‘Search and seizure’ is an important power conferred on the tax authorities, which is primarily put to use to detect tax evasion. An inspection may result in a search for further deep probe. Dictionaries define the word ‘search’ to mean ‘try to find something by looking or otherwise seeking carefully and thoroughly.’ Search is generally conducted to find something — may be books of account, goods, etc. — which has been concealed.
Chapter XIV of the CGST Act, 2017 (for short GST Act) deals with ‘search and seizure’. Section 67 (2) therein provides for exercise of such power. It reads as follows:—
“67. (2) Where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under sub-section (1) or otherwise, has reasons to believe that any goods 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 authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things:
Provided that where it is not practicable to seize any such goods, the proper officer, or any officer authorised by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer:
Provided further that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act.”
It may be seen from the above provision that an officer not below the rank of a Joint Commissioner only can authorize any other officer to conduct search or he may himself conduct search of the premises. In the first part of this subject, we have discussed the concept of ‘reason to believe’, which is sine qua non for giving authorization to conduct search also. The intention to conduct search is to seize goods, documents, books or things, which are secreted in any place. If it is not practicable to seize the goods, the proper officer may entrust the custody of such goods to the owner or custodian of the goods by following due procedure. Documents, books or things (dictionaries define the word ‘things’ thus—‘an object or entity that is not or cannot be named specifically’) so seized shall be retained only for so long as may be necessary for any enquiry or proceedings. Under sub Section (3) documents, books or things referred to in sub Section (2) which have not been relied upon for the issue of notice shall be returned to such person within a period of not exceeding thirty days of the issue of the notice. Sub Section (4) confers power on the authorized officer 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. Under sub Section (5), the person from whose custody, any documents are seized shall be entitled to make copies thereof, except where making such copies or taking such extracts may, in the opinion of the proper officer prejudicially affect the investigation. Under sub Section (6), goods so seized shall be released as per the conditions mentioned therein. Under sub Section (7), where a notice has not been issued within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized. Such period of six months can be extended maximum by another six months on sufficient cause. Under sub Section (8), Government may by notification specify the goods or class of goods which shall be disposed of quickly by the proper officer in the prescribed manner, if such goods are perishable or hazardous etc. By Notification No. 27/2018-Central Tax dated 13.6.2018, Government has notified certain goods like salt, petroleum products, fireworks, etc., (total 17 items). Please see Notification for the complete list. Under sub Section (9), proper officer shall prepare an inventory of goods seized in the manner prescribed. Sub Section (10) reads as follows:—
“(10) The provisions of the Code of Criminal Procedure, 1973, relating to search and seizure, shall, so far as may be, apply to search and seizure under this section subject to the modification that sub-section (5) of section 165 of the said Code shall have effect as if for the word “Magistrate”, wherever it occurs, the word “Commissioner” were substituted.”
Section 165 (5) of the Cr.P.C., 1973 is to the following effect:—
“165 (5) Copies of any record made under sub- section (1) or sub-section (3) shall forthwith be sent to the nearest Magistrate empowered to take cognizance of the offence, and the owner or occupier of the place searched shall, on application, be furnished, free of cost, with a copy of the same by the Magistrate.”
The following are the true extracts of relevant Sections from the Code of Criminal Procedure, 1973:—
“93 (1) (a) Where any Court has reason to believe that a person to whom a summons or order under section 91 or a requisition under sub-section (1) of section 92 has been, or might be, addressed, will not or would not produce the document or thing as required by such summons or requisition, or
(b) where such document or thing is not known to the Court to be in the possession of any person, or
(c) where the Court considers that the purposes of any inquiry, trial or other proceeding under this Code will be served by a general search or inspection,
it may issue a search-warrant; and the person to whom such warrant is directed, may search or inspect in accordance therewith and the provisions hereinafter contained.
(2) The Court may, if it thinks fit, specify in the warrant the particular place or part thereof to which only the search or inspection shall extend; and the person charged with the execution of such warrant shall then search or inspect only the place or part so specified.
(3) Nothing contained in this section shall authorise any Magistrate other than a District Magistrate or Chief Judicial Magistrate to grant a warrant to search for a document, parcel or other thing in the custody of the postal or telegraph authority.”
“100 (1) Whenever any place liable to search of inspection under this Chapter is closed, any person residing in, or being in charge of, such place, shall, on demand of the officer or other person executing the warrant, and on production of the warrant, allow him free ingress thereto, and afford all reasonable facilities for a search therein.
(2) If ingress into such place cannot be so obtained, the officer or other person executing the warrant may proceed in the manner provided by sub-section (2) of section 47.
(3) Where any person in or about such place is reasonably suspected of concealing about his person any article for which search should be made, such person may be searched and if such person is a woman, the search shall be made by another woman with strict regard to decency.
(4) Before making a search under this Chapter, the officer or other person about to make it shall call upon two or more independent and respectable inhabitants of the locality in which the place to be searched is situate or of any other locality if no such inhabitant of the said locality is available or is willing to be a witness to the search, to attend and witness the search and may issue an order in writing to them or any of them so to do.
(5) The search shall be made in their presence, and a list of all things seized in the course of such search and of the places in which they are respectively found shall be prepared by such officer or other person and signed by such witnesses; but no person witnessing a search under this section shall be required to attend the Court as a witness of the search unless specially summoned by it.
(6) The occupant of the place searched, or some person in his behalf, shall, in every instance, be permitted to attend during the search, and a copy of the list prepared under this section, signed by the said witnesses, shall be delivered to such occupant or person.
(7) When any person is searched under sub-section (3), a list of all things taken possession of shall be prepared, and a copy thereof shall be delivered to such person.
(8) Any person who, without reasonable cause, refuses or neglects to attend and witness a search under this section, when called upon to do so by an order in writing delivered or tendered to him, shall be deemed to have committed an offence under section 187 of the Indian Penal Code (45 of 1860).”
Relevant Rule is Rule 139 of the CGST Rules, 2017. It is sine qua non to obtain search warrant, show to the person in-charge at the premises and obtain his signature. Search warrant shall contain all the required details like name and designation of the officer authorized to search, detailed address of the premises to be searched, name and designation of the officer issuing the warrant, date, place of issue, period during which the warrant has to be executed and DIN. The search warrant must be in writing and it shall contain all the matters that the law requires it to be stated therein. Form GST INS 01 is the authorization to be issued for conducting search. Para C of this form provides for search of both residential and business premises. Two respectable gentlemen of the same locality (panchas) shall be taken by the Officer as witnesses for search and they should be informed in advance about the proposed search. Officers and witnesses entering into the premises shall prove their identity and they should also offer themselves for search of their persons and bags, if any before commencing search. While leaving the premises also, they should offer for such search. Woman officer or employee has to accompany the search team. Panchanama of the search proceedings shall be drafted by the witnesses. Goods and documents seized must be listed in detail and attested by the witnesses, officer and the person in-charge of the premises. Copy of Panchanama along with its enclosures must be given to the person in-charge. Person in-charge must also co-operate with the Officer.
Under sub Section (11), if the proper officer has reasons to believe that any person has evaded or is attempting to evade the payment of any tax, he may for the reasons to be recorded in writing seize the accounts, registers or documents and grant receipt for the same. ‘Seizure’ generally means taking into custody any books and property as per the statutory provisions. FORM GST INS-02 is the order of seizure under Rule 139 (2) of the Rules. Under sub Rule (4), where it is not practicable to seize any such goods, the proper officer or the authorised officer may serve on the owner or the custodian of the goods, an order of prohibition in FORM GST INS-03 to the effect that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer. Under sub Rule (5), the officer seizing the goods, documents, books or things shall prepare an inventory of such goods or documents or books or things containing, inter alia, description, quantity or unit, make, mark or model, where ever applicable, and get it signed by the person from whom such goods or documents or books or things are seized. Under Rule 140 (1) of the Rules, the seized goods may be released on a provisional basis upon execution of a bond for the value of the goods in FORM GST INS-04 and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable. As per sub Rule (2) in case the person to whom the goods were released provisionally fails to produce the goods at the appointed date and place indicated by the proper officer, the security shall be encashed and adjusted against the tax, interest and penalty and fine, if any, payable in respect of such goods. On proof of payment as prescribed in Rule 141 (1) of the Rules, the seized goods or things, which are of perishable or hazardous nature shall be released by issuing an order in FORM GST INS-05. Under sub Rule (2), on failure to pay the amount specified in sub Rule (1) such goods or things may be disposed of and the amount realized thereby shall be adjusted against the tax, interest, penalty or any other amount payable in respect of such goods or things. It will be useful to refer to some decisions on the subject:—
In the case of Vishnu Departmental Stores vs. State of Rajasthan and others (104 STC 443), the Rajasthan Taxation Tribunal held as follows:—
‘that no seizure took place in respect of books of account or goods. The words “inspection” and “examination” on the one hand and the words “search” and “seizure” on the other have separate meanings and connote different things. In the case of the former no detailed examination of anything is to take place whereas in the case of the latter the official has to make an exploratory exercise to ferret out something which is hidden or concealed. Where mere inspection or examination of the business premises of a dealer is made or conducted no reasons need to be recorded in writing prior to such inspection or examination. It is only in a case where search is made or seizure either of books of account or of goods is effected that reasons are to be recorded, under section 22 of the Act. Moreover, the provisions of rule 58 are attracted into application only in a case where search is made. No compliance with these provisions need to be made where only the inspection or examination is made or conducted. This is a case of mere inspection or examination and not a case of search and seizure.”
In the case of Dr. Pratap Singh vs. Director of Enforcement (1985) 155 ITR 166 (SC), the Honourable Supreme Court held that the High Courts and Supreme Court have the jurisdiction to call for and look into the reasons recorded to decide whether the issue of the search warrant was called for. It has also been held ‘Illegality of the search does not vitiate the evidence collected during such illegal search. The only requirement is that the court or the authority before which such material or evidence seized during the search shown to be illegal is placed has to be cautious and circumspect in dealing with such evidence or material.’
In the case of Tajal Hussain vs. State of Assam (No.WA.297/2019 dated 25.11.2019), the Honourable Guwahati High Court held as follows (Dr. Ashok Saraf, past President of AIFTP appeared on behalf of the appellant) :—
“26. Accordingly, we are of the view that if the authorities under the AGST Act of the State of Assam are of the view that the appellants are required to be proceeded with or prosecuted under the AGST Act, it would be appropriate to invoke the provisions of Section 67 of the AGST Act and proceed accordingly. But without invoking the provisions of Section 67 of the AGST Act and following the procedure prescribed therein, it would be inappropriate to allow the police authorities of Assam to continue with the detention and the seizure of the trucks containing the areca nuts on the plea that the appellants have violated some or any of the provisions under the AGST Act.”
In the case of Prakash V. Sanghvi vs. Ramesh G. Major DDIT (Inv) (356 ITR 426-2013) the Karnataka High Court held that in case of trespassing of assessee’s property, the delinquent officers may be prosecuted by a competent criminal court. Further the Act has not invested in the officer searching the premises to have a camp office at the residence of the assessee and call his attendance
in connection with the proceedings under the Act. However search warrant was held to be valid.
V. Subba Rao, Advocate, Hyderabad,Bojja Srinivas, Advocate, Visakhapatnam