Sections 67 to 72 of the CGST Act, 2017 provide for the situations where a Government official has been empowered to inspect for the goods, books of accounts or other documents of a taxable person or a person engaged in transportation of goods or owner of a godown or warehouse, where any transaction is suppressed, or any documents are intentionally secreted.
INSPECTION PROCEEDINGS AS PER SECTION 67(1)
As per Section 67(1) of the CGST Act 2017, inspection proceedings can be initiated only on an authorisation by the Proper Officer, who is not below the rank of Joint Commissioner.
Such authorisation has to be given in writing to an officer of CGST in FORM GST INS-01 to conduct such inspection.
Inspection can be carried out where such proper officer has reasons to believe that –
- A taxable person has suppressed any transaction relating to supply of goods or services, or
- A taxable person has suppressed any transaction relating to stock of goods in hand, or
- A taxable person has claimed excess input tax credit to which he was entitled, or
- A Taxable person has indulged in contravention of provisions of CGST Act or the rules, with the purpose of evade tax, or
- A person engaged in transportation of goods or owner or operator of a godown or a warehouse is keeping goods which have escaped payment of tax, or
- A person engaged in transportation of goods or owner or operator of a godown or a warehouse has maintained books in such a way that may cause evasion of tax
Where can inspection be done?
Inspection can be carried out at any place of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of godown or warehouse.
As per section 2 (85) of the CGST Act, a place of business includes the place where business is ordinarily carried on and includes a warehouse and godown where goods are stored or where books of accounts are maintained or a place of an agent.
This implies that if books of accounts are maintained at the residence of a Key Managerial Person, it will be covered in Place of Business and inspection can be carried out there.
SEARCH & SEIZURE PROCEEDINGS AS PER SECTION 67(2)
Search and Seizure Proceedings under the GST Law are harder version of the Inspection Proceedings where the proper officer with the rank of Joint Commissioner or above has reasons to believe that –
- Goods are liable to be confiscated as per section 130(1) of the Act, or
- Any books or documents or things that useful for the proceedings have been secreted
In both of these cases, such proper officer may authorise any subordinate to him in FORM GST INS-01 to search and seize such goods, books, documents or things.
As per section 130(1) of the CGST Act, goods and the related conveyances are liable to be confiscated and penalty will be levied under section 122 in the below cases –
- Goods are supplied or received in contravention of the provisions with intent to evade tax; or
- Goods on which tax is payable have not been accounted; or
- Goods liable to tax have been supplied without applying for registration; or
- Any of the provisions of the Act or Rules have been contravened with an intention to evade tax; or
- A conveyance used as a means of transport for carriage of goods in contravention of the provisions unless the owner of conveyance proves that it was used without the knowledge of the owner, his agent and the person in charge of the conveyance
It has to be noted that only the goods that are liable to be confiscated under section 130(1) can be seized.
Where it has been substantiated that goods, books, documents or things are liable for seizure, then an order for seizure will be passed in FORM GST INS-02 by the proper officer or the authorised officer.
However, the seized goods may be released on a provisional basis upon execution of a bond in FORM GST INS-04 with the value of goods and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable.