SEIZURE AND

CONFISCATION
UNDER GST
 INDTRODUCTIO
N: for Inspection, Search, Seizure
In any tax administration the provisions
and Arrest are provided to protect the interest of genuine tax payers (as
the Tax evaders, by evading the tax, get an unfair advantage over the
genuine tax payers) and as a deterrent for tax evasion. These
provisions are also required to safeguard Government's legitimate
dues. Thus, these provisions act as a deterrent and by checking evasion
provide a level playing field to genuine tax payers.
 PROVISIONS: Search and Seizure
The procedure for Inspection, Search, Seizure and Arrest are given under chapter XIV of
the GST Act, 2017. Where Section 67 states power of inspection under search and seizure
and is to be read with CGST Rule 139. The section empowers an officer to search and
seize goods, relevant documents, and even seal premises if necessary. They must follow
due process and return seized documents within 30 days unless they're crucial for
investigation. Seized goods can be released on provisional basis upon execution of a bond
and upon paying applicable tax, interest and penalty payable, as the case maybe.
Perishables and specific categories of goods can be disposed of quickly. The CrPC search
and seizure procedures apply with some modifications. An officer can also seize accounts
and documents for investigation purposes. They can even authorize to check purchase tax
invoice issuance.
 Inspection can be carried out by an officer of CGST/SGST only upon a written
authorization given by an officer of the rank of Joint Commissioner or above. A
Joint Commissioner or an officer higher in rank can give such authorization only
if he has reasons to believe that the person concerned has done one of the
following actions:

(a). Suppression of any transaction relating to supply of goods or services or

stock in hand.
(b). Claimed excess input tax credit.
(c). Contravention of any provisions of the Act or the Rules to evade tax.
(d). Transporting or keeping goods which escaped payment of tax or
manipulating accounts or stocks which may cause evasion of tax.
Autherisation letter to conduct search is signed by a proper officer of Joint
Commissioner Rank or above and is known as INS 01 where INS stands for
inspection. Search authorizations (GST INS-01) must be generated electronically
with a unique System Generated Document Identification Number (ARN) to be
considered valid. Manual forms are now unauthorized.
Case Law: Hon’ble High Court of Gujarat at Ahmedabad in the case of
Prakashsinh Hathisinh Udavat v. State of Gujarat [2019] 112 taxmann.com 124
adjudged that-
Officer lacked authority to search or seize goods and documents in this case (no
authorization under subsection (2) of section 67). Court deems officer's actions
unauthorized and high-handed, awarding compensation to the affected citizen.
Difference between Detention & Seizure and Confiscation
• Detention-
Not allowing access to the owner of the goods by a legal order/notice is called detention.
However the ownership of goods still lies with the owner. It is issued when it is suspected
that the goods are liable to confiscation.
• Seizure-
Seizure is taking over of actual possession of the goods by the department Seizure can be
made only after inquiry/investigation that the goods are liable to confiscation.
• Confiscation-
Confiscation of the goods is the ultimate act after proper adjudication. Once confiscation
takes place, the ownership as well as the possession goes out of the hands of the original
owner and into the hands of the Government Authority.
Sections 129 and 130 of the CGST Act differ in purpose:
129: Allows detention/seizure for any contravention of the Act or Rules, not requiring "intent
to evade tax."
129 notice: Requires only contravention, not necessarily "intent to evade."
130: Deals with confiscation and requires specific circumstances, including a "reasonable
belief" of such intent.
130 notice: Demands a "reasonable belief" of such intent based on the transaction.
While detention may lead to seizure, and seizure to confiscation, the key difference lies in the
initial trigger: Therefore, Mobile Squads issuing detention/seizure notices under section 129
shouldn't automatically assume intent to evade for a potential section 130 notice. They need a
"reasonable belief" based on specific evidence and circumstances.
CBIC issued a circular restricting Section 129 seizures (goods detention) for minor documentation errors in certain
situations. Examples include:
• Misspelled names (if GSTIN is correct).
• Pin code errors (if not extending e-way bill validity).
• Minor consignee address errors (locality correct).
• Document number typos in e-way bills.
• HS code errors beyond the first two digits (if tax rate is correct).
• Vehicle number typos (one or two digits).
 Appeal Mechanism
Only those directly affected by an adjudicating authority's decision under CGST Act,2017 can
file an appeal to the Appellate Authority (AA). Appeals are limited to decisions/orders passed
under the Act, excluding specific ones like transfer orders, document retention, prosecution, and
installment payments.
The appeal window is 3 months from the order's communication, with a possible 1-month
extension granted by the AA for sufficient cause. The AA must uphold natural justice principles,
including hearing the appellant, allowing reasonable adjournments (3 maximum), and
permitting additional grounds if justified. They can also conduct further inquiries if
necessary.The AA's final order (Order-in-Appeal) can confirm, modify, or annul the original
decision but cannot send the case back to the issuing authority. Notably, the AA can increase
penalties, fines, or confiscated goods' value, or reduce refunds/credits, but only after providing
the appellant a chance to respond.
Additionally, if the AA believes unpaid/underpaid taxes, wrongly refunded taxes, or
wrongfully claimed input tax credit exists, they must notify the appellant and pass the order
within the specified time limits of Section 73 or 74 of the Act. Finally, the Order-in-Appeal
must be a "speaking order" clearly stating the points considered, the decision, and the
reasoning behind it. The
law suggests an advisory time limit of 1 year for the AA to decide the appeal.

Appeals in CGST:

Tribunal-
• Second appeal level for AA/revision order grievances.
• Jurisdiction based on dispute: place of supply (National) or other issues (State).
• Appeal within 3 months (extendable), no pre-deposit for small amounts.
 • Cross-objections by respondents within 45 days (extendable).
• Tribunal can confirm, modify, or annul orders, or remand for re-adjudication.

Department Appeals-
• Commissioner can review subordinate orders and file appeals as needed.
• Review within 6 months of order communication.

Revision by Commissioner-
• Corrects erroneous subordinate orders affecting revenue, legality, or material facts.
• Initiated within 3 years of order, excluding appeal periods.
• Cannot revise non-appealable orders, appeals already filed, or past timelines.

Authorized Representatives-
• Qualified individuals (relatives, employees, professionals) can represent parties.
• Some disqualifications apply (dismissal, conviction, etc.).
 High Court Appeals-
• From State/Area Bench orders on substantial questions of law.
• Filed within 180 days (extendable).
• Court decides only formulated questions of law initially.

Supreme Court Appeals:

• From High Court certifications or National/Regional Bench orders.
.
• Direct appeals for place of supply disputes.

Existing Systemic Hurdles and proposed recommendation-

Procedural delays, inconsistent application, and inadequate due process safeguards are some
of the systemic hurdles that exist in the GST law search and seizure process. Addressing these
hurdles requires clearer guidelines, streamlined appeals, and better training for GST officers,
ultimately aiming for a more efficient, transparent, and fair system that protects taxpayer
rights while effectively combating tax evasion.
FAQ and landmark judgments related to Seizure and Confiscation
under GST.

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