Detailed analysis of seizure under GST

Judgments

Perishable goods if not sold within 15 days will not become non Perishable goods , not to be relased under GST : High Court

Video Lecture on Seizure provisions of  GST Act

Meaning of Seizure under GST

The term ‘seizure’ has not been specifically defined in the GST Act . In Law Lexicon Dictionary, ‘seizure’ is defined as the act of taking possession of property by an officer under legal process. It generally implies taking possession forcibly contrary to the wishes of the owner of the property or who has the possession and who was unwilling to part with the possession.

Difference  between ‘Seizure’ and ‘Detention’

Denial of access to the owner of the property or the person who possesses the property at a particular point of time by a legal order/notice is called detention.

Seizure is taking over of actual possession of the goods by the department.

Detention order is issued when it is suspected that the goods are liable to confiscation.

Seizure can be made only on the reasonable belief which is arrived at after inquiry/investigation that the goods are liable to confiscation.

What can be Seized under GST Act?

Where the CGST/SGST/UTGST officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out under section 67(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 authorize in writing any other CGST/SGST/UTGST officer to search and seize or may himself search and seize such goods, documents or books or things – section 67(2) of CGST Act.

Who is allowed to seize goods under GST

Where the proper officer not below the rank of a Joint Commissioner has reasons to believe that a place of business or any other place is to be visited for the purposes of inspection or search or, as the case may be, seizure in accordance with the provisions of section 67, he shall issue an authorisation in FORM GST INS-01 (Authorisation For Inspection or Search)  authorising any other officer subordinate to him to conduct the inspection or search or, as the case may be, seizure of goods, documents, books or things liable to confiscation. – rule 139(1) of CGST Rules, 2017.

What is the procedure of seizure of Goods under GST

Where any goods, documents, books or things are liable for seizure under  section 67 (2), the proper officer or an authorised officer shall make an order of seizure in FORM GST INS 2  (Order of seizure) –   rule 139(2) of CGST Rules, 2017.

What is the responsibility of person if goods are seized

The proper officer or an authorised officer may entrust upon the owner or the custodian of goods, from whose custody such goods or things are seized, the custody of such goods or things for safe upkeep and the said person shall not remove, part with, or otherwise deal with the goods or things except with the previous permission of such officer – rule 139(3) of CGST Rules, 2017.

What is to be done if goods can not be seized under GST

Where it is not practicable to seize any such goods, the proper officer, or any officer authorized 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. – proviso to  section 67(2) of CGST Act.

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 (Order of Prohibition)  that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer. – rule 139(4) of CGST Rules, 2017.

Who should sign Inventory if goods are seized

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 applicable, and get it signed by the person from whom such goods or documents or books or things are seized. – rule 139(5) of CGST Rules, 2017.

How longs seized goods or things can be kept by GST officer

The goods, 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 proceeding under this Act – second proviso to  section 67(2) of CGST Act.

The documents, books or things which have not been relied upon for the issue of notice under this Act shall be returned to such person within 30 days of issue of said notice – section 67(3) of CGST Act.

Proper Officer for Section 67(3)of CGST Act is  Additional or Joint Commissioner of Central Tax.

Who are the Officer empowered to order search and seizure 

‘Proper Officer’ (to order search and seizure u/s 67(2) of CGST Act and custody of rules as provided in rule 139 of CGST Rules and to release provisionally the seized goods) for the purpose of CGST is Additional Commissioner/Joint Commissioner of Central Tax, vide CBE&C circular No. 3/3/2017-GST dated 5-7-2017 [State Government will prescribe ‘proper officer’ for purpose of SGST in the respective State]

What is the power with GST Officer during Seizure under GST

Power to seal or break open door, box, almirah during seizure operations

The officer authorised under section 67(2) shall have the power to seal or break open the door of any premises or to break open any almirah, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, box or receptacle is denied – section 67(4) of CGST Act.

What are the rights of person if documents are seized

Person entitled to make copies or take extracts 

The person from whose custody any documents are seized under section 67(2) shall be entitled to make copies thereof or take extracts therefrom in the presence of an officer of CGST/SGST/UTGST, except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation. – section 67(5) of CGST Act.

Proper Officer for Section 67(5) of CGST Act is Additional or Joint Commissioner of Central Tax as per CBE&C circular No. 3/3/2017-GST dated 5-7-2017

How to release seized goods

Provisional release of seized goods 

Good seized under section 67(2) shall be released on provisional basis on execution of bond and furnishing of security or on payment of tax, interest and penalty – section 67(6) of CGST Act.

The seized goods may be released on a provisional basis upon execution of a bond for the value of the goods in  GST INS 4 ( Bond for Release of Goods Seized ) and furnishing of a security in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable.

Explanation.—For the purposes of the rules under the provisions of this Chapter, the “applicable tax” shall include central tax and State tax or central tax and the Union territory tax, as the case may be and the cess, if any, payable under the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017) -.  rule 140(1) of CGST Rules, 2017.

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. – rule 140(2) of CGST Rules, 2017.

Goods seized under GST can be released upon execution of bond and bank guarantee : HC

Which officer can release Seized Goods

Officer empowered to order release of seized goods 

‘Proper Officer’ (to release provisionally the seized goods under section 67 and rule 140) for the purpose of CGST is Principal Commissioner/Commissioner of Central Tax, vide CCBE&C circular No. 3/3/2017-GST dated 5-7-2017 [State Government will prescribe ‘proper officer’ for purpose of SGST in the respective State]

When can the seized goods be returned

Return of goods if notice not issued within six months, which can be extended upto 6 months 

Where any goods are seized under section 67(2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized.

The aforesaid period of  six months  may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months–section 67(7) of CGST Act.

‘Proper Officer’ for the purpose of CGST is Principal Commissioner/Commissioner of Central Tax – CBE&C circular No. 3/3/2017-GST dated 5-7-2017 [State Government will prescribe ‘proper officer’ for purpose of SGST in the respective State. It may be noted that powers under SGST can be exercised by Central Tax Authorities and powers under CGST can be exercised by State Tax Authorities, if powers are delegated under section 6 of CGST and SGST Act].

what will happen if seized goods are perishable or hazardous goods

Immediate sale of perishable or hazardous goods 

The Central or a State Government may, having regard to the

• perishable or hazardous nature of any goods,
• depreciation in the value of the goods with the passage of time,
• constraints of storage space for the goods or
• any other relevant considerations,

by notification, specify the goods or class of goods which shall, as soon as may be after its seizure under section 67(2), be disposed of by the proper officer in such manner as may be prescribed- section 67(8) of CGST Act.

Where such perishable or hazardous goods have been seized by a proper officer under section 67(2), he shall prepare an inventory of such goods in the manner as may be prescribed in this behalf – section 67(9) of CGST Act.

[  Proper Officer for Section 67(9) of CGST Act is  Additional or Joint Commissioner of Central Tax as per CBE&C circular No. 3/3/2017-GST dated 5-7-2017]

Where the goods or things seized are of perishable or hazardous nature, and if the taxable person pays

• an amount equivalent to the market price of such goods or things or
• the amount of tax, interest and penalty that is or may become payable by the taxable person,

whichever is lower,

such goods or, as the case may be, things shall be released forthwith, by an order in FORM GST-INS-05 ( Order of Release of Goods/ Things of Perishable or Hazardous Nature ), on proof of payment – rule 141(1) of CGST Rules, 2017.

Where the taxable person fails to pay the amount referred to in sub-rule (1) in respect of the said goods or things, the Commissioner may dispose of such goods or things 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. –rule 141(2) of CGST Rules, 2017.

Notification No 27/2018 Central Tax Dated 13.06.2018 :List of Seized Goods to be disposed by proper officer

What are the power of GST Officers for seizure

Provisions of CrPC applicable to seizure 

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 section 165(5) of the said Code shall have effect as if for the word “Magistrate“, wherever it occurs, the word ‘Commissioner‘ were substituted – section 67(10) of CGST Act.

Can the GST officer Seize you documents produced before him

Seizure of accounts, registers or documents produced before proper officer 

Where 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 reasons to be recorded in writing, seize the accounts, registers or documents of such person produced before him and shall grant a receipt for the same, and shall retain the same for so long as may be necessary in connection with any proceedings under this Act or the rules made thereunder for prosecution –section 67(11) of CGST Act.

Proper Officer for Section 67(11) of CGST Act is  Superintendent .  [ Proper Officer’ for the purpose of CGST have been specified as  vide  CBE&C circular No. 3/3/2017-GST dated 5-7-2017 [State Government will prescribe ‘proper officer’ for purpose of SGST in the respective State]

Judgments on Seizure

If valuation of seized goods in dispute ,Appellate Authority to decide :HC

Refer Topic wise Commentary on GST Act of India