply to a case of transfer of business as going concern.

Section 22(3) of CGST Act also contemplates a situation of transfer of business on account of succession or otherwise to another person as a going concern and makes it obligatory that the transferee must obtain registration under with effect from date of such transfer i.e. before the agreement for transfer of assets is executed.

[Source : Article printed in the souvenir of 2 Day National Tax Conference held on 5th & 6th May, 2018 at Indore]

Introduction

Every fiscal statute provides power to the officer for inspection of the records to ascertain the proper payment of tax. These measures are provided in the statute to prevent the evasion of tax. All the Act, Income Tax Act, Erstwhile Central Excise Act and Customs Act, Every State Law and Now Goods and Services Tax Act makes provision relating to inspection, search and seizure. The Sections 67 to 72 of GST Act makes provision in this regard. The provisions under these sections along with the general principle in this regard based on judgments rendered in context of provisions in other statute are discussed as under:

Contents

1. Access to Business Premises

2. Power to Inspection, Search and Seizure

3. Inspection of goods in movement

4. Power to summons to give evidence

5. Power to arrest

6. Other officers to assist

Access to Business Premises

Section 71 of the GST Act, any officer not below the rank of Joint Commissioner as authorised by proper officer shall have access to any business premises to inspect books of account, documents, computers, computer programmes, computer software and such other things which may require. The purpose of having access to business premise is carrying out any audit, scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.

This section further provides that the person in charge of the premises shall on demand made by authorised officer or by the Audit Party or by cost Accountant or Chartered Accountant nominated under section 11 provide the following:

(i) The records as prepared or maintained by the registered person and declared to the proper officer as may be prescribed

(ii) Trial balance or its equivalent;

(iii) Statements of annual financial accounts, duly audited, wherever required;

(iv) Cost audit report, if any, under section 148 of the Companies Act, 2013 (18 of 2013);

(v) The income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961 (43 of 1961); and

(vi) Any other relevant record.

The above records will be presented for scrutiny by authorised person within a period not exceeding fifteen working days from the date when such demand is made or further period as may be allowed Joint Commissioner.

Power to Inspection, Search and Seizure

The power of the authorised person to inspect, search and seize the goods or documents are provided in Section 67 of the GST Act. These are discussed below:-

(a) Power to inspection

(b) Search and Seizure

(c) Return of seized goods

(d) Applicability of code of criminal procedure

(e) Seizure of account, register etc.

(f) Purchase of sample

Power to Inspection

The clause (1) of the Section 67 provides that when proper officer not below the rank of Joint Commissioner has reasons to believe that: 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 hereunder to evade tax under this Act; or

(a) 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 authorise in writing to the officer to inspect any place of business of taxable person or the persons engaged in transportation of goods or owner or operator of warehouse or go down.

Thus, the officer shall have reason to believe about suppression of information leading to suppression of tax amount. The identical word appears in Section 132 of Income-tax Act. The various authorities have interpreted the said words “reason to believe” in various judgments. These are discussed below:

• Has reason to believe – The words “has reason to believe” in section 132(1) postulate belief and existence of reasons for that belief. The belief must be held in good faith: it cannot be merely pretence. It does not mean a purely subjective satisfaction of the officer ITO v. Lakhmani Mewal Das, (1976) 103 ITR 437 (SC)].

The expression “reason to believe” is both subjective and objective but the area of objectivity is limited. Its existence is subject only to a limited scrutiny and the court cannot substitute its own opinion for that of the authority specified in the section [Balwant Singh v. R.D. Shah, (1969) 71 ITR 550, 562 (Delhi).

Formation of belief – The formation of the belief within the meaning of section 132(1) is an important step and a condition precedent to the authorisation of search and seizure. It is nevertheless basically a subjective step. It is one essentially making up one’s mind as to whether on the information presented he had or had not formed the reason to believe. This belief, of course, cannot be a mere pretence nor can it be a mere doubt or suspicion. It is something much more than that. Section 132(1), in its opening paragraph, speaks of “reason to believe” and not “reason to suspect or reason to doubt”. “Reason to believe” is thus a higher test to be fulfilled. It is, however, not necessary for the authorising authority to reach that belief by a process akin to judicial process. His reasons and his belief do not constitute a judicial or quasi-judicial act nor is issue of authorisation a judicial or quasi-judicial function. And the matter, though to an extent justifiable, extremely limited and circumscribed are the court’s power of scrutiny and review in that behalf. One may not like the belief of the authorising authority.

But if the belief is bona fide, if the same is in good faith, if it is not a pretence and if it is cogently supported by the information, the Court will not interfere therewith or sit in appeal over it. Indeed there would, in such circumstances, be no jurisdiction to interfere [Jain & Jain v. Union of India (1982) 134 ITR 655, 661-62 (Bom.)

• The principle for determining the reason to believe can be summarized as below:

(a) The authority must be in possession of information and must form an opinion that there is reason to believe that the article or property has not been or would not be disclosed for the purposes of the Act.

(b) The authorised person must on the basis of information with him shall form opinion whether there is reason to believe or not.

(c) The opinion must be based on the material which is available and it should not be formed on the basis of extraneous or irrelevant material.

(d) The court would examine whether the authorised person had material before it on which he could form the opinion whether there is rational connection between the information possessed and the opinion formed.

(e) The court cannot go in to the question of aptness or sufficiency of the grounds upon which the subjective satisfaction is based.

Communication of the reason to the person is not necessary as there is no provision in the Act which requires the reasons to be communicated to the person.

Authorisation should be in writing and shall provide the same and address and place of business of the taxable person or the person engaged in business of transporting goods or owners of operator of the warehouse or any other place.

2. Search and Seizure

Sub-section (2) provides that either pursuant to an inspection carried out or otherwise the officer not below the rank of Joint Commissioner has reason to believe that any goods is 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 to search and seize or may himself search and seize such goods, documents or books or things

As per rule 139( I ),such authorisation shall be issued in form GSTINS-01 Thus, the premises can be searched as result of inspection if it is ascertained that goods are liable for confiscation or any documents is relevant for any proceeding under the Act are hidden in premises. The seizure of goods and documents are normally made by drawing of panchnama. The list of documents or goods are specified in the panchnama. As per Rule 139(2) the Proper Officer shall make an order for seizure in Form GSTINS-02. Sub-section (5) further provides that the person shall be entitled to make copies of the documents or take extract of the documents. The officer undertaking the search has power under sub-section (4) 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. Thus, search of the premises can be made either as the result ol inspection or otherwise.

First proviso to sub-section (2) of section 67 provides that where it is not practical to seize any goods, the proper officer or any officer authorised by him may serve on the owner or custodian of goods an order that he shall not part with or otherwise deal with the goods except with the permission of such officer. Such order shall be served in form GSTINS-03 as provided in rule 139(4).

Second proviso to section 67(2) provides that the document or books which have been seized shall be retained by the proper officer only if it is necessary for the examination and enquiry or proceedings. Normally, after seizure of books or documents, the proper officer will examine the records and thereafter the officer take statement on oath from the relevant person. Complete enquiry results in serving of show cause notice under section 73 or section 74. The show cause notice refers to the documents which are relied upon for alleging recovery of the amount.

As per section 67(3) after issuance of show cause notice all documents which are not relied shall be returned back to the taxable person within a period not exceeding 30 days from the date of issue of show cause notice. Thus, it creates obligation on the part of the officer to ensure that the documents have been returned back.

As per Rule 139(3) the Proper Officer shall provide custody of such goods or things for safe upkeep to the person.

3. Return of seized goods

Sub-section (7) provide that any seized goods shall be returned if no notice in respect thereof is given within six months of the seizure. The goods shall be returned to the person from whose possession they were seized. The period of six months can be extended for a further period not exceeding six months.

Sub-section (8) of section 67 empowers the Government having regard to perishable, hazardous nature of goods, depreciation in view of goods with passage of time, constraints for storage of space for goods etc., specify that the goods which have been seized shall be disposed of by proper officer. Rule 141 provides that where the goods are of perishable or hazardous nature and if the taxable person pays—

(a) Amount equivalent to market price: or

(b) The amount of tax, interest and penalty whichever is lower

Such goods shall be released forthwith by an order in Form GST-INS-1 on proof of payment. However, where the taxable person fails to pay the amount in respect of such goods the Commissioner shall dispose of the goods. The amount realised thereby shall be adjusted against tax, interest, penalty or any other amount in respect of such goods.

PROVISIONAL RELEASE – Section 67(6) specifically provides that the seized goods shall be provisionally released upon execution of bond and furnishing of security. The bond to the extent of value of goods is required to be executed which is supported by bank guarantee. However, in case the taxable person accepts the contravention, he may pay tax, interest and penalty and obtain release of goods permanently.

As per Rule 140 applicants seeking release of goods provisionally shall execute bond in Form GSTINS-04 for the value of goods. He shall furnish security in the form of bank guarantee equivalent to the amount of tax, interest and penalty. The explanation given in rule 140(1) provides that applicable tax shall include central tax and state tax or central tax and union territory tax, cess payable under Goods & Services Tax Compensation to States) Act 2017. It is the responsibility of the person to whom the goods are released provisionally to produce the goods on the appointed