GST Update on search by Customs officers is not restricted to premises of importer or exporter 116/2020-21

We have discussed various issues in our earlier updates on risky exporters. The finance ministry has identified numerous ‘risky’ exporters who have fraudulently claimed IGST refund and promised stern action against them.IGST refund has been suspended in all such cases where an adverse report was generated post verification of the exporter or his suppliers. However, Customs officials have been sensitized to expedite refunds to genuine exporters. Yet, in another case of fake invoices and claim of ineligible drawback and IGST credit, the Hon’ble Punjab and Haryana High Court in the case of M/s Shri Vishnu Processors Vs. Union of India & Others (CWP 25129 of 2019 dtd. 20^th March 2020) held that Section 105 of the Customs Act is widely worded, and the said section does not restrict the search proceedings only with regard to the importer or exporter and that, any other premises, which would be relevant to the proceedings can also be searched. The Petitioner was a supplier to the exporters and there was an investigation regarding ineligible drawback that had been claimed by procuring only the bills without actually there being transfer of goods, which establishes the relevance of search proceedings under the Act. Accordingly, it was apprehended that the contention of the Petitioner that search proceedings against them could not be conducted was declared as invalid and hence, the petition was dismissed.
DRI officers conducted a search on petitioner’s factory premise on the grounds that they have supplied goods to M/s Worldwide Tradelink and M/s NMR Knitfab Private Limited in connection with ongoing investigation of ineligible benefit pertaining to duty drawback and IGST availment. Though the records of the Petitioner were seized and panchnama was prepared, the Petitioner contended that the panchnama should be quashed as officials of DRI had no jurisdiction to conduct search at the premises of the petitioner as he is not an exporter, and that, in case of any doubt or dispute in the said matter, only the officials of GST department can proceed. His contentions were rejected by the hon’ble high court stating that the power of search is wide under section 105 of the Customs Act, 1962 so as to include other premises also in their jurisdiction in case of any doubt.

The government has armed tax officers with sweeping powers to conduct searches and surveys. In order to crack down on fake invoicing and fraudulent input tax credit (ITC) refunds under GST, the Budget has introduced strict penal provisions under the GST legislation, making it a non-bailable offence.
Search proceedings are seen as blunt instruments of law enforcement. The intention of the government is that they want to expand the tax base, but it must be ensured that the tax administration is handling powers in a judicious way.New GST return framework and E-invoicing which is proposed to be implemented from 1^st October, 2020, primarily is an attempt to plug the tax revenue leakage on account of fake invoicing and fraudulent claims of input tax credit.

This is solely for educational purpose.
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GST Update on search by Customs officers is not restricted to premises of importer or exporter 116/2020-21

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