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Necessity Of Recording Reasons To Believe Of Search Under CGST Act, 2017

After the implementation of the Central Goods And Service Act, in 2017, there has been a multi-fold increase in the searches being conducted by the department and there is no effective watchdog which can keep an eye on these actions undertaken by the departmental officers and neither there is any mechanism which can draw a line between the acts categorised as the ones done under the colour of duty and the ones which can be simply termed as vindictive and invasion of privacy and violation of Article 21 of the Constitution of India. The legal provisions qua search under the CGST Act, 2017 should only be invoked in cases where the officer takes a view that the reason which he is going to form for search is honest and reasonable and the same is not based upon grounds which culminates from mere suspicion, gossips, rumours and the officer is duty bound to act upon direct or circumstantial evidence and nothing contrary as held by the Hon’ble Supreme Court and various Hon’ble High Courts of our country. It is very much apt to mention that personal liberty of any individual is one of the most priceless freedoms which has been guaranteed to every citizen of this country under the Indian Constitution, but invoking the power to search in an arbitrary manner without even considering the judicial pronouncements of the higher courts and going beyond the scope of the intent of the Act is a state of affairs which needs to be looked into and dealt with by a very strong hammer.

That the CGST Act, 2017 has made it mandatory to have reasons to believe for search and the same must be recorded in writing by the concerned officer. The Act also states that the search and seizure shall be in accordance with Section 165 of Cr. P.C. The Hon’ble Supreme Court in Sheonath Singh Versus AAC AIR 1971 SC 2451, observed that the words ‘Reason to Believe’ suggest that the belief must be of an

honest and reasonable person and the same has to be based upon reasonable grounds and the officer concerned must act upon direct or circumstantial evidence but not on mere suspicion, gossip or rumours. That it was further held that the concerned officer would be acting without jurisdiction if the reason for his belief does not satisfy the conditions as stated under Section 165 Cr.P.C. and further the reason to belief must have a link with the formation of belief.

That further the Hon’ble Supreme Court in ITO Vs Seth Brothers UOI AIR 1970 SC 292 held that power of search is a serious invasion upon the rights, privacy and freedom of taxpayer and therefore, the same must be exercised in strict accordance with law and must be exercised bonafide.

That the intent of the legislature while drafting the CGST Act, 2017 was to make the process transparent and to free the taxpayer from the terrorism of vindictive officers, hence the CGST Act, 2017 further states that Section 67(10) of the CGST Act, 2017 states that provisions of the Code of Criminal Procedure, 1973, relating to search and seizure, shall, so far as may be, apply to search and seizure in relation to searches under the CGST Act, 2017 with a modification that the sub- section (5) of section 165 of the said Code shall have effect as if for the word ‘Magistrate’, wherever it occurs, the word ‘Commissioner’ were substituted.

In order to meet the procedural requirements of Section 165 Cr.P.C., certain requirements have been laid down by the statue qua the search, which are as follows:

  1. The officer making investigation should have reason to believe that anything necessary for investigation may be found in a place within his jurisdiction

  2. Such thing cannot be otherwise obtained without undue delay

  3. Grounds of such belief be recorded in writing and specifying the things for which search is to be made

  4. The officer should search himself, if practicable or require any officer subordinate to him to make the search

  5. Authority to subordinate officer should be in writing, specifying the place to be searched and things for which the search is to be made

  6. Copy of record made should be sent to Magistrate and should be furnished to the owner or occupier of the place searched, if he applies for the copies and the copies should be supplied free of cost.

That as per Section 26 of IPC, it is stated that a person is said to have reason to believe only on sufficient cause to believe that thing but not otherwise. The Hon’ble Supreme Court in the following matters took a similar and consistent view:

  1. Calcutta Discount Co. Ltd. Vs. ITO AIR 1961 SC 372

  2. S Narayanappa Vs. CIT AIR 1967 SC 523

  3. Pratap Singh Vs. Director of Enforcement, FERA (1985) 155 ITR 166 (SC)

  4. Tata Chemicals Vs. CC (2015) 52 GST 94

  5. State of Uttar Pradesh Vs. Aryaverth Chawl Udyog (2016) 91 VST 1 (SC 3 member bench)

In the case of N. Nagendra Rao Vs. State of AP (1994) 6 SCC 205 it was further held that forming an opinion

qua reasons to believe has to be based upon material on record and the same cannot be arbitrary, capricious or whimsical and the same view Was reiterated in the case of Ganga Saran Vs. ITO (1981) 130 ITR 1.

The reason to believe must not be on the basis of suspicion and the same has to be on reasonable grounds and good faith, which is a view taken by the Hon’ble Apex Court in the case of ITO Vs. Lakhmani Mewal Das AIR 1976 SC 1753.

That the Hon’ble Delhi High Court in the matter of L R Gupta Vs. UOI (1992) 194 ITR 32 held that the reason to believe must be backed by adequate material and not on assumption and whims as reason to believe has a wider scope than reason to suspect.

That further in Gurmukh Singh Vs. Union of India 1984 (18) ELT 274 Hon’ble Punjab & Haryana High Court held that the search cannot be based on mere suspicion. Further it was held that where the search was conducted and certain articles were seized but the articles/materials so seized could on which the department is relying upon could give rise to nothing other than a suspicion, then the said action of search is termed as for no jurisdiction.


At the end it can be concluded that the officers under the CGST Act, 2017 are duty bound to record the reasons to believe qua search in a proper manner and in accordance with the provisions of the CGST Act, 2017 r.w. relevant provisions of Cr.P.C and the reasons so formed by the concerned officer must be valid, strong and has to be on the basis of concrete evidence and not on mere suspicion or gossip and invoking the power to search the premises of any taxpayer or any person has serious consequences and is a serious blow and is an invasion in privacy of the person which is contrary to Article 21 of the Constitution of India.




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