Library / Goods and Services Tax: The Professional's Master Guide

37. Inspection, Search, Seizure, Summons and Arrest (Sections 67 to 72, 132)

These are the enforcement powers of the law. They are used where the department suspects evasion rather than an honest error, and they intrude on property and liberty. The law therefore attaches conditions to each power, and the courts insist on them. A professional must know both the powers and the limits.

37.1 Inspection, Search and Seizure (Section 67)

An officer of the rank of Joint Commissioner or above may authorise an inspection in INS-01 where he has reasons to believe that a taxable person has suppressed transactions, claimed excess ITC or otherwise contravened the law to evade tax, or that a transporter or warehouse keeper holds goods that escaped tax. If he has reasons to believe that goods liable to confiscation or relevant documents are hidden, he may authorise a search and seizure.

Step	Rule of law	Form or reference
Authorisation	Written, by Joint Commissioner or above, on reasons to believe	INS-01
Seizure	Order listing goods, documents and things seized	INS-02
Prohibition	Where seizure is not practical, order not to remove or deal with goods	INS-03
Provisional release	On bond for value of goods and security equal to tax, interest and penalty	INS-04, rule 140
Perishable goods	Released on payment or disposed of	INS-05, section 67(8)
Show cause for goods	Within 6 months of seizure, extendable by 6 months; else goods returned	Section 67(7)
Documents	Kept only as long as needed; copies allowed unless prejudicial; return within 30 days of notice if not relied upon	Section 67(3), 67(5)
Procedure	Search provisions of the criminal procedure code (now the Bharatiya Nagarik Suraksha Sanhita, 2023) apply	Section 67(10)

Illustration 186: Provisional release of seized goods

On 12 March 2026 officers seized stock of Arora Electronics worth Rs. 40,00,000, alleging clearance without invoices. Tax at 18% is Rs. 7,20,000.

Step 1: Release in INS-04 needs a bond for the value of goods, Rs. 40,00,000, and security equal to the tax, interest and penalty payable. The officer quantified penalty at Rs. 7,20,000 and interest at Rs. 64,800. Bank guarantee: Rs. 7,20,000 + Rs. 7,20,000 + Rs. 64,800 = Rs. 15,04,800.

Step 2: Unless a show cause notice is issued by 12 September 2026 (six months), or by 12 March 2027 if the period is extended, the goods must be returned.

37.2 Rights of the Taxpayer During a Search

A search must follow the authorisation. Officers must show it, conduct the search in the presence of two independent witnesses, prepare a panchnama with an inventory of what is seized, and give a copy. Women are searched only by women. The taxpayer may take copies of seized documents unless that would prejudice the investigation. There is no general right to have a lawyer present during questioning, though some High Courts have allowed presence at a visible but not audible distance.

Recovery of tax during search is the most abused area. CBIC Instruction No. 01/2022-23 (GST-Investigation) dated 25 May 2022 told officers that there can be no recovery by force or threat during search, inspection or investigation, and that a DRC-03 payment made during these stages must be truly voluntary. A taxpayer who pays under pressure can later seek a refund, and courts have directed refunds where payment was not voluntary.

Judicial view: Arrest and payment under GST

Radhika Agarwal v. Union of India (Supreme Court, 2025): The Court upheld the power of arrest under section 69 of the CGST Act and the Customs Act, but held that the Commissioner's "reasons to believe" must rest on material and be recorded, grounds of arrest must be given in writing, and anticipatory bail is available. Coercing a person to pay tax during search is not allowed; any payment must be voluntary, and a person may approach the court for refund of an amount paid under coercion.

P.V. Ramana Reddy v. Union of India (Telangana High Court, 2019): Arrest for offences under section 132 can be made even before the tax liability is determined in adjudication. The Supreme Court declined to interfere with this view.

37.3 Summons (Section 70)

The proper officer may summon any person to give evidence or produce documents in an inquiry, with the powers of a civil court. The inquiry is a judicial proceeding for the purposes of the offence of giving false evidence. The person must attend in person or through an authorised representative as the officer directs. CBIC guidelines of August 2022 discourage summoning senior management in the first instance and ask that summons not be issued for routine information that can be called for by letter.

Every summons from a CBIC officer must carry a DIN (Circular 122/41/2019-GST). A communication without DIN is invalid and treated as never issued, subject to the limited exceptions in the circular. The CBIC website allows the DIN to be verified online.
Summons may be served electronically. Keep proof of service and of every attendance.
A summons is not "proceedings" for the bar in section 6(2)(b), as held in Armour Security (Supreme Court, 2025). So a summons from one administration while the other investigates does not by itself breach the bar.
A statement is evidence. Read it before signing, correct errors in your own hand, and ask for a copy.

37.4 Arrest (Section 69 read with Section 132)

The Commissioner may authorise arrest only where he has reasons to believe that the person has committed an offence under section 132(1)(a) to (d) punishable under section 132(1)(i) or (ii), or an offence under section 132(2). In practice this means tax evaded, ITC wrongly availed or refund wrongly taken above Rs. 2 crore, or a repeat offence. Offences above Rs. 5 crore under clauses (a) to (d) are cognizable and non-bailable; others are non-cognizable and bailable, and the arrested person must be released on bail by the Deputy or Assistant Commissioner.

Grounds of arrest must be explained and given in writing as an annexure to the arrest memo (CBIC Instruction No. 01/2025-GST dated 13 January 2025), with acknowledgement.
In cognizable cases the person must be produced before a Magistrate within 24 hours.
Arrest is not routine; the guidelines of August 2022 require the need for arrest to be recorded, such as risk of tampering with evidence or of the person absconding.

Illustration 187: Is arrest possible?

Case A: Singh Traders availed fake ITC of Rs. 6.2 crore. This exceeds Rs. 5 crore. The offence is cognizable and non-bailable; punishment up to 5 years with fine.

Case B: Verma Metals availed fake ITC of Rs. 3.4 crore. The amount is above Rs. 2 crore but not above Rs. 5 crore. Arrest can be authorised, but the offence is non-cognizable and bailable; punishment up to 3 years with fine.

Case C: Rao Enterprises issued invoices without supply involving tax of Rs. 1.4 crore. For this offence the threshold is Rs. 1 crore; punishment up to 1 year with fine, and the offence is bailable. Since the offence is punishable under section 132(1)(iii), not clause (i) or (ii), arrest under section 69 cannot be authorised unless it is a repeat offence.

37.5 Goods in Movement and Officers to Assist

Section 68 requires the person in charge of a conveyance to carry prescribed documents, mainly the invoice and e-way bill, and allows officers to intercept and verify. Section 129 provides for detention and release on payment of penalty, and section 130 for confiscation where there is intent to evade. These are covered in the e-way bill chapter. Section 72 requires police, railways, customs, State and Central officers and others to assist GST officers.

37.6 A Practical Protocol for a Search

Stage	What the client should do
On arrival	Ask to see the authorisation (INS-01) and identity cards; note names and DIN; call the tax adviser
During search	Cooperate; do not obstruct or destroy anything; one senior person to accompany officers
Witnesses	Ensure two independent witnesses; note their names
Statements	Answer factually; do not guess figures; read before signing; ask for a copy
Payment	Do not pay under pressure; if paying, record in writing that it is voluntary and under protest where applicable
Panchnama	Check inventory of documents, devices and cash; get a copy signed by all
Digital data	Record hash values or list of files copied from servers; ask for a copy
After search	Prepare a note of events the same day; request copies of seized documents; diarise the six-month limit for seized goods

Chapter summary

• Inspection and search under section 67 need a written INS-01 authorisation by a Joint Commissioner or above, based on reasons to believe.

• Seized goods can be released provisionally on bond and security in INS-04; without a notice within six months (extendable by six), goods must be returned.

• Payment during search must be voluntary (Instruction 01/2022-23 and Radhika Agarwal); coerced payments can be recovered.

• Summons under section 70 need a DIN, compel attendance and are not "proceedings" for the section 6(2)(b) bar.

• Arrest needs reasons to believe on material, written grounds and production before a Magistrate within 24 hours; only offences above Rs. 5 crore are cognizable and non-bailable.

• A written search protocol and a same-day note of events protect the client more than any later argument.