Section 67 of CGST Act, 2017 – Case 1 for inspection
When proper officer not below the rank of JC, has reason to believe that a taxable person:
- has suppressed any transaction relating to supply of goods or services or both
- has suppressed the stock of goods in hand
- has claimed input tax credit in excess of his entitlement
- has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act
Section 67 of CGST Act, 2017 – Case 2 for inspection
- When proper officer not below the rank of JC, has reason to believe that a transporter or storage service provider:
- Is keeping goods which have escaped payment of tax
- has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act
Inspection orders in such cases
Joint Commissioner or higher proper officer may then:
- may authorise 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 (may include residence etc).
Some important points
- Transporter or storage service provider do not have their own supply of goods,
- Their premises can be inspected only where they are engaged in engaging themselves in storage of goods escaping tax
- This provision does not capture in movement inspection of goods (which is covered by Section 68)
Proper Officer
2(91) “proper officer” in relation to any function to be performed under this Act, means the Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the Board.
Circular No.3/3/2017-GST, dated 5-7-2017
- Officers who have been assigned powers by Board:
Additional or Joint Commissioner – Sub-sections (1), (2), (5) and (9) of Section 67
Reasons to believe
- Indian Penal Code, 1860, “A person is said to have ‘reason to believe’ a thing, if he has sufficient cause to believe that thing but not otherwise.“
- Pukhraj v. D.R. Kohli [1983 (13) E.L.T. 1360 (S.C.)]
“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.”
- Durga Prasad’s [1983 (13) E.L.T. 1501 (S.C.)]
Power of search granted under Section 105 of the Customs Act (para materia to Section 67 of the Act, 2017) is a power of general search but it is essential that before this power is exercised, the preliminary conditions required by the section must be strictly satisfied, that is, the officer concerned must have reasons to believe that the documents and things which in his opinion are relevant for any proceedings under the Act, are secreted in their place.
- Sheonath Singh’s (AIR 1971 SC 2451),
“Court can examine the materials to find out whether an honest and reasonable person can base his reasonable belief upon such materials although the sufficiency of the reasons for the belief cannot be investigated by the Court.”
- Golden Cotton Industries [2019 (29) G.S.T.L. 587 (Guj.)]
‘Belief’ is a mental operation of accepting a fact as true, so, without any fact, no belief can be formed. It is true that it is not necessary for the Proper Officer under the Act to state reasons for his belief. But if it is challenged that he had no reasons to believe, in that case, he must disclose the materials upon which his belief was formed.
- M.R. Nirman Pvt. Ltd. [2015 (40) S.T.R. 20 (Cal.)]
Assimilation of the ratio culled out from the aforesaid report “reason to believe” is not synonymous to a subjective satisfaction but based on good faith which is opposed to a mere pretence. The belief cannot be formed on mere rumour, gossip or suspicion but based on something which have a relevance and nexus to the concealment or evasion of the Service Tax.
Actions under the earlier Acts – are they illegal
- Magma Fincorp Limited [2019 (29) G.S.T.L. 193 (Bom.)]
The writ challenged that the State of Maharashtra could not have continued the application and effect of the provisions of the VAT Act, beyond one year after the appointed day
Hon’ble Court dismissed the petition observing as under:
“No such law made or repealed or saved by the State Legislature can be said to be inconsistent with Article 246A of the Constitution brought in by the Amendment Act.
Secondly, and at any rate, Section 19 of the Constitution Amendment Act cannot be said to have taken away the power of the State Legislature to amend or repeal or save any law relating to tax on goods or services or on both in force in any State immediately before the Constitution Act, so long, of course, as such amendment, repeal or saving is not inconsistent with the Constitution as amended.”
