SCOPE OF PANCHNAMA IN GST SEARCH

The provisions relating to search and seizure are contained in sub-sections 2 to 8 of Section 67. The rules relating to search and seizure are contained in Rules 139, 140, 141 of CGST Rules, 2017.

Search and seizure provisions contained in tax statutes are provided to act as a restraint on evasion of taxes. Such powers are within the constitutional frame work and can not be considered as violative of Article 19 of Constitution of India.

Search

The term 'search', simply denotes an action of a government machinery to go, look through or examine carefully a place, area, person, object etc. in order to find something concealed or for the purpose of discovering evidence of a crime. The search of a person or vehicle or premises etc. can only be done under proper and valid authority of law.

"Search" has not been defined in the GST law. However, Shorter Oxford English Dictionary defines "search" to mean to probe, scrutinize, examine, investigate. The rights of the state to authorize a search are well recognized and are used against those who perpetrate fraud on the revenue. There has to be compelling reasons to order for a search i.e. transgression into one's privacy. In case of search, due process of law has to be followed. In case of taxes, a suspicion of undisclosed or concealed income or assets is sufficient for issuance of a search warrant.

Seizure

The term "Seizure" has not been defined in the GST law. In Law Lexicon Dictionary, "seizure" is defined as the act of taking possession of property by an officer under legal process. It generally implies taking possession forcibly contrary to the wishes of the owner of the property or who has the possession and who was unwilling to part with the possession.

Seizure is the outcome of search. If any documents are found during the search which need to be seized, the officials conducting the search can seize such documents etc. When power to seize exists, the power to release seized items is also implied. Once the investigation is completed, the department may retain or release the seized documents or papers or things. The investigation officer, if establishes that there has been an evasion of tax, notice under section 74 of the Act may be issued.

Seizure is taking into possession of goods in pursuance of a legal right. In COMMISSIONER OF INCOME-TAX, AND OTHERS Versus TARSEM KUMAR - 1986 (7) TMI 110 - Supreme Court, the Apex Court held that seizure implies forcibly taking something from its owner or who has possession and who was unwilling to part with such possession.

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.

As per second proviso to section 67(2), the goods, 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 proceeding under the GST law.

In terms of section 67(5), the person from whose custody any documents are seized shall be entitled to make copies thereof or take extracts there from in the presence of an authorized officer at such time and place as allowed except, where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation.

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.

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