Chapter 2: Powers of Inspection, Search, and Seizure (Section 67)

Section 67 of the Central Goods and Services Tax (CGST) Act grants significant authority to designated officers for inspection, search, and seizure. These powers are crucial for ensuring compliance and combating tax evasion within the GST framework. They enable officials to scrutinize business premises, investigate potential contraventions, and secure evidence pertinent to GST proceedings.

The powers conferred by Section 67 are delineated into several key areas:

Power of Inspection (Section 67(1))

An authorized officer may conduct an inspection of any taxable person’s place of business if there is reason to believe that the taxable person has:

Suppressed transactions.

Claimed excessive input tax credit (ITC).

Engaged in other contraventions of the GST Act or its rules with the intent to evade tax.

Power of Search and Seizure (Section 67(2))

An officer is authorized to perform a search and seize goods, documents, or other items if there is reason to believe they are secreted in any location and are either:

Liable to confiscation under the GST Act.

Relevant for any proceedings under the GST Act.

Power to Seal or Break Open Premises (Section 67(4))

During a search and seizure operation under sub-section (2), if access to any premises or receptacle is denied, the officer is empowered to seal or break open such premises or receptacle to facilitate the search.

Right to Make Copies or Extracts (Section 67(5))

Individuals from whom documents are seized retain the right to make copies or extracts of those documents. This must be performed in the presence of the authorized officer, ensuring transparency and proper record-keeping.

To ensure the lawful and fair exercise of these powers, Section 67(10) of the CGST Act mandates the application of the provisions of the Code of Criminal Procedure, 1973 (CrPC). A key modification is that the term “Commissioner” is substituted for “Magistrate,” meaning the GST Commissioner assumes a role analogous to a Magistrate under the CrPC for search and seizure purposes. The CrPC provides a procedural framework covering aspects such as:

Requirements for warrants (though the GST Act permits search and seizure based on ‘reason to believe’).

Guidelines for conducting searches.

Procedures for handling seized items.

Safeguards for the rights of the person being searched.

While Section 67 grants extensive powers, the GST framework incorporates several procedural safeguards and related provisions to ensure a balance between enforcement and taxpayer rights:

Reason to Believe: The exercise of powers under Section 67(1) and 67(2) is not arbitrary. It must be predicated on the officer’s “reason to believe,” which necessitates a basis in material facts or information indicating a contravention or evasion.

Access to Business Premises (Section 71): This section allows authorized officers (not below the rank of Joint Commissioner) to access business premises for inspection, scrutiny, verification, and checks. Such officers must present written authorization, and the person in charge is obligated to provide access to records. Non-compliance can result in a penalty of up to .

Production of Documents (Section 70): The proper officer has the authority to summon any person to provide evidence or produce documents relevant to an inquiry. This process mirrors that of a civil court under the Code of Civil Procedure, 1908, and inquiries under this section are considered judicial proceedings.

Officers to Assist Proper Officers (Section 72): To facilitate the implementation of the Act, various government officers, including those from Police, Railways, Customs, and State/Union Territory tax departments, are mandated to assist GST proper officers. The government may also empower other classes of officers to provide assistance.

Inspection of Goods in Movement (Section 68): Distinct from Section 67, Section 68 empowers officers to inspect goods in transit. This includes stopping conveyances, demanding production of documents and devices, and inspecting the goods themselves. Non-compliance can lead to penalties or confiscation, particularly in relation to e-way bill requirements for goods exceeding specified values.

In summary, Section 67 provides critical powers for GST administration, but its application is tempered by the principle of ‘reason to believe’ and reinforced by procedural requirements from other sections of the GST Act and the CrPC, thereby ensuring accountability and fairness in its execution.