Search & Seizure Under Service Tax

The power to search the premises of the service providers are contained in section 82 of the Finance Act, 1994 which deals with provisions relating to search and seizure of articles, documents etc, as a consequence of search.

Search and seizure provisions contained in tax statutes are provided to act as a restraint on evasion of taxes. Such powers are within the constitutional frame work and cannot be considered as violative of Article 19 of Constitution of India.

Power of search and seizure in any system of jurisprudence is an overriding power of the State to provide security and that power is necessarily regulated by law – M.P. Sharma v. Satish Chandra, District Magistrate 1954 AIR 300; (1954) 2 ELT 287 (SC).

In Baboo Ram Hari Chand v. Union of India (2014) 304 ELT 371 (Gujarat), it has been held that powers to seize and confiscate are quite drastic powers, such that authority exercising the same should have reasons to believe that goods were liable therefor. It was held that passing of a composite order, i.e. panchnama –cum-seizure order is impermissible in law.

Statutory Provisions

The power to search for documents, papers or things is contained in section 82 of the Finance Act, 1994. subject to the provisions of Code of Criminal Procedure, 1973. This section provides for search of documents, books or things by Commissioner of Central Excise or any other officer authorized by him. The pre-condition to search is that the CCE should have reason to believe that there are certain books etc. in secret possession at any place which may be useful for any proceedings under this Act. Such reasons may or may not be recorded in writing. Search can be done at any place which would include any house, office, building, vehicle etc. search is supposed to be an invasion into person’s privacy and it must be guided by certain principles under normal human tendency.

Finance Act, 2002 had amended section 82 to provide specifically for the power to seize documents relevant to any proceedings under the service tax law. He may authorize Assistant or Deputy Commissioner of Central Excise to search for and seize or for himself search for and seize documents or books or things which in his opening may be useful for or relevant to any proceeding under the Act.

Under section 82(1), the power for authorization for conducting search of any premises vests in the Commissioner of Central Excise. However, since under section 83 of the Finance Act, 1944 has been made applicable to service tax, provision of Customs Act, 1962 also become applicable to service tax matters. Accordingly, as per section 105 of Customs Act, the Assistant Commissioner or Deputy Commissioner of Central Excise is empowered to authorize any Central Excise Officer not below the rank of Sub-Inspector for search of any premises or he may himself search.

Finance Act, 2011 (w.e.f. 8.4.2011) amended the power to issue search warrant at the level of Joint Commissioner and the execution of search warrant at the level of Superintendent of Central Excise.

In M/s Innovation, Secunderabad & Others v. CBEC & Others (1984) 15 ELT 91 (AP), it was held that it is well settled that an officer cannot search any premises or of seize any goods, in the hope of ultimately discovering some basis or ground to justify the search or seizure.

In line with section 12F of the Central Excise Act, 1944, Finance Act, 2014 has amended section 82(1) of the Finance Act, 1994 relating to search provisions whereby powers have now been granted to Joint Commissioner or Additional Commissioner or any other officer notified by the Board, to authorize any Central Excise Officer to search and seize.

According to ‘Notes on Clauses’ to Finance Bill 2014, the amendment seeks to amend sub-section (1) of section 82 so as to provide that where the Joint Commissioner of Central Excise or Additional Commissioner of Central Excise or such other Central Excise officer as may be notified by the Board has reasons to believe that any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Chapter, are secreted in any place, he may authorize in writing any Central Excise officer to search for and seize or may himself search and seize such documents or books or things.

The erstwhile sub-section has been thus, substituted as under:

“(1) Where the Joint Commissioner of Central Excise or Additional Commissioner of Central Excise or such other Central Excise officer as may be notified by the Board has reasons to believe that any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Chapter, are secreted in any place, he may authorise in writing any Central Excise officer to search for and seize or may himself search and seize such documents or books or things.”

The amendment enhances the power of officers to authorize search and seizure. Now instead of Joint Commissioner, Additional Commissioner and any other officer notified by Board can also authorize the undertaking of search and seizure. The persons who can be authorized to do so can be any Central Excise Officer.