CONFISCATION AND SEIZURE OF GOODS IN GST LAW

Situations for Confiscation leading to Search

Under section 67(2) of the CGST Act, 2017, search can be ordered where the CGST/SGST officer has reasons to believe that goods are liable to confiscation. In terms of section 130 of CGST Act, 2017, goods become liable to confiscation when any person does the following acts:

1. supplies any goods in contravention of any of the provisions of this Act or rules made there under leading to evasion of tax;
2. does not account for any goods on which he is liable to pay tax under this Act;
3. supplies any goods liable to tax under this Act without having applied for registration;
4. contravenes any of the provisions of the GST Act or rules made there under with intent to evade payment of tax.
5. uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made there under unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance.

As per section 67(11) of CGST Act, 2017, 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.

Return of Documents etc. Seized

According to section 67(3) of the GST Act, 2017 the documents, books or things or any other documents, books or things produced by a taxable person or any other person, which have not been relied upon for the issue of notice under this Act or the rules made thereunder, shall be returned to such person within a period not exceeding thirty days of the issue of the said notice.

As per section 67(7) the seized goods are liable to be returned to the person from whom they were seized. Where any goods are seized 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 and the aforesaid period of six months may be extended by the competent authority for a further period not exceeding six months, on sufficient cause being shown.

Inventory of Items Seized

As per section 67(9), where any goods, being goods specified under sub-section (8), have been seized by a proper officer, or any officer authorised by him he shall prepare an inventory of such goods in such manner as may be prescribed.

Panchnama for Seizure

The inventory of goods seized is prepared in a document which is popularly called 'panchnama', though such term is not defined in CrPC, 1973 or CGST Act, 2017. It is a document prepared by the investigating agency after conclusion of search and seizure. A panchnama generally contains the following information:

1. Dates of commencement and conclusion of search and seizure proceedings
2. Name and address of the person searched
3. Name and address of the premises searched
4. Inventory of goods, articles, things, books, documents, records, files, equipments etc. seized - description, identification, quantitative and other details.
5. Signature of investigating officers with date, time and place.
6. Signature of persons searched with date, time, place and designation.
7. Particulars and signature of two independent witnesses (Panch's).

For a valid Panchnama, following points are relevant:

1. Panchnama should record everything that take place during the course of search
2. Panchnama should contain all and full particulars as listed in the aforesaid para
3. Panchnama should mention clearly that it has been prepared with utmost fairness, transparency and free mind without any threat and coercion.
4. Copy of Panchnama shall be delivered or served to the searched person immediately on conclusion of search.
5. A defective, incomplete and incorrect Panchnama has no evidentry value and may be held as non-sustainable.

Panchnama should record that:

(i) documents were recovered from the searched premises, and give brief description of exact place where they were located, and from where they were seized, who had found them and exactly from where in the searched premises,

(ii) they were seized by concerned officers,

(iii) steps taken by seizing officer to refrain himself and persons accompanying him from causing damage to documents, avoid inference with them and their contents,

(iv) to safeguard against interference by stranger, they have been kept in sealed envelope/packing material. It should give proper description of documents and refer to importance of very vital documents, so that there is no room to doubt, their genuineness and contents.

All these have to be recorded briefly mere recording of 'resumption of records' after search, without mentioning anything about seizure of documents and their details/ description, is not sufficient. It is more so in case of seizure in support of serious charge. This information is mandatory to give credibility to panchnama, particularly when contents of seized documents and entire proceedings are challenged. On the question of legality or otherwise of seizure, it was held that relevance of the documents seized in the course of proceedings has to be ascertained on the basis of their nature and charge against the assessee.

Manner of seizing goods

As per rule 139 (1 and 2) of CGST Rules, 2017, where any goods, documents, books or things are liable for seizure under sub-section (2) of section 67, the proper officer or an authorised officer shall make an order of seizure in FORM GST INS-02. 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. 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.

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 that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.

Seizure of perishable/hazardous nature of goods

In terms of Rule 141 of CGST Rules, 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, on proof of payment.

Where the taxable person fails to pay the amount in respect of the said goods or things, the proper officer 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.

In case of failure to do so, the proper officer has the power to dispose off the said goods as per Notification No. 27/2018-Central Tax dated 13.06.2018 [S. No. 17 of the Schedule appended to such notification]

Notification No. 27/2018-CT dated 13.06.2018 notifies the goods or the class of goods which shall as soon as may be after its seizure under section 67(2) be disposed off by the proper officer having regard to the perishable or hazardous nature, depreciation in value with passage of time, constraints of storage space.

List of perishable or hazardous goods:

1. Salt and hygroscopic substances
2. Raw (wet and salted) hides and skins
3. Newspapers and periodicals
4. Menthol, Camphor, Saffron
5. Re-fills for ball-point pens
6. Lighter fuel, including lighters with gas, not having arrangement for refilling
7. Cells, batteries and rechargeable batteries
8. Petroleum Products
9. Dangerous drugs and psychotropic substances
10. Bulk drugs and chemicals falling under Section VI of the First Schedule to the Customs Tariff Act, 1975
11. Pharmaceutical products falling within Chapter 30 of the First Schedule to the Customs Tariff Act, 1975.
12. Fireworks
13. Red Sander
14. Sandalwood
15. All taxable goods falling within Chapters 1 to 24 of the First Schedule to the Customs Tariff Act, 1975
16. All unclaimed / abandoned goods which are liable to rapid depreciation in value on account of fast change in technology or new models etc.
17. Any goods seized by the proper officer under section 67 of the said Act, which are to be provisionally released under sub-section (6) of section 67 of the said Act, but provisional release has not been taken by the concerned person within a period of one month from the date of execution of the bond for provisional release.

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