Presence of an Advocate is not mandatory while conducting search under GST
The term ‘search’, in simple language, 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. ‘Inspection’ is a new provision under the CGST/SGST Act. It is a softer provision than search to enable officers to access any place of business of a taxable person and also any place of business of a person engaged in transporting goods or who is an owner or an operator of a warehouse or godown.Section 67 of the CGST Act pertains to Power of inspection, search and seizure under GST.
Is presence of an advocate mandatory while conducting search under GST?
The Madhya Pradesh High Court on 3rd July, 2020, gave an important judgement in the case of Subhash Joshi & another Vs. Director General of GST Intelligence (DGGI) & Ors, where the petitioner had submitted that the search should be carried out in the presence of the Advocate, but counsel for petitioner had failed to point out any statutory provision or any such legal right in favour of the petitioner.
Facts of the Case:-
- The petitioner is a manufacturer of sweet betel nut and has all the necessary licenses and permissions for this purpose and is regularly paying GST.
- Petitioner has taken a plot on lease from Kishore Wadhwani and the petitioner is running the manufacturing unit on this plot. Apart from the lease, the petitioner had no connection with Kishore Wadhwani.
- Action was initiated against Kishore Wadhwani for evasion of tax and the premises of the petitioner taken on lease were sealed.
- By this petition, the petitioner challenged the notice whereby the premises of the petitioner had been sealed under the provisions of The CGST Act, 2017.
Proceedings of the High Court:-
What are the provisions of Section 67?
1.Section 67 of the GST Act pertains to Power of inspection, search and seizure. According to Section 67, where the proper officer, not below the rank of Joint Commissioner, 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 if he has reasons to believe that:-
a. a taxable person has suppressed any transaction relating to supply of goods, services or both or the stock of goods in hand, has claimed ITC 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
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. Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorise in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things.
3. If it is not practicable to seize any such goods, the proper officer, or any officer authorised by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.
4. The documents, 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 proceedings.
5. The documents, books or things produced by a taxable person or any other person, which have not been relied upon, shall be returned to such person within a 30 days of the issue of the said notice.
6. The officer authorised shall have the power to seal or break open the door of any premises or to break open any almirah, electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah, electronic devices, box or receptacle is denied.
7. The person from whose custody any documents are seized shall be entitled to make copies or take extracts in the presence of an authorised officer at such place and time as such officer may indicate, except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation.
8. The goods so seized under shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be.
9. Where any goods are seized and no notice in respect thereof is given within 6 months (may be extended by 6 months) of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized.
10. The Government may, having regard to the perishable or hazardous nature of any goods, depreciation in the value of the goods with the passage of time, constraints of storage space for the goods or any other relevant considerations, by notification, specify the goods or class of goods which shall, as soon as may be after its seizure, be disposed of by the proper officer in such manner as may be prescribed.
11. Proper Officer shall prepare an inventory of seized goods in such manner as may be prescribed.
12. The provisions of the Code of Criminal Procedure, 1973, relating to search and seizure, shall, so far as may be, apply to search and seizure under this section subject to the modification that section 165(5) of the said Code shall have effect as if for the word “Magistrate”, wherever it occurs, the word “Commissioner” were substituted.
13. 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.
14. The Commissioner or an officer authorised by him may cause purchase of any goods, services or both by any person authorised by him from the business premises of any taxable person, to check the issue of tax invoices or bills of supply by such taxable person, and on return of goods so purchased by such officer, such taxable person or any person in charge of the business premises shall refund the amount so paid towards the goods after cancelling any tax invoice or bill of supply issued earlier.
Applicability of Code of Criminal Procedure (Cr.P.C)
- In terms of Section 67(10), the provisions of search and seizure as contained in Code of Criminal Procedure are applicable.
- According to Section 100(4) of Cr.P.C, before making a search, the officer or other person about to make it shall call upon 2 or more independent and respectable inhabitants of the locality in which the place to be searched is situate or of any other locality if no such inhabitant of the said locality is available or is willing to be a witness to the search, to attend and witness the search and may issue an order in writing to them or any of them so to do.
- In terms of the above sub-section presence of two or more independent and respectable inhabitants of the locality is necessary as witness to the search.
- The search was yet to take place in the present case and the respondents had duly assured the court that the aforesaid provision will be complied with and therefore no direction in this regard was required.
- Another submission of counsel for petitioner was that the search should be carried out in the presence of the Advocate, but petitioner had failed to point out any statutory provision or any such legal right in favour of the petitioner.
Reference to Similar Cases
A similar issue had come up before the Supreme Court in the matter of Poolpandi and others Vs. Superintendent, Central Excise & Ors. (1992)
- During the investigation and interrogation under the provisions of Foreign Exchange Regulations Act 1973 and Customs Act, a prayer was made for assistance of a lawyer.
- Supreme Court denying such a prayer had held that, they did not find any force in the arguments that if a person is called away from his own house and questioned in the atmosphere of the customs office without the assistance of his lawyer or his friends, his constitutional right under Article 21 is violated.
- It is true that large majority of persons connected with illegal trade and evasion of taxes and duties are in a position to afford luxuries on lavish scale of which an honest ordinary citizen of this country cannot dream of and they are surrounded by persons similarly involved either directly or indirectly in such pursuits.
- But that cannot be a ground for holding that he has a constitutional right to claim similar luxuries and company of his choice.
- Appellant continued to maintain that he was entitled to the company of his choice during the questioning.
- The purpose of the enquiry under the Customs Act and the other similar statutes will be completely frustrated if the whims of the persons in possession of useful information for the departments are allowed to prevail.
- For achieving the object of such an enquiry if the appropriate authorities be of the view that such persons should be dissociated from the atmosphere and the company of persons who provide encouragement to them in adopting a non-cooperative attitude to the machineries of law, there cannot be any legitimate objection in depriving them of such company.
- The relevant provisions of the Constitution in this regard have to be construed in the spirit they were made and the benefits thereunder should not be “expanded” to favour exploiters engaged in tax evasion at the cost of public exchequer.
- Applying the ‘just, fair and reasonable test’ SC held that there was no merit in the stand of appellant.
The same issue came up before the Delhi High Court in reference to the GST Act in the matter of Sudhir Kumar Aggarwal Vs. Directorate General of GST Intelligence 2019
- Delhi High Court placing reliance upon the earlier judgments of the Supreme Court on this point held that, presence of a lawyer cannot be allowed at the time of examination of a person under the Customs Office.
- The petitioner in the present case had been summoned by the Officers under GST Act who were not Police Officers and who have been conferred with the power to summon any person whose attendance they consider necessary to give evidence or to produce a document.
- The presence of the lawyer, therefore, is not required during the examination of the petitioner as per the law laid down by Supreme Court in Pool Pandi’s case (supra).
- So far as apprehension of petitioner that he may be physically assaulted or manhandled is concerned, this Court is of the opinion that it is a well settled law now that no inquiry/investigating officer has a right to use any method which is not approved by law to extract information from a witness/suspect during examination and in case it is so done, no one can be allowed to break the law with impunity and has to face the consequences of his action.
- It was thus clarified that presence of a lawyer cannot be allowed to the petitioner at the time of questioning or examination by the officers of the respondent.
Having regard to the above position in law and the fact that no such legal right has been pointed out, the submission of the counsel for petitioner to carry out the search and seizure operation in the presence of the advocate cannot be accepted. Having regard to the aforesaid analysis, High Court was of the opinion that no case for interference in the present writ petition at this stage was made out. The petition was accordingly dismissed.