STRICTURES AGAINST GST OFFICERS

[Mr. M. GOVINDARAJAN]

From the introduction of GST the stakeholders are suffering a lot from various corners.  The GST portal is the main one.  The glitches in the GST portal do not allow the stakeholders to comply with the provisions of GST Act and the rules framed there under.  Similarly challenges are there in transportation of goods which are mostly intercepted and detained without any reasonable cause.  Inspection, search and seizure is also not an exemption to this.

Section 67 of the Central Goods and Services Tax Act, 2017 deals with the power of officers in relation to inspection, search and seizure.

Section 67(1) of the Act provides that where the 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 there under to evade tax under this Act; or
• 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 authorize in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place.

Section 67(2) of the Act provides that 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 authorize 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.    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.  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.

Section 67(4) provides that   the officer authorized under sub-section (2) shall have the power 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.

Section 67 gives powers to the proper officers to break open the door of any premises, if required,  in which registers or documents of the person are suspected to be concealed.  Beyond this there is no power to the proper officers to cause any interruption to the incumbents of the premises. 

In one case the proper officers acted beyond the power given to them in section 67 of the Act for the action of which the High Court passed strictures against the said proper officer and also directed the department to take action against such erring officers.

In ‘Paresh Nathalal Chauhan v. State of Gujarat’ – 2019 (10) TMI 1184 - GUJARAT HIGH COURT the petitioner filed the present writ petition before the High Court against the action of the proper officers in conducting inspection in their premises.  As per the directions of the High Court the Department submitted the confidential report of the proceedings carried out by the aid officers at the premises of the petitioner pursuant to the authorization issued in favor of the said officers under section 67(2) of the Act.

The report revealed that the proper officers authorized to carry out the search at the residential premises of the petitioner had stayed there from 11.10.2019 to 18.10.2019.  On 11.10.2019 at 2.15, it has been recorded that after searching of the rooms in the premises, the records of the accounts were brought to the main room and gather there which included the bank pass books of the family members as well as the cheque books and that verification thereof was continuing. 

Thereafter no search has been carried out in the said premises but the officers had stayed at the premises and had examined the phone calls that were received by the family members and had recorded their phone calls.  They also recorded statements of the family members of the petitioner on 11.10.2019.  The officers who had arrived on previous day as well as the panchas were relieved by new set of officers and panchas and the cycle continues till 18.10.2019.  They have questioned the family members of the petitioner on a day-to-day basis till 18.10.2019.

The High Court observed that section 67(2) of the Act empowers the authorized officers to search and seize goods, documents or books or things.  Section 67(4) empowers the officers to seal or break open 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.

Section 67(2) does not empower the officer to record statements of family members through force or coercion or to record their conversations in their mobile phones.  It is not permissible for the authorized officer to use coercive measures against family members to find out whereabouts of the taxable person.  The High Court expressed their shockness on this occasion in which premises where there are ladies, male officers together with a CRPF officer have stayed throughout the day and night despite the fact that the goods, articles and things were already seized on 11.10.2019. 

The High Court held that the entire exercise carried out by the proper officers from 12.10.2019 to 18.10.2019 was totally without any authority of law and in flagrant disregard of the provisions of the Act and the rules and in total abuse of the powers vested in them.  The manner in which the officers have conducted themselves by overreaching the process of law and acting beyond the powers vested in them under section 67(2) of the Act needs to be deprecated in the strictest terms.  The High Court directed to conduct a proper enquiry in respect of the action of the said officers of staying day and night at the premises of the petitioner without any authority of law.