5. Search, Seizure & Arrest
Under the Goods and Services Tax (GST) law, authorities have special powers for inspection, search, seizure, and arrest, aimed at combating serious tax evasion and protecting government revenue. These measures are only taken when there are valid reasons to suspect that an offense has taken place, and they must adhere to strict procedures and legal protections.
Inspection
Inspection is a "softer" provision than search, allowing officers access to business premises, warehouses, or transport vehicles.
- When it occurs: A Joint Commissioner or higher must have valid reasons to suspect that an individual has concealed transactions, claimed excessive input tax credit, or evaded tax, usually requiring a written authorization (Form GST INS-01), though inspections of goods in transit valued over ₹50,000 can be conducted by any authorized officer without prior approval.
- Powers: Officers may inspect records and goods. The person running the vehicle must show key papers like the e-way bill or invoice for checks.
Search and Seizure
Search and seizure are more intrusive and involve an attempt to find concealed goods, documents, or evidence of a crime.
When it occurs
A Joint Commissioner or higher officer can authorize a search if they have "reasons to believe" that goods liable for confiscation or useful documents/things are hidden in a specific place.
Procedure:
- Issue a valid search warrant (Form GST INS-01) before any search. It names the premises and officer details.
- Carry out the search with two or more independent witnesses present. o If denied entry, officers may seal or break doors, cupboards, or electronic devices.
- Prepare an inventory (Panchama) of seized goods and documents. Give a copy to the premises owner.
Seizure of Goods/Documents
Officers can take possession of goods liable for confiscation or any document/book/thing useful for proceedings.
- If taking bulky goods is not practical, officials issue a prohibition order (Form GST INS-03). This blocks their removal.
- Owners can get seized goods back on a trial basis. They sign a bond and provide security for tax, interest, and penalty (Form GST INS-04).
- Goods return to the owner if no show cause notice comes within six months of seizure. Officials may extend this by six more months.
Arrest
Arrest is the most severe measure and is used in exceptional cases of serious tax fraud or evasion.
When it occurs
The Commissioner must have "reasons to believe" a person has committed specific serious offenses under Section 132 of the CGST Act.
Monetary Thresholds:
- Arrest kicks in when tax evasion tops ₹200 lakhs (₹2 crore).
- Tax evasion from ₹200 lakhs to ₹500 lakhs counts as non-cognizable and bailable. Bail comes from a Deputy or Assistant Commissioner.
- Tax evasion over ₹500 lakhs makes it cognizable and non-bailable. Bail needs a Judicial Magistrate. Repeat offenders skip the money limit.
Procedure & Safeguards:
- Arrest needs prior approval from the Commissioner.
- Tell the arrested person the reasons for arrest in writing.
- Bring that person before a Magistrate within 24 hours.
- Follow Code of Criminal Procedure (CrPC), 1973 arrest rules. Include Supreme Court guidelines from the D.K. Basu case.
Taxpayers hold rights during these actions. They can have witnesses present for searches and seizures. They receive copies of documents. They may seek bail. Officers must act with care. They cannot use these powers to harass or force tax payments.
