In Part I of this series, we explored Section 67(1) of the CGST Act, 2017, which outlines the inspection authority-serving as the initial and most limited step in the GST enforcement process, primarily focused on inspection and verification. We highlighted how inspections are confined to specific business premises, only conducted when there's a documented "reason to believe," and require approval from senior officials along with formal procedures. Importantly, inspections are not meant to be confrontational or intimidating; instead, they serve as a friendly, structured opportunity for tax authorities to verify facts and for taxpayers to demonstrate their transparency and compliance early on.
Sometimes, inspections reveal things that records alone cannot explain-like signs of intentionally hiding goods, transactions, or records, or attempts to hide evidence from authorities. In these situations, the law cannot just stand by. It must step in carefully and purposefully to gather evidence and safeguard revenue. This shift from just observing to actively investigating is an important step, and that's when Section 67(2) comes into play.
Part II of this series highlights an important phase. It provides a warm explanation of the legal framework for search and seizure under Sections 67(2) to 67(5), along with Rules 139(3) to 139(5) of the CGST Rules, 2017. These rules empower tax authorities with robust investigative tools while also emphasising crucial procedural safeguards-covering approval processes, scope, custody, documentation, and the duration of evidence retention. The aim is not to create fear but to ensure evidence is collected properly, intrusion happens only when necessary, and powers are exercised fairly and proportionately.
For Chartered Accountants and other professionals advising businesses, understanding this phase well is truly important. Search and seizure might seem quite intimidating in GST enforcement, often because of misconceptions about their scope and impacts. Having a clear, contextual understanding of these provisions and rules enables professionals to confidently guide their clients, protect their legal rights, and distinguish between what the law permits and what it prohibits. Building on this foundation, let's now explore how the law seeks to uncover the truth-steadily yet fairly-under Section 67(2).
Power of Search and Seizure - Section 67(2)
If, during an inspection under Section 67(1) or for other reasons, a proper officer reasonably believes that certain goods, documents, books, or items-especially those that might be confiscated or are relevant to proceedings under the CGST Act-are hidden somewhere, he has the authority to take action. He can either authorise another central tax officer or proceed to search and seize the items himself. When he authorises another officer, it's crucial that the authorisation is in writing so everything is recorded correctly.
An order of seizure shall be made in FORM GST INS-02 - Rule 139(2)
Whenever goods, documents, books, or other items are subject to seizure under Section 67(2), the designated officer or an authorised officer will issue a seizure order using FORM GST INS-02.
No removal/otherwise dealing with the goods/things without previous permission - Rule 139(3)
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.
Preparation of inventory of seized goods, documents, books or things - Rule 139(5)
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.
Serving of a prohibition order where it is not practicable to seize any goods- First proviso to Section 67(2)
This proviso embodies compassion within control: instead of removing bulky goods, the officer may leave them in the owner's custody, directing that they not be moved or dealt with without permission. This constructive seizure saves cost and avoids business disruption while keeping evidence intact.
Prohibition order to be served in FORM GST INS-03 - Rule 139(4)
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.
Duration of seizure- Second proviso to Section 67(2)
The authority to seize documents, books, or other items under Section 67(2) is definitely an essential tool for investigators. But the lawmakers were careful to ensure that such seizures do not lead to unnecessary long-term deprivation. That's why the second proviso to Section 67(2) clearly outlines how long seized records can be kept. This provision serves as a vital safeguard, balancing the need for investigation with protection against potential abuse of power, ensuring that investigations remain fair and don't turn into harassment. The proviso clearly states that the authorised officer may retain seized documents, books, or things only for so long as is necessary for two specific purposes:
(a) for their examination, and
(b) for any inquiry or proceedings under the CGST Act, 2017.
Once these purposes are met, the authority to retain information naturally ceases. The law emphasises that retention shouldn't be for convenience, caution, or future contingencies. Instead, it should always be based on a clear purpose, rather than a set amount of time.
The phrase "so long as may be necessary" is crucial because it reminds us that the officer must continually assess whether the seized material remains relevant. Once the examination is complete or the documents are no longer needed for inquiry or adjudication, the reason for keeping them no longer exists. This means that retention is an ongoing responsibility, not just a one-time right. While the power to seize might be granted at a specific moment, the authority to keep the items must be justified each day.
The Deeper Philosophy of Section 67(2) - Power Guided by Prudence
At its heart, Section 67(2) goes beyond procedural rules; it reflects the legislature's thoughtful awareness that unchecked power can lead to oppression, while excessive restraint without sufficient power can render mechanisms less effective. This part of the regulation thoughtfully grants the tax authorities the ability to search and seize when deception is suspected, while also ensuring they're held to high standards with layers of safeguards - such as requiring approval from senior officers, maintaining written records, preparing inventories, and limiting how long items can be held.
The philosophy is simple but heartfelt: the law should be firm enough to address dishonesty but gentle sufficient to protect honest people. When goods or documents are deliberately hidden to evade taxes, it's essential that the law act decisively and promptly. At the same time, when everything is in order, the law should step back thoughtfully, gather the appropriate documentation, and withdraw when appropriate. Section 67(2) plays a key role in ensuring enforcement is accurate and based on substantial evidence, rather than flashy or impulsive.
The first proviso to Section 67(2) highlights this thoughtful approach wonderfully. By permitting seized goods to remain with the owner rather than being physically removed, the law recognises real-world business considerations - storage needs, ongoing operations, and the risk of avoidable damage. This idea of constructive seizure shows a wise legal perspective: maintaining control without taking everything, exercising authority with humility.
"छुप गए सारे नज़ारे …"- (Anand Bakshi, Do Raaste, 1969)
This lyric truly touches the essence of protection. The goods do not just vanish; they stay right there - in sight, clearly identified, and kept intact, even if temporarily hidden by legal rules. It is not about scaring anyone; it's about holding things steady so the truth can emerge. The hiding is not physical but procedural - a legal pause to ensure facts are checked, and decisions are made.
Practically speaking, Section 67(2) does not assume guilt right away. Instead, it gently pauses the usual course of things just enough to let investigations clarify the situation. Once everything is verified, the law either takes strong action against evasion or steps back smoothly, returning things to normal and restoring possession. This capacity to step back is just as vital as the power to intervene.
Ultimately, Section 67(2) offers a timeless lesson in good governance: true respect for authority is not gained by how forcefully it is exercised, but by how gracefully it is surrendered. When power is wielded wisely, people stop obeying out of fear and start doing so because they believe in the process. That harmony is what truly makes the GST framework strong and resilient.
Judicial Pronouncements - Guardrails on the Exercise of Search and Seizure Powers
Judicial scrutiny has played a vital role in ensuring that the extensive powers of search and seizure under Section 67 of the CGST Act are exercised within the bounds of law, reason, and proportionality. Courts have consistently emphasised that, while the statute permits decisive action where evasion is suspected, such power cannot be exercised mechanically or routinely.
In Bhagat Ram Om Prakash Agro Private Limited & Another v. Commissioner, Central Tax, GST, Delhi (2023-VIL-868-DEL, decision dated 07 December 2023), the Delhi High Court examined the validity of a search authorisation issued under Section 67. The Court found that, except for certain directions issued under the Prevention of Corruption Act, 1988, there existed no independent material to justify the formation of "reason to believe" for initiating search proceedings under the GST law. Consequently, the authorisation was held to be patently erroneous, as departmental records failed to substantiate any of the grounds cited. The judgment reinforces the principle that search authorisation must be founded on credible, GST-specific material rather than on extraneous or unrelated considerations.
The requirement of procedural discipline was further reinforced by the Allahabad High Court in Gaurav Saurav Traders and Contractors v. State of Uttar Pradesh & Others (2023-VIL-886-ALH, decision dated 13 December 2023). The Court categorically held that the recording of reasons must precede the issuance of authorisation for search and seizure under Section 67. Any attempt to record reasons after issuing the authorisation was held to vitiate the entire proceeding. The ruling makes it abundantly clear that "reason to believe" is not a post-facto justification, but a condition precedent for the lawful exercise of search powers.
On the specific issue of seizure of cash, authoritative clarity has been provided by the Supreme Court in State Tax Officer (IB) & Others v. Shabu George & Another(2023-VIL-74-SC, decision dated 31 July 2023). The Supreme Court held that cash, not forming part of the stock-in-trade of the business, cannot ordinarily be seized under Section 67(2). The Court observed that the object of the statute must guide the power of seizure, and that cash, by itself, does not automatically qualify as "goods liable to confiscation" or as a "thing" relevant for GST proceedings. This judgment imposes a clear and binding restraint on investigative overreach and affirms that seizure powers must align with the GST law's statutory purpose.
Taken together, these judicial pronouncements firmly establish that search and seizure under Section 67 is an exceptional power to be exercised with caution, accountability, and strict adherence to statutory safeguards. They underline a consistent judicial message: enforcement must be vigorous where necessary, but never arbitrary; decisive where justified, but always disciplined by law.
Return of non-relied upon documents, etc., within 30 days of the issue of the SCN - Section 67(3)
If the documents, books or things referred to in Section 67(2) or any other documents which have been produced by the taxable person or any other person that have not been relied upon for the issue of notice under the CGST Act, or rules made thereunder, then the same shall be returned to such person. Further, such return of documents, books or things is required to be made within 30 days from the date of issue of such notice.
When Access Is Denied: The Power to Seal or Break Open- Section 67(4)
Even the most law-abiding enforcement sometimes meets resistance. A taxpayer may deny entry to a godown, claim that a locker key is lost, or refuse access to a computer that holds digital invoices. The law cannot halt there. Section 67(4), therefore, provides that where access to any place, almirah, electronic device, or receptacle is denied, the officer authorised under Section 67 may seal or break open such premises or container to carry out an inspection or search.
However, this power is neither absolute nor aggressive. The principle of necessity and proportionality guides it - the officer must first seek voluntary cooperation; only when it is denied, may he open forcibly. Every act must be recorded and ideally witnessed. In essence, it is not about breaking locks but breaking barriers to truth.
Illustration: Suppose officers authorised to search the warehouse of Kirti Ltd. are denied entry to a server room containing invoice data, with staff citing "system maintenance." If the request for access is repeatedly refused, the officer may, as a last resort, seal or unlock the room in the presence of witnesses, clone the data securely, and record every step. The aim is not intrusion but investigation - the law's duty to uncover, not to disrupt.
Section 67(4) thus acts as the law's assertive safeguard: it ensures that cooperation cannot be withheld as a tool of evasion. Yet, it also reminds officers that every exercise of force must carry the signature of fairness. The doors the law opens must lead to truth - not to intimidation.
Entitlement to make copies or take extracts of seized documents - Section 67(5)
Anyone whose documents are seized under Section 67(2) has the right to make copies or take extracts from those documents. He can do this in the presence of an authorised officer at a specified place and time. However, if the officer believes that copying or taking extracts might harm the investigation, he can prevent the person from doing so through an order. It's also important to note that orders regarding the seizure or retention of books of account, registers, and other documents cannot be appealed under Section 121(b) of the CGST Act.
When Power Pauses to Let Truth Speak
Search and seizure under Section 67(2) mark the moment when the law takes a responsible step forward-not out of anger, but out of duty. This part of enforcement reminds us that power is a trust, not an end in itself, exercised to protect the system and returned once its job is done. When handled with discipline and understanding, search and seizure can actually strengthen trust-they help gather evidence, not hurt egos; they look for facts, not fear.
For both professionals and taxpayers, understanding this stage can turn any worries into a clearer picture. It becomes easier to see that the GST law, at its core, gently promises fairness: nothing is taken without good reason, nothing kept without necessity, and nothing hidden once the truth is clear. This careful balance between strictness and restraint truly reflects the strength of good governance.
As a simple couplet reminds us:
"न ज़ोर से सच निकलता है, न शोर से बात बनती है,जहाँ सलीक़ा हो क़ानून का, वहीं इंसाफ़ पनपता है।"
Building on this understanding, we now enter the final phase of Section 67 in Part III. Here, the law gently shifts to restore what it temporarily held, focusing on release, return, and closure. It reminds us that absolute trust is nurtured only when power learns to step back and let things unfold naturally.
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