Search conducted by GST Inspector not authorised by Joint Commissioner or above rank is unsustainable in law in the light of provisions of section 67.

As per Section 67 of CGST Act, the proper officer not below the rank of Joint Commissioner decides to either conduct the search and seizure himself or authorize another person in writing to do the same, he should have, reasons to believe, that “any” goods are liable to be confiscated or “any” documents or books or things which, in his opinion, are useful or relevant to any proceedings under the CGST Act, are secreted in "any" place.

In this case, the search and seizure was conducted by an Inspector of the CGST Delhi North Commissionerate based on the authorization of the Additional Commissioner of the same department i.e. CGST Delhi North Commissionerate. Admittedly, in the instant case, no investigations were carried out against RJT by the CGST Delhi North Commissionerate. The authorization, as noticed above, (and qua which there is no dispute) was based on the communication dated 05.03.2021 addressed by Joint Commissioner (AE), Gautam Budh Nagar to the Additional/Joint Commissioner, CGST Delhi North Commissionerate. A careful perusal of this communication would show that the Joint Commissioner (AE), Gautam Budh Nagar wanted to know, in connection with the investigation of an entity going by the name M/s Mridul Tobie Inc., as to whether RJT, which was its L2 category supplier, actually existed. There is nothing stated in the document which could have formed the basis for issuing an authorization of even date by the Additional Commissioner CGST Delhi North Commissionerate. In other words, the communication dated 05.03.2021 gives no clue that “any” goods of RJT were liable for confiscation or “any” documents, or books or things which would be useful for or relevant for proceedings under the CGST Act had been secreted to any place; a prerequisite for the formation of belief, and therefore, for the exercise of powers concerning search and seizure.

Both the order of seizure of documents and the order of prohibition, simply replicate the language of subsection (2) of Section 67 and the corresponding Rule i.e. Rule 139(2). Thus, according to us, the very trigger for conducting the search [i.e. the authorization issued by the Additional Commissioner, CGST Delhi North Commissionerate] was flawed and unsustainable in law.

Having regard to the foregoing discussion, we are of the opinion that the Additional Commissioner, CGST Delhi North Commissionerate exercised his powers for according authorization to conduct search and seizure, at RJT's premises, even though the jurisdictional ingredients were absent. The request of Joint Commissioner (AE), Gautam Budh Nagar conveyed through the communication dated 05.03.2021, was only to ascertain as to whether RJT, which was the L2 supplier of M/s Mridul Tobie Inc., was in existence. There was no independent application of mind by the Additional Commissioner, CGST Delhi North Commissionerate.

The officers concerned should bear in mind that the search and seizure power conferred upon them, is an intrusive power, which needs to be wielded with utmost care and caution. The legislature has, therefore, consciously ringfenced this power by inserting the controlling provision, i.e., “reasons to believe”.

It appears, the concerned officer, i.e., the inspector used a prescribed form without taking the trouble of modifying having known that he was not the proper officer but someone who was authorised to act on behalf of the proper officer. Because we have concluded, that the authorization accorded by the Additional Commissioner is legally untenable, this facet of the case need not be, dwelled upon any further. However, the respondents would do well, in future, to bear in mind that prescribed forms i.e. GST IN - 02 and GST IN - 03 are for guidance, and that necessary modification is made while passing orders depending upon who is conducting search and seizure.

Conclusion:

The search and seizure conducted by CGST Delhi North Commissionerate are declared unlawful. Consequently, both the orders of seizure and prohibition dated 05.03.2021 are set aside. The subject documents will be released to RJT, at the earliest. Liberty is, however, given to the concerned officer to retain copies of the same in case they are required for carrying out further investigations against RJT.

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