ESSENTIALS OF INSPECTION UNDER SECTION 67.

[Sadanand Bulbule]

Essentials of authorisation for  under Section 67 of the GST Act, 2017.

1. Section 67 of the GST Act, 2017 read with Rule 139 of the GST Rules, 2017 confers the jurisdiction for authorisation of inspection to the Appropriate Authority besides for the authorised Inspecting Officers to execute it. The Appropriate Authority is defined as the authority not below the rank of Joint Commissioner and he has reasons to believe that––

(a) 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 thereunder to evade tax under this Act; or

(b) 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,

2.  The above pre-requisites mandate that, the event of suppression of any transaction or excess ITC has been claimed or the person has indulged in contravention of the provisions of the GST Act or Rules has actually taken place. It means absolutely there is no scope for intendment or assumption of such eventualities. Fundamentally the cogent evidence on records must be there to invoke the jurisdiction under Section 67(2) by the Appropriate Authority. It cannot be invoked in a routine and casual manner. So the authority is expected to be thoughtful on the existence of these pre-requisites on records before issuing an authorisation to the inspecting officers.

3. The words “ where the proper officer has reason to believe” in Section 67 of the GST Act suggest that, the belief must be that of an honest and reasonable person based upon the relevant materials and circumstances. The satisfaction has to be of the Appropriate Authority not below the rank of Joint Commissioner. The Appropriate Authority should have reasons to believe that a taxable person has actually suppressed any transaction relating to supply of goods or services or both. The statutory requirement of reasonable belief, rooted in the information in possession of the Appropriate Authority under the GST Act, is to safeguard the citizen from vexatious proceedings.

3. Secondly, it could be said that the Appropriate Authority had reasons to believe that the mandatory conditions of FORM-GST-INS-01 are ex facie established. Thus actual offence should have been committed by the person, then alone he would become liable for inspection, search and seizure. Therefore the entire responsibility and accountability is imposed on the Appropriate Authority who issues an authorisation for inspection, search and seizure under Section 67(2). The secondary responsibility to legally execute the inspection authorisation always vests with the Inspecting Authority, who carries out the order of the Appropriate Authority. But enough caution should be ensured that, as on the date of visit for inspection the person should still be a non-compliant for which the specific authorisation is issued. If there is any proper compliance curing the violations between the period of issuance of authorisation and the actual date of inspection, then there is no reason to execute such authorisation and it becomes redundant. It means sufficient “home-work” needs to be done. Otherwise it is highly prone for questioning the jurisdiction itself.

4. Subjective satisfaction of the Appropriate Authority is not enough to issue an authorisation for inspection, search and seizure. It needs to be demonstrated on records. Any deficiency in this regard is questionable before the judicial forums. If the Appropriate Authority’s satisfaction of reasonable belief is questioned in any collateral proceedings, then he only has to produce relevant evidence to sustain his belief. So any casual inspection authorisation may lead to the “casualty” of the inspection proceedings.

5. In PUKHRAJ VERSUS DR. KOHLI, COLLECTOR OF CENTRAL EXCISE, MADHYA PRADESH, VIDARBHA AND ANOTHER [1962 (3) TMI 2 - SUPREME COURT], the Supreme Court observed as follows:

"After all, when we are dealing with a question as to whether the belief in the mind of the officer who effected the seizure was reasonable or not, we are not sitting in appeal over the decision of the said officer. All that we can consider is, whether there is ground which prima facie justifies the said reasonable belief."

6. So the essential of any authorisation for inspection is the records should speak themselves for the need for sustainable inspection, search and seizure the way it is mandated under Section 67, Rule 139 and the FORM GST INS-01. Otherwise it would be “hit & run” case, which is never permitted under the Act. Thus the legal responsibility and the accountability of the Appropriate Authority is much more than the Inspecting Authority. The jurisdiction is, therefore, conferred on the superior authority to be exercised diligently and to ensure that the inspection authorisation is executed on real time basis.