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Summons, Enquiries and Investigations Summons, Enquiries and Investigations Summons, Enquiries and Investigations Summons, Enquiries and Investigations under under under under

Service TaxService TaxService TaxService Tax

Udayan Choksi

9th July 2011

� Investigation by tax authorities

� Jurisdictional

� Investigative

� Preparatory steps to proceedings

� SCN

� Prosecution

Why summons and investigation/search and seizure?

You know your own facts (best!)

� (1) Any Central Excise Officer duly empowered by the Central Government Central Excise Officer duly empowered by the Central Government Central Excise Officer duly empowered by the Central Government Central Excise Officer duly empowered by the Central Government in this behalf,

shall have power to summon power to summon power to summon power to summon any person whose attendance he considers necessary

either to give evidence give evidence give evidence give evidence or to produce a document produce a document produce a document produce a document or any other thing in any inquiry any other thing in any inquiry any other thing in any inquiry any other thing in any inquiry which

such officer is making for any of the purposes of this Act. A summons to produce

documents or things may be for the production of certain specified documents or

things or for the production of all documents or things of a certain description in the in the in the in the

possession or under the control of the person summonedpossession or under the control of the person summonedpossession or under the control of the person summonedpossession or under the control of the person summoned.

(2) All persons so summoned shall be bound to attendbound to attendbound to attendbound to attend, either in person or by an

authorised agent, as such officer may direct; and all persons so summoned shall be

bound to state the truth bound to state the truth bound to state the truth bound to state the truth upon any subject respecting which they are examined or make

statements and to produce such documents and other things as may be required :

Provided that the exemptions under sections 132 and 133 of the Code of Civil exemptions under sections 132 and 133 of the Code of Civil exemptions under sections 132 and 133 of the Code of Civil exemptions under sections 132 and 133 of the Code of Civil

ProcedureProcedureProcedureProcedure, 1908 (5 of 1908) shall be applicable to requisitions for attendance under

this section.

(3) Every such inquiry as aforesaid shall be deemed to be a “judicial proceeding”deemed to be a “judicial proceeding”deemed to be a “judicial proceeding”deemed to be a “judicial proceeding” within

the meaning of section 193 and section 228 of the Indian Penal Code, 1860 (45 of

1860).

Key provisions – Section 14 of Central Excise Act

� (1) Any decision or order passed or any summonssummonssummonssummons or notices issued under this

Act or the rules made there under, shall be servedshall be servedshall be servedshall be served, -

(a) by tendering tendering tendering tendering the decision, order, summons or notice, or sending it by

registered post with acknowledgment registered post with acknowledgment registered post with acknowledgment registered post with acknowledgment due, to the person for whom it is intended

or his authorised agent, if any;

(b) if the decision, order; summons or notice cannot be served in the manner

provided in clause (a), by affixing a copy thereof to some conspicuous part of the affixing a copy thereof to some conspicuous part of the affixing a copy thereof to some conspicuous part of the affixing a copy thereof to some conspicuous part of the

factory or warehouse or other place of business or usual place of residence factory or warehouse or other place of business or usual place of residence factory or warehouse or other place of business or usual place of residence factory or warehouse or other place of business or usual place of residence of

the person for whom such decision, order, summons or notice, as the case may

be, is intended;

(c) if the decision, order, summons or notice cannot be served in the manner

provided in clauses (a) and (b ), by affixing a copy thereof on the notice board of affixing a copy thereof on the notice board of affixing a copy thereof on the notice board of affixing a copy thereof on the notice board of

the officer or authoritythe officer or authoritythe officer or authoritythe officer or authority who or which passed such decision or order or issued

such summons or notice.

(2) Every decision or order passed or any summons or notice issued under this

Act or the rules made there under, shall be deemed to have been served on the deemed to have been served on the deemed to have been served on the deemed to have been served on the

date date date date on which the decision, order, summons or notice is tendered or delivered by

post or a copy thereof is affixed in the manner provided in sub-section (1)

Key provisions – Section 37C of Central Excise Act

� 82. Power to search premises – (1) If the Joint Commissioner of Central Excise

has reason to believe that any documents or book or things which in his opinion reason to believe that any documents or book or things which in his opinion reason to believe that any documents or book or things which in his opinion reason to believe that any documents or book or things which in his opinion

will be any useful for or relevant to proceedings will be any useful for or relevant to proceedings will be any useful for or relevant to proceedings will be any useful for or relevant to proceedings under this Chapter are secreted

in any place, he may authorizemay authorizemay authorizemay authorize any Superintendent of Central Excise or, as the

case may be, Deputy Commissioner of Central Excise to search for and seize or

may himself search for and seize, such documents or books or thingssearch for and seize, such documents or books or thingssearch for and seize, such documents or books or thingssearch for and seize, such documents or books or things....

(2) The provisions of the Code of Criminal Procedure, 1973 provisions of the Code of Criminal Procedure, 1973 provisions of the Code of Criminal Procedure, 1973 provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating

to searches, shall, so far as may be, apply or searches under this section as they

apply to searches under that Code.

Key provisions – Section 82 of Finance Act, 1994

� Rule 5A. Access to a registered premises.

(1) An officer authorised by the Commissioner in this behalf shall have access to access to access to access to

any premises registered any premises registered any premises registered any premises registered under these rules for the purpose of carrying out any purpose of carrying out any purpose of carrying out any purpose of carrying out any

scrutiny, verification and checks as may be necessary to safeguard the interest scrutiny, verification and checks as may be necessary to safeguard the interest scrutiny, verification and checks as may be necessary to safeguard the interest scrutiny, verification and checks as may be necessary to safeguard the interest

of revenueof revenueof revenueof revenue.

(2) Every assessee shall, on demand, make available on demand, make available on demand, make available on demand, make available to the officer authorised

under sub-rule (1) or the audit party deputed by the Commissioner or the

Comptroller and Auditor General of India, within a reasonable time not exceeding within a reasonable time not exceeding within a reasonable time not exceeding within a reasonable time not exceeding

fifteen working daysfifteen working daysfifteen working daysfifteen working days from the day when such demand is made, or such further or such further or such further or such further

period as may be allowed period as may be allowed period as may be allowed period as may be allowed by such officer or the audit party, as the case may be,-

(i) the records as mentioned in sub-rule (2) of rule 5;

(ii) trial balance or its equivalent; and

(iii) the income-tax audit report, if any, under section 44AB of the Income-tax Act,

1961 (43 of 1961), for the scrutiny of the officer or audit party, as the case may

be.

Key provisions – Rule 5A of Service Tax Rules, 1994

� Summons

� Search and seizure

� Access to registered premises

� Investigative agencies

Overview

� Section 14 of Central Excise Act, 1944 (‘CEA’)

made applicable to service tax per Section 83

of the Finance Act 1994 (‘Act’), authorises any

‘central excise officer’ empowered by the

Central Government to issue summons to any

person in respect of any enquiry related to

service tax

� Persons authorised include

� Chief Commissioner of Service Tax

� Commissioner of Service Tax

� Commissioner of Service Tax (Appeals)

� Additional Commissioner of Service Tax

� Joint Commissioner of Service Tax

� Assistant Commissioner of Service Tax

� Deputy Commissioner of Service Tax

� Any other officer of the Service Tax Department, or

any person (including an officer of the State

Government) invested by the Central Board of Excise

and Customs constituted under the Central Boards of

Revenue Act, 1963 (54 of 1963) with any of the

powers of a Central Excise Officer under the CEA

� Investigating agencies

Who has the powers to issue summons

� Central excise officer given powers to

summon person, whose attendance he

considers necessary either to give evidence or

produce documents or any other thing in any

enquiry which such officer is making

� Summon may be for production of specified

documents or things or for the production of all

documents or things of certain description in

possession or control of the person summoned

� Per Section 174 of the Indian Penal Code (‘IPC’) where

a person summoned intentionally omits to attend at

that place of time, or departs form the place where he

is bound to attend before the time at which it is lawful

for him to depart, shall be punished with simple

imprisonment for a term which may extend to one

month, or with fine, or with both

� Also per Section 175 of IPC, where person summoned

intentionally omits to produce or deliver asked for

documents, shall be punished with simple

imprisonment for a term which may extend to one

month, or with fine or with both

Scope of section 14 of CEA

� CBEC vide F. No. 137/39/2007-CX-4, dated 26-2-2007 clarified the situations which warrant issuance of summons

� For calling for information / documents, normally the mode of communication should be either in the form of a telephone call or by way of sending a simple letter

� Issuance of summons should be resorted to only when the above mentioned modes of communication are found to be ineffective or are likely to jeopardize revenue interest or when it is essential to ensure personal presence of the person concerned to tender evidence or record statement

� Summons should be issued after obtaining prior written permission from the AC

CBEC clarification on use of summons

� Mode of service� Tendering or sending it by registered

post with acknowledgment due

� By affixing a copy thereof to some conspicuous part of the factory or warehouse or other place of business or usual place of residence of the person

� By affixing a copy thereof on the notice board of the officer or authority who or which passed such decision or order or issued such summons or notice

� Latter modes to be resorted to only if the earlier modes are not possible

� Service may be made on the person himself or any authorised agent

� Document is deemed to have been served on the date on which it is tendered or delivered by post or a copy thereof is affixed

Service of notices

� All persons summoned shall be

bound to attend, either in person

or by an authorised agent and

shall be bound to state the truth,

make statements, produce

documents and other things as

required (Section 14 of the CEA)

Obligations of person summoned

� Per Section 77(1)(c) of the Act,

every person, who fails to furnish

information called by officer, or

fails to produce documents called

for or fails to appear before the

officer when issued with a

summon, shall be liable to a

penalty which may extend to Rs.

10,000 or Rs 200 per day during

continuance of default (subject to

maximum of Rs 10,000)

Penalty under the Act for non-appearance

� Newly introduced section 89 (w.e.f. 8-4-2011) vide Finance Act, 2011

� Offence

� Failure to supply any information which he is required to supply under this

Chapter or the rules made thereunder, or supply of false information

� Punishment

� Where the amount exceeds 50 lakh rupees, imprisonment for a term which

may extend to three years

� In absence of special and adequate reasons to the contrary to be recorded

imprisonment shall be for a minimum of six months

� In any other case, imprisonment for a term which may extend to one year

� Sanction of the Chief Commissioner of Central Excise required for

initiating a prosecution

� Per Notification 3/2004-ST dated 11th March 2004, the Director General of

Central Excise Intelligence (DGCEI) can exercise the power of Chief

Commissioner of Central Excise throughout India

� Prosecution proceedings to be initiated by filing of complaint in a court of law

� To be generally initiated after adjudication of an offence is complete

Prosecution provisions

� Proceedings under Section 14 of CEA are

deemed to be judicial proceedings within

the meaning of Section 193 & Section

223 of Indian Penal Code, 1860 (IPC)

� Section 193Section 193Section 193Section 193-Whoever intentionally gives

false evidence in any stage of a judicial

proceeding or fabricates false evidence,

shall be punished with imprisonment for a

term which may extend to seven years, and

shall also be liable to fine

� SectionSectionSectionSection---- 223223223223---- Whoever intentionally offers

any insult, or causes any interruption to

any public servant, while such public

servant is sitting in any stage of a judicial

proceeding, shall be punished with simple

imprisonment for a term which may extend

to six months, or with fine or with both

Deemed judicial proceedings under Indian Penal Code

� Practically, it has been seen that on many

occasions, merely for obtaining information

or documents pertaining to service tax

cases/ matters, officers of field formations

or intelligence agencies resort to issuance

of summons to either service tax payers or

to other persons

� From the nature of information / documents

called for, it is clear that same may be

obtained by making a telephonic request or

writing a simple letter to the person

concerned. Instead, summons are issued in

a routine manner, under the signature of

superintendent or the senior intelligence

officers.

Summons being misused??

Nandini Satpathy vs P.L. Dani and Anr [AIR 1978 SC

1025]

� Accusation of corruption and acquisition of assests

disproportionate to income

� Article 20(3) of constitution and Section 161(2) of CrPc

sought to be invoked

� Article 20(3)- No person accused of any offence shall be compelled

to be a witness against himself

� Section 161(2)-Such person shall be bound to answer truly all

questions relating to such case Put to him by such officer, other than

questions the answers to which would have a tendency to expose

him to a criminal charge or to a penalty or forfeiture.

� Conflicting considerations before court� Preventing interrogation and tackling crime

� Need for “accused” and “compelled”

� Article 20(3) operates at all stages� Amendment IV and V to the US constitution and Magna Carta

� Right to be secure against unreasonable search and seizure

� Cannot be compelled to be witness against oneself

� Article 22(1)- Right to have lawyer present

Presence of lawyer during interrogation?

� Supreme Court held that if an accused person expresses his wish to have his lawyer during examination, this facility should not be denied� “73.The right to consult an advocate of his choice shall not

be denied to any person who is arrested. This does not mean that persons who are not under arrest or custody can be denied that right. The spirit and sense of Article 22(1) is that it is fundamental to the rule of law that the services of a lawyer shall be available for consultation to any accused to any accused to any accused to any accused person person person person under circumstances of near custodial interrogation. Moreover, the observance of the right against self-incrimination is best promoted by conceding to the accused the right to consult a-legal practitioner of his choice.

� 75. Not that a lawyer's presence is a panacea for all problems of involuntary self crimination, for he cannot supply answers or whisper hints or otherwise interfere with the course of questioning except to intercept where intimidatory tactics are tried, caution his client where incrimination is attempted and insist on questions and answers being noted where objections are not otherwise fully appreciated. He cannot harangue the police but may help his client and complain on his behalf, although his very presence will ordinarily remove the implicit menace of a police station”


� Contrary view taken in Romesh Chandra Mehta vs State Romesh Chandra Mehta vs State Romesh Chandra Mehta vs State Romesh Chandra Mehta vs State

of West Bengal [1999 (110) E.L.T. 324 (S.C.)] of West Bengal [1999 (110) E.L.T. 324 (S.C.)] of West Bengal [1999 (110) E.L.T. 324 (S.C.)] of West Bengal [1999 (110) E.L.T. 324 (S.C.)] in the

context of customs law

� SC held that a statement made to a Customs Officer is not

hit by Section 25 of the Evidence Act since Customs

Officers are not Police Officers (Section 25 of the Evidence

Act states “No confession made to a Police Officer shall be

proved as against a person accused of any offence.”)

� A person who was asked to give evidence under the Sea

Customs act is not an accused and therefore guarantee

against testimonial compulsion under Article 20(3) is not

available to a person suspected of Customs duty evasion


� Ratio in Romesh Chandra Mehta Romesh Chandra Mehta Romesh Chandra Mehta Romesh Chandra Mehta reiterated in Poolpandi vs Poolpandi vs Poolpandi vs Poolpandi vs

Superintendent of Central Excise [1992 (60) E.L.T. 24 (S.C.)] Superintendent of Central Excise [1992 (60) E.L.T. 24 (S.C.)] Superintendent of Central Excise [1992 (60) E.L.T. 24 (S.C.)] Superintendent of Central Excise [1992 (60) E.L.T. 24 (S.C.)]

� Nandini Satpathy decision distinguished on grounds that in that

case, an accused was entitled to protection under Article 20(3) and

the Officers were Policemen, whereas in a case under the Customs

Act, the person does not become an accused during the enquiry

stage, nor are Customs Officials Police Officers

� A perusal of the facts in Nandini Satpathy v. Dani (supra)

would clearly indicate that the decision has no application in

the present cases. The matter arose out of a complaint filed by

the Deputy Superintendent of Police (Vigilance) against the

appellant under Section 179 of the Indian Penal Code before

the Sub-Divisional Judicial Magistrate, Cuttack. [ ] In this

background the observations relied upon by Mr. Salve and Mr.

Lalit were made and they cannot be treated to have in any way

diluted the ratio in Romesh Chandra Mehta’s Romesh Chandra Mehta’s Romesh Chandra Mehta’s Romesh Chandra Mehta’s case. The

question whether customs officials are police officers, and

whether the statements recorded by the customs authorities

under Sections 107 and 108 of the Customs Act were

inadmissible in evidence were examined in Illias v. Collector of

Customs (supra) and answered in the negative by a Bench of

five Judges and it is, therefore, no use referring to the

observations made in the judgment in a regular criminal case

initiated by the police’


� Person called for interrogation has no right for his lawyer to be

present as such person not equitable with an accused in the

criminal case� Article 21 not violated- No person shall be deprived of his life or personal liberty

except according to procedure established by law


� Thus the settled position is that a person

summoned before a Central Excise / Customs /

Service Tax Officer is not entitled to be

accompanied by his lawyer / advocate

� Recently Supreme Court decision in Anand Prakash Anand Prakash Anand Prakash Anand Prakash

Choudhari vs Union of India[2010Choudhari vs Union of India[2010Choudhari vs Union of India[2010Choudhari vs Union of India[2010----TIOLTIOLTIOLTIOL----98989898----SCSCSCSC----CUS]CUS]CUS]CUS]

� Interrogation can be conducted in the presence of an

advocate, who would be entitled to stay at a visible

but beyond hearing distance from the place of

interrogation

� “Accordingly, we allow the application and direct that

the interrogation, if any, of the petitioner under Section

108 of the Customs Act, 1962, in connection with file

No. DRI/GRU/INV-02/2010-11, be conducted in the

presence of his advocate, who would be entitled to

stay at a visible but beyond hearing distance, from the

place of interrogation”

� We understand that the summoned person accused

the DRI of torture and had suffered a heart attack


� Effect of retraction of statements made during interrogation

� State (NCT of Delhi) v. Navjot Sandhu @ Afasan Guru [Supreme Court:

MANU/SC/0465/2005]

� A retracted confession may form the legal basis of a conviction if the court is

satisfied that it was true and was voluntarily made

� Court not to base a conviction on a retracted confession without

corroboration

� State of Maharashtra v. A.N.Sabnai [1992 (58) ELT 208 (Bom.)]

� Retracted statement not to form solitary basis of conviction

� Commissioner of Customs, Mumbai v. Foto Centre Trading Co. [2008

(225) ELT 193 (Bom.)]

� Even if retracted statements could be considered, there must be other

corroborative evidence

Retraction of statements

� Petitioner was engaged in the business of printing

and publishing newspapers, periodicals

� AC issued summons u/s 14 to furnish certain

identifiable documents w.r.t. taxability under the

entry for ‘business auxiliary service’ (BAS)

� Petitioner challenged the summons on grounds

that the same were based on suspicion as it was

mentioned that ‘commercial activities may fall’

under BAS

� However the High court held in favor of revenue

� Documents sought being identifiable, inquiry

cannot be termed as fishing or omnibus inquiry

� Authorities conducting statutory duty - Petitioner

bound to comply with statutory notice

Summons seeking identifiable documents legal

� Supreme Court in the case of Commissioner of Customs, Calcutta vs. M.M. Commissioner of Customs, Calcutta vs. M.M. Commissioner of Customs, Calcutta vs. M.M. Commissioner of Customs, Calcutta vs. M.M.

Exports [Exports [Exports [Exports [2222007 (212) E.L.T. 165 (S.C.)] 007 (212) E.L.T. 165 (S.C.)] 007 (212) E.L.T. 165 (S.C.)] 007 (212) E.L.T. 165 (S.C.)] observed that the High Court ought not

to exercise its writ jurisdiction at the summons stage unless there are

exceptional reasons

� However, we wish to make it clear that as far as possible the High Court should not

interfere at the stage when the Department has issued the summons. This is not

one of those exceptional cases where the High Court should have interfered at the

stage of issuance of the summons.

Writ jurisdiction at summons stage?

� How does the summons process begin?

� Can someone be authorised to appear on behalf of summoned

person?

� Can a summon be avoided?

� Must correct information be provided?

� Can the officer use third degree measures? If yes, what

remedies are available?

� Can a Chartered Accountant be present?

� Can a statement be retracted

FAQs- Summons

� Give a hand written statement

� Ask for time or refer to a colleague, if necessary

� After the summons make your own notes of statement

recorded, and take legal advice

� Can an assessee ask the officers to visit on an alternative date

Tips for summons

� When service tax was introduced in the year

1994, it provided for very stringent

measures in case of non-compliance with

service tax provisions

� Sections 87 to 92 of the Finance Act, 1994

prescribed criminal liabilities under the Act

� The Finance Act, 1998 w.e.f. 16-10-1998

omitted Sections 87 to 92 of the Finance

Act, 1994 leaving Section 82 of the Act,

which authorised the Commissioner of

Central Excise to cause search and seizure

� Finance Act, 2011, has now empowered a

Joint Commissioner (earlier Commissioner)

to authorise a search under section 82 and

the rights for execution of such search given

to Superintendent (earlier AC/DC)

Search and seizure – Service tax

� Per Section 82, where the Joint Commissioner (JC) has

reason to believe reason to believe reason to believe reason to believe that any document or books or thingsany document or books or thingsany document or books or thingsany document or books or things,

which in his opinion will be useful for any relevant

proceeding, are secreted in any placeare secreted in any placeare secreted in any placeare secreted in any place, , , , he may authorise

any Superintendent of Central excise to search and seize

or may himself do so

� The Finance Act, 2002 w.e.f. 16-08-2002 had

expanded the scope of the section to authorise for

both search and seizure both

� Previously, only “search” and not “seizure” allowed

� Search is not restricted to any particular premise,

i.e. the premise need not be necessarily of the

assessee

� The term ‘secreted’ means kept in any place other

than the usual or normal place with a view to hide /

conceal them, where the officer of law cannot find it

� Supreme Court in the case of Durgaprasad vs.

H.B.Gomes, Superintendent (Prevention), Central

Excise [AIR 1966 SC 1209] has observed that

‘secret means documents not kept at normal or

usual place with a view to conceal it’

When can search be initiated??

� The expression 'reason to believe’ does not mean a purely

subjective satisfaction on the part of the Income tax officer.

It is open to the Court to examine whether the reasons for the

formation of the belief have a rational connection with or

relevant bearing on the formation of belief have a rational

connection with or relevant bearing on the information of the

belief and are not extraneous or irrelevant.

� [ITO v. Lakhmani Mewal Das (1976) 3 SCC 757][ITO v. Lakhmani Mewal Das (1976) 3 SCC 757][ITO v. Lakhmani Mewal Das (1976) 3 SCC 757][ITO v. Lakhmani Mewal Das (1976) 3 SCC 757]

� The belief must be of a reasonable prudent man based on

some material facts, and not on the basis of suspicion,

gossip, or rumour

� [Little Co. v. CST, (1979) 43 STC 449 (All)][Little Co. v. CST, (1979) 43 STC 449 (All)][Little Co. v. CST, (1979) 43 STC 449 (All)][Little Co. v. CST, (1979) 43 STC 449 (All)]

� There must be evidence of application of mind by the

prescribed officer

� [Ramnarain Bhojnanarwalla v. ITO, (1970) 77 ITR 653 (Cal)][Ramnarain Bhojnanarwalla v. ITO, (1970) 77 ITR 653 (Cal)][Ramnarain Bhojnanarwalla v. ITO, (1970) 77 ITR 653 (Cal)][Ramnarain Bhojnanarwalla v. ITO, (1970) 77 ITR 653 (Cal)]

Extent of subjectivity involved..

� The belief of the assessing authority is mandatory. “Reason to believe” “Reason to believe” “Reason to believe” “Reason to believe” is stronger than “is

satisfied”. The belief entertained by the assessing officer must not be arbitrary or irrational and it

must be reasonable

� [S. [S. [S. [S. GangaGangaGangaGanga Saran & Sons (P) Ltd. v. ITO [(1981) 3 SCC 143]Saran & Sons (P) Ltd. v. ITO [(1981) 3 SCC 143]Saran & Sons (P) Ltd. v. ITO [(1981) 3 SCC 143]Saran & Sons (P) Ltd. v. ITO [(1981) 3 SCC 143]

� Mere suspicion cannot take the place of reasonable belief - officers must have reason to believe

� [[[[MitexcoMitexcoMitexcoMitexco vsvsvsvs Commissioner of Customs (E.P.), Mumbai Commissioner of Customs (E.P.), Mumbai Commissioner of Customs (E.P.), Mumbai Commissioner of Customs (E.P.), Mumbai ---- 2003 (155) E.L.T. 69 Tri. 2003 (155) E.L.T. 69 Tri. 2003 (155) E.L.T. 69 Tri. 2003 (155) E.L.T. 69 Tri. ---- Mumbai)]Mumbai)]Mumbai)]Mumbai)]

� In the instant case, there is no acceptable proof to find that the inspecting staff of the Central Excise

Department or the Assistant Collector of Central Excise had at any time prior to the search and seizure

entertained any reasonable belief, on material scrutinised by them that the petitioner was likely to

arrive in Madras with tainted Indian currency attributable to the sale of smuggled goods or goods of

illicit origin. As the foundation for the exercise of power is conspicuously absent in the instant case

� [Abdul Kader [Abdul Kader [Abdul Kader [Abdul Kader vsvsvsvs Inspector of Central Excise [2000 (126) E.L.T. 48 (Mad.)]Inspector of Central Excise [2000 (126) E.L.T. 48 (Mad.)]Inspector of Central Excise [2000 (126) E.L.T. 48 (Mad.)]Inspector of Central Excise [2000 (126) E.L.T. 48 (Mad.)]

� The words “reason to believe” cannot mean that the assessing officer should have finally

ascertained the fact by legal evidence, they only mean that he forms a belief on the basis of

examination he makes, and from any information that he receives

� [[[[PrafulPrafulPrafulPraful ChunilalChunilalChunilalChunilal Patel Patel Patel Patel vsvsvsvs CIT [CIT [CIT [CIT [(1999) 236 ITR 832 (Guj)(1999) 236 ITR 832 (Guj)(1999) 236 ITR 832 (Guj)(1999) 236 ITR 832 (Guj)]]]]

Extent of subjectivity involved..

� Power of search and seizure has to be conceded in the larger interest of the society and

to check evasion of tax. Exercise of power of seizure is liable to be struck down unless

“reasons to believe” were duly recorded before action of search and seizure was taken.

The search and seizure was declared illegal where nothing was produced before the

court to show as to whether reasons were recorded or not before the search was

authorised or seizure took place.

� Mapsa Tapes (P) Ltd. v. Union of India [Mapsa Tapes (P) Ltd. v. Union of India [Mapsa Tapes (P) Ltd. v. Union of India [Mapsa Tapes (P) Ltd. v. Union of India [(2006) 201 ELT 7 (P&H)](2006) 201 ELT 7 (P&H)](2006) 201 ELT 7 (P&H)](2006) 201 ELT 7 (P&H)],

� Search and seizure operations were lawful though no reasons were recorded by the

person responsible to order the search and seizure in furtherance of his belief that any

goods liable to confiscation or any documents or things which he considers might be

useful for or relevant to any proceedings under the Customs Act were secreted in any

place. The Court observed the affidavit of the Associate Directorate of DRI and various

documents clearly suggested that there were enough reasons for the respondents to

order the search of the premises of the petitioners.

� Ajit Kumar Agarwalla vs Union of India [1998 (100) E.L.T. 333 (Cal.)]Ajit Kumar Agarwalla vs Union of India [1998 (100) E.L.T. 333 (Cal.)]Ajit Kumar Agarwalla vs Union of India [1998 (100) E.L.T. 333 (Cal.)]Ajit Kumar Agarwalla vs Union of India [1998 (100) E.L.T. 333 (Cal.)],

� Not necessary to record the reasons of search in writing

� [Partap Singh vs Director of Enforcement [(1985) 3 SCC 72][Partap Singh vs Director of Enforcement [(1985) 3 SCC 72][Partap Singh vs Director of Enforcement [(1985) 3 SCC 72][Partap Singh vs Director of Enforcement [(1985) 3 SCC 72]

Whether reasons need to be recorded in writing..

� Article 20(3) of the Constitution of India states that “No person accused of

any offence shall be compelled to be a witness against himself”

� M.P. Sharma & 4 others vs. Satish Chandra [AIR 1954 SC 300] M.P. Sharma & 4 others vs. Satish Chandra [AIR 1954 SC 300] M.P. Sharma & 4 others vs. Satish Chandra [AIR 1954 SC 300] M.P. Sharma & 4 others vs. Satish Chandra [AIR 1954 SC 300]

� Issue as to whether a search to obtain documents for investigation of an offence,

which is a compulsory procuring of incriminatory evidence from the accused

himself, can be said to be hit by said Article 20(3) of the Constitution of India

� In this context, the Hon’ble Apex Court held that it is not legitimate to assume that

the constitutional protection under Article 20(3) would be defeated by the statutory

provisions for searches, as a power of search and seizure is, in any system of

jurisprudence, an overriding power of state for the protection of social security and

that power is necessarily regulated by law.

Whether search hit by article 20(3)?

� No specific provision under service tax legislation.

� Per rule 24A of the Central Excise Rules, 2002 (‘CER’), the books of accounts or other documents

seized by the Central excise officer or produced by assessee or any other person, which have not

been relied upon for issuance of show cause notice (‘SCN’) need to be returned with 30 days from

the date of issuance of within 30 days from expiry of the period for issuance of SCN

� Under the Customs Act, 1962, Section 110 contain provisions for seizure of goods and

documents. Whereas Section 110(3) provides a limitation period six months for returning the

seized goods, if SCN is not issued within 6 moths from the date of seizure, no such limitation

provided for documents.

� Stovekraft Pvt. Ltd JT. Director, DRI [2007 (214) E.L.T. 179 (Kar.)]Stovekraft Pvt. Ltd JT. Director, DRI [2007 (214) E.L.T. 179 (Kar.)]Stovekraft Pvt. Ltd JT. Director, DRI [2007 (214) E.L.T. 179 (Kar.)]Stovekraft Pvt. Ltd JT. Director, DRI [2007 (214) E.L.T. 179 (Kar.)]

� Whether floppies, CDs, Hard disc, Pen drives etc. belonging to petitioner, which were seized and in which

relevant information which is useful for investigation was stored, were to be treated as ‘goods’ or

‘documents’ for the purpose of applicability of limitation period for return of seized item (section 110 of

Customs Act, 1962). It was held that the material which is stored in such Hard Disc, Pen-drives etc., can

be termed as electronic files or electronic documents. Such electronic document or records are admissible

as per Section 65B(1) of the Evidence Act.

� The Court also noted that the situation would have been different if the Floppies, CDs., Hard Disc, Pen-

drives etc., with or without the filled up data are brought to India by avoiding customs duty. In such a

situation, the aforesaid materials will have to be treated as goods for the purpose of paying customs duty

under Section 12 of the Customs Act.

� It is true that the Legislature has not laid down any period as to when the documents or things seized, are

to be returned to the concerned. However, it is expected that the authorities concerned can only retain

them as long as they require them for the purpose of investigation or for other purposes under the Act, but

cannot retain the same for inordinate length of time

Documents seized when to be returned?

� Per Section 82(2) of the Act, the provisions

of the Code of Criminal Procedure, 1973

(CrPC), relating to searches, shall, so far as

may be, apply to searches under section

82 as they apply to searches under that

Code

� The relevant provision of the CrPC are

sections 47, 51, 94, 99, 100, 101, 103,

165 & 166 of CCP

Code of criminal procedure applicable

Section 100Section 100Section 100Section 100---- Persons in charge of closed place to allow searchPersons in charge of closed place to allow searchPersons in charge of closed place to allow searchPersons in charge of closed place to allow search

� (1) Whenever any place liable to search of inspection under this Chapter is closed, any

person residing in, or being in chare of, such place, shall, on demand of the officer or

other person executing the warrant, and on production of the warrant, allow him free

ingress thereto, and afford all reasonable facilities for a search therein-

� (2) If ingress into such place cannot be so obtained, the officer or other person executing

the warrant may proceed in the manner provided by sub-section (2) of section 47.

� (3) Where any person in or about such place is reasonably suspected of concealing about

his person any article for which search should be made, such person may be searched

and if such person is a woman, the search shall be made by another woman with strict

regard to decency.

� (4) Before making a search under this Chapter, the officer or other person about to make

it shall call upon two or more independent and respectable inhabitants of the locality in

which the place to be searched is situate or of any other locality if no such inhabitant of

the said locality is available or is willing to be a witness to the search, to attend and

witness the search and may issue an order in writing to them or any of them so to do.

Important Provisions of CrPC

Section 100Section 100Section 100Section 100---- Persons in charge of closed place to allow searchPersons in charge of closed place to allow searchPersons in charge of closed place to allow searchPersons in charge of closed place to allow search

� (5) The search shall be made in their presence, and a list of all things seized in the

course of such search and of the places in which they are respectively found shall be

prepared by such officer or other person and signed by such witness; but no person

witnessing a search under this section shall be required to attend the court as a witness

of the search unless specially summoned by it.

� (6) The occupant of the place searched, or some person in his behalf, shall, in every

instance, be permitted to attend during the search, and a copy of the list prepared under

this section, signed by the said witnesses, shall be delivered to such occupant or person.

� (7) When any person is searched under sub-section (3), a list of all things taken

possession of shall be prepared, and a copy thereof shall be delivered to such person.

� (8) Any person who, without reasonable cause, refuses or neglects to attend and witness

a search under this section, when called upon to do so by an order in writing delivered or

tendered to him, shall be deemed to have committed an offence under section 187 of the

Indian Penal Code (45 of 1860).

Also, Section 165 authorizes search by a Police officer

Important Provisions of CrPC

� The purpose of search proceedings is to collection of evidences of violations.

However during the course of such search, the officers cannot

� Disrupt daily activities like production, sale or clearance;

� Prevent communication with the legal advisor, business partners, clients, friends

or relatives;

� Carry out their search in a surreptitious manner without allowing personnel to see

what they are doing;

� Execute their search without identifying themselves individually so as to prevent

any complaint of a misconduct;

Rights of assesses during search

Remember: The Service Tax provisions do not provide for arrest

� At the entry point of your premises, you are well within your rights to

� Ask each of the officers to identify himself by showing his identity card

� Ask the leader of the team to show you the authorization letter of Joint Commissioner before

the search operation commences.

� In case of the premises under search are residential premises where women reside, no

search can be carried out unless the search team includes a lady. Women’s rooms can only

be searched in the presence of the female members of the search team. Women can only be

searched by female members of the search team.

� Personnel can insist that the search operation is conducted in the presence of at least two

independent witnesses (akin to a Panchnama).

� Upon completion of the search, the records collected should be properly numbered and

listed, and only listed documents and records should be taken away by the officers. In case of

seizure of goods, they are not taken away except as samples. The seized goods are generally

left with the owner himself under a document with a direction not to use or dispose off

without the permission of the department

� Personnel can insist that a copy of the signed witness statement be provided at the end of

the search

Rights of assesses during search

� Per Rule 5A of Service Tax Rules, 1994

(‘STR’), an authorised officer shall have

access to premises registered under the Act

for carrying out any scrutiny, verification and

checks

� Every assessee shall on demand make

available to the authorised officer or the

audit party deputed by Commissioner or

Comptroller and Auditor General of India

(CAG) for scrutiny the following

� Records as mentioned in Rule 5 of STR

� Trial balance or its equivalent

� Tax audit report

� Most commissionrates have, vide circulars,

authorised officers of the rank of inspector

for the aforesaid purposes

Access to registered premises

� DGCEI is the apex intelligence organization

functioning under the Central Board of Excise &

Customs, Department of Revenue, Ministry of

Finance, entrusted with detection of cases of

evasion of duties of Central Excise and Service Tax

� Earlier known as Directorate General of Anti-Evasion

(DGAE)

� In 2004, DGCEI was entrusted with the work of

detecting evasion in service tax

� Established in the year 1979 as an independent

wing under the control of Directorate of Revenue

Intelligence, New Delhi with regional units located at

Chennai, Delhi, Kolkata and Mumbai

� At present DGCEI, with its Headquarters at New

Delhi, has 6 Zonal Units and 18 Regional Units

Directorate General of Central Excise Intelligence (DGCEI)

� ‘Central excise officer’ not defined under the Act, however

per Section 2(121), words and phrases not defined but

used under the Act, the corresponding definition of CEA to

apply

� Section 2(b) of CEA defines ‘central excise officer’ to

include any person invested by CBEC to exercise any of the

powers of a ‘central excise officer’

� Per notification 38/2001-CE dated 26-6-2001, officers of

DGCEI appointed as ‘central excise officers’ with the

following powers

Source of DGCEI’s powers

Officer of DGCEIOfficer of DGCEIOfficer of DGCEIOfficer of DGCEI Corresponding powers of Corresponding powers of Corresponding powers of Corresponding powers of

Directorate general Chief commissioner

Additional directorate

general

Commissioner

Additional director Additional commissioner

Joint director Joint commissioner

Deputy/ Assistant director DC/AC

Senior intelligence officer Superintendent

Intelligence officer Inspector

� Can a person be refused movement outside the searched

premises at any point of time?

� Can an assessee ask the officers to visit on an alternative

date?

FAQs- Search and seizure

� Ask to speak to your legal advisor

� Ask for list of items and documents taken

� Computer storage devices should be sealed in your presence

Tips for search and seizure

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