DREADING A SEARCH: KNOW YOUR RIGHTS
For the revenue intelligence agencies, search is a powerful instrument to gather evidence against tax evaders. In fact, given the magnitude of tax evasion in the country, searches are conducted almost everyday by one or the other investigative or preventive set-ups. Though the tax laws have given immense power to these agencies it has, at the same time, given certain rights to tax-payers to safeguard their interests. The modalities and rules to conduct search under various tax laws like Central Excise, Customs, NDPS and
Income Tax are almost common except for a few minor differences. For instance, a search warrant under Customs Act or Central Excise Act can be issued by an Assistant Commissioner and above while by a Commissioner under the Income Tax Act. For illustration, we will talk about the various rules and rights under the Central Excise Act here.
You are a reputed manufacturer or godown in-charge or a registered dealer or simply a wholesale dealer of goods. One fine morning you receive some unpleasant guests, either at your place of business or at your residence. They come in a group of fives or sixes, call themselves as central excise officers, enter your premises, fan out in all the rooms, start picking up your records and documents and starts grilling your employees. You are puzzled and perturbed. You feel humiliated when one of them ask you to open your drawer, your briefcase and your car boot. Your humiliation gives way to anger and you pick up a brawl with them.
Stop it. Never ever mess up with them. You should show a great deal of sang-froid in finding out the objective of their untimely visit. Most probably they are officers from the anti-evasion _ preventive wing of the central excise department conducting a search.
WHAT IS A SEARCH
A search operation is executed under the Central Excise law when the officers have some intelligence about evidences being available in your premises, which would help them in substantiating a case of violation of the Central Excise laws. It is not necessary that the owner of the premises under search has committed the offence. It is quite possible that somebody else may be the suspected violator. As far as the officers know (in legal parlance it is called 'having a reason to believe') that the evidences are available at a particular place and, they have the power to search that place. For instance, if the officers believe that you have purchased some material from a manufacturer who has not paid the due excise duty, they may search your place to recover all evidences relating to those purchases.
Therefore, it would be wrong to presume that in all cases there is a search in your place and you are the prime suspect. The power to search premises was originally given to the customs officers, primarily to search for the smuggled goods sneaking into the country. Later it was extended to the Central Excise domain. The authority vested in excise officers is akin to the power available to a police officer looking for an evidence of crime under the Criminal Procedure Code.
In fact their authority is more substantive in the sense that unlike a police officer he need not prepare an inventory of what they have to look around for. It is quite possible that they were originally looking for evidences of a suspected offence, which turns out to be non-existent. But in the course of a search they lay their hands on evidences of something which they were not looking for at all. Without booking another case they would be within their power to recover the unintended piece of evidence. True, such an authority can be abused if an officer wants to. Hence, it is necessary that you, the person being searched, know the law and procedure relating to a search. Such knowledge-base helps you safeguard your legal rights.
YOUR RIGHTS DURING A SEARCH
Never forget that by searching your premises the officers are carrying out an official duty and are, therefore, bound by certain rules and regulations that are meant not only to further their official purpose but also to safeguard your rights and interests. It is important to keep it in mind that the only purpose of their visit is to look for and collect evidences of violations and, they have no right to:
++ Mess up with your daily activities like production, sale or clearance;
++ Stop you from communicating with your legal advisor, business partners, clients, friends or relatives;
++ Carry out their search in a surreptitious manner without allowing you or your employee to see what they are doing;
++ Execute their search without identifying themselves individually so as to prevent any complaint of a misconduct;
++ Prevent you or your employees from leaving the premises. (However, while leaving you might be required to give the phone number or the address of your destination, if asked for, so that they can contact you in case a clarification is required)
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. (This should obviously be done with utmost politeness so as to prevent any kind of confrontation. Remember that causing obstruction to an officer in the conduct of his official duty is also an offence. But it is equally important to know the authority of the raiding party);
++ Politely ask the leader of the team to show you the search warrant before the search operation commences. Remember, a search can be carried out only if the visitors have been authorised to do so by an Assistant Commissioner of the department or an officer of a rank higher than that. There are several instances of officers conducting a search without any authority (i.e. search warrant);
Sometimes officers take a plea that your factory or godown is registered with the department so they need not carry a search warrant. What a lie! Unless they have the authorisation papers they cannot do it. Save the raiding team is being led by an Assistant Commissioner or above. Since the officer is vested with the power to authorise his subordinates to conduct a search, there is no point in asking for a search warrant. If a search warrant has been issued, it should clearly give the name and the address of the premises to be searched. This is a legal requirement which is often violated by the officers. A proper search warrant filled up and signed by the authority is the first requirement. Sometimes it has been seen that after entering your premises officers try to fill up a blank search warrant already bearing the signature of the Assistant Commissioner. This is nothing but a serious irregularity which an assessee should bring to the notice of the higher-ups in the department.
++ In case of the premises under search is residential, where women reside, no search can be carried out unless the search team includes a lady. Rooms of ladies can only be searched in the presence of the lady members of the search team.
++ It is your right to carry out a personal search of the members of the search team (a lady can only be search by another lady). This is a legal safeguard provided to you to prevent planting of evidence against you.
++ You must insist (for it is your right) that the search operation is conducted in the presence of at least two independent witnesses. In Northern India these witnesses are called the pancha and the entire search operation is known as panchnama proceeding. In fact the officers are legally bound to conduct the entire operation in the presence of these witnesses who, at the end, record the entire happening in a narrative form called the Panchnama. The officers themselves are not supposed to record the event and, it is this Panchnama which becomes the official record of the entire episode and is used as the evidence.
In fact the panch witnesses should be present during the entire operation and not brought into the scene only after the officers have conducted their search and have ghost written the panchnama. Many times illiterate persons, or people who are known to the officers (some worker of the adjacent factory, a known chaiwala, or anybody who, the departmental officers feel, would not go against the official
version) may be called to become the panch witness. This is totally wrong. You must insist that at least persons of reasonable literacy, intellect, knowledge and certain credibility should be present through out the proceeding. They should be independent in the sense that they should neither be your relative, partner, employee or legal counsel nor should they be the persons inclined to tow the line of the officers if later called upon to reiterate the happenings. Many a times after a search operation is complete and panchnama drawn you realise that it contains things that were not there or did not occur. Such situations can be avoided if the persons acting as witnesses are really independent and were present through out.
++ Sometimes the officers may inform you that they are going to seize your goods. Seizure of goods is resorted to when their quantity differ from the recorded balance and when they are found to have violated some central excise law (Goods can also be seized as an evidence or for carrying out tests, but in those cases only samples of the goods are seized). It is your right that before effecting any seizure, the officers explain to you the exact nature of irregularity or the violation that they have in mind. If you have an explanation to offer, do so before the witnesses. If the officers are not convinced with your argument and still proceed to seize the goods you can insist upon recording your explanation in the panchanama. It may help you in future. In any case you must ensure that the correct inventory of the goods are recorded in the panchnama.
++ Upon completion of the search, when the officers collect the evidences in the form of documents and records, you should be alert and vigilant. The records should be properly numbered and listed in the panchnama and only listed documents and records may be taken away by the officers. As for the goods seized, they are never taken away except as samples. The seized goods are generally left with the owner himself under a 'superdiginama' with a direction not to use or dispose off without the permission of the department.
++ Further, upon completion of the search, the officers will submit themselves to a personal search by you. This is a right of the searched person, which may be exercised.
++ Finally, you must insist that a copy of the signed panchnama be given to you at the end of the search.
YOUR DUTIES DURING A SEARCH
++ Whereas you should be firm on safeguarding your legal rights, there is no reason why you should be impolite. Though you feel harassed and humiliated by the entire episode you must realise that the officers are doing their duty. Therefore, your shouting or show of anger or throwing names of influential persons is not going to make them go away. In fact it is their duty to carry out the search and failure to do so renders them liable to departmental action. Thus, be sure that they would carry out their duties and it is in mutual interest, besides also being your duty to ensure that the proceeding are carried out quickly and peacefully. Hence, it is your duty to assist the officers in stocktaking, scrutiny of documents and preparation of panchnama.
TIPS TO AVOID INCONVENIENCE
++ During the search operation, the officers fan out to various palaces, your shop-floor, factory office and store-room to take stock of the raw material and the finished goods, to recover papers and documents, to open your computers. It is always advisable to instruct your trusted employees to accompany the officers and assist them in their work. It helps in many ways. The officers get a feeling that you are assisting in their work; it makes their life simpler as they can ask the person to take out the relevant record; it reduces the mess that is otherwise created during a search operation by the officers pulling all types of records and documents; and it also keeps a check on them as to what they are looking at or what they are doing. As for the stock-taking of goods only the concerned person like the stores' in-charge should be sent.
++ Many assessees insist upon calling their legal counsel during the
search operation. This is not a very good idea. It must be understood that search operation is primarily to gather evidences i.e. facts. At this stage the legal points are not of much relevance. Therefore, the presence of a legal counsel is not of much help. In fact it may aggravate the situation further if your legal counsel believes in starting an argument on legal issues there itself and the officers feel his presence to be annoying. Ideally you should handle a search operation yourself and consult him after the operation, giving him the details of the happenings.
Finally, you should keep it in mind that no extra duty can be charged
from you nor can you be penalised under the law unless there is short payment of duty or certain irregularity and evidence to this effect. Therefore, the same law which empowers the central excise officers to search your premises is your biggest safeguard. This should be your talisman
For the revenue intelligence agencies, search is a powerful instrument to gather evidence against tax evaders. In fact, given the magnitude of tax evasion in the country, searches are conducted almost everyday by one or the other investigative or preventive set-ups. Though the tax laws have given immense power to these agencies it has, at the same time, given certain rights to tax-payers to safeguard their interests. The modalities and rules to conduct search under various tax laws like Central Excise, Customs, NDPS and
Income Tax are almost common except for a few minor differences. For instance, a search warrant under Customs Act or Central Excise Act can be issued by an Assistant Commissioner and above while by a Commissioner under the Income Tax Act. For illustration, we will talk about the various rules and rights under the Central Excise Act here.
You are a reputed manufacturer or godown in-charge or a registered dealer or simply a wholesale dealer of goods. One fine morning you receive some unpleasant guests, either at your place of business or at your residence. They come in a group of fives or sixes, call themselves as central excise officers, enter your premises, fan out in all the rooms, start picking up your records and documents and starts grilling your employees. You are puzzled and perturbed. You feel humiliated when one of them ask you to open your drawer, your briefcase and your car boot. Your humiliation gives way to anger and you pick up a brawl with them.
Stop it. Never ever mess up with them. You should show a great deal of sang-froid in finding out the objective of their untimely visit. Most probably they are officers from the anti-evasion _ preventive wing of the central excise department conducting a search.
WHAT IS A SEARCH
A search operation is executed under the Central Excise law when the officers have some intelligence about evidences being available in your premises, which would help them in substantiating a case of violation of the Central Excise laws. It is not necessary that the owner of the premises under search has committed the offence. It is quite possible that somebody else may be the suspected violator. As far as the officers know (in legal parlance it is called 'having a reason to believe') that the evidences are available at a particular place and, they have the power to search that place. For instance, if the officers believe that you have purchased some material from a manufacturer who has not paid the due excise duty, they may search your place to recover all evidences relating to those purchases.
Therefore, it would be wrong to presume that in all cases there is a search in your place and you are the prime suspect. The power to search premises was originally given to the customs officers, primarily to search for the smuggled goods sneaking into the country. Later it was extended to the Central Excise domain. The authority vested in excise officers is akin to the power available to a police officer looking for an evidence of crime under the Criminal Procedure Code.
In fact their authority is more substantive in the sense that unlike a police officer he need not prepare an inventory of what they have to look around for. It is quite possible that they were originally looking for evidences of a suspected offence, which turns out to be non-existent. But in the course of a search they lay their hands on evidences of something which they were not looking for at all. Without booking another case they would be within their power to recover the unintended piece of evidence. True, such an authority can be abused if an officer wants to. Hence, it is necessary that you, the person being searched, know the law and procedure relating to a search. Such knowledge-base helps you safeguard your legal rights.
YOUR RIGHTS DURING A SEARCH
Never forget that by searching your premises the officers are carrying out an official duty and are, therefore, bound by certain rules and regulations that are meant not only to further their official purpose but also to safeguard your rights and interests. It is important to keep it in mind that the only purpose of their visit is to look for and collect evidences of violations and, they have no right to:
++ Mess up with your daily activities like production, sale or clearance;
++ Stop you from communicating with your legal advisor, business partners, clients, friends or relatives;
++ Carry out their search in a surreptitious manner without allowing you or your employee to see what they are doing;
++ Execute their search without identifying themselves individually so as to prevent any complaint of a misconduct;
++ Prevent you or your employees from leaving the premises. (However, while leaving you might be required to give the phone number or the address of your destination, if asked for, so that they can contact you in case a clarification is required)
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. (This should obviously be done with utmost politeness so as to prevent any kind of confrontation. Remember that causing obstruction to an officer in the conduct of his official duty is also an offence. But it is equally important to know the authority of the raiding party);
++ Politely ask the leader of the team to show you the search warrant before the search operation commences. Remember, a search can be carried out only if the visitors have been authorised to do so by an Assistant Commissioner of the department or an officer of a rank higher than that. There are several instances of officers conducting a search without any authority (i.e. search warrant);
Sometimes officers take a plea that your factory or godown is registered with the department so they need not carry a search warrant. What a lie! Unless they have the authorisation papers they cannot do it. Save the raiding team is being led by an Assistant Commissioner or above. Since the officer is vested with the power to authorise his subordinates to conduct a search, there is no point in asking for a search warrant. If a search warrant has been issued, it should clearly give the name and the address of the premises to be searched. This is a legal requirement which is often violated by the officers. A proper search warrant filled up and signed by the authority is the first requirement. Sometimes it has been seen that after entering your premises officers try to fill up a blank search warrant already bearing the signature of the Assistant Commissioner. This is nothing but a serious irregularity which an assessee should bring to the notice of the higher-ups in the department.
++ In case of the premises under search is residential, where women reside, no search can be carried out unless the search team includes a lady. Rooms of ladies can only be searched in the presence of the lady members of the search team.
++ It is your right to carry out a personal search of the members of the search team (a lady can only be search by another lady). This is a legal safeguard provided to you to prevent planting of evidence against you.
++ You must insist (for it is your right) that the search operation is conducted in the presence of at least two independent witnesses. In Northern India these witnesses are called the pancha and the entire search operation is known as panchnama proceeding. In fact the officers are legally bound to conduct the entire operation in the presence of these witnesses who, at the end, record the entire happening in a narrative form called the Panchnama. The officers themselves are not supposed to record the event and, it is this Panchnama which becomes the official record of the entire episode and is used as the evidence.
In fact the panch witnesses should be present during the entire operation and not brought into the scene only after the officers have conducted their search and have ghost written the panchnama. Many times illiterate persons, or people who are known to the officers (some worker of the adjacent factory, a known chaiwala, or anybody who, the departmental officers feel, would not go against the official
version) may be called to become the panch witness. This is totally wrong. You must insist that at least persons of reasonable literacy, intellect, knowledge and certain credibility should be present through out the proceeding. They should be independent in the sense that they should neither be your relative, partner, employee or legal counsel nor should they be the persons inclined to tow the line of the officers if later called upon to reiterate the happenings. Many a times after a search operation is complete and panchnama drawn you realise that it contains things that were not there or did not occur. Such situations can be avoided if the persons acting as witnesses are really independent and were present through out.
++ Sometimes the officers may inform you that they are going to seize your goods. Seizure of goods is resorted to when their quantity differ from the recorded balance and when they are found to have violated some central excise law (Goods can also be seized as an evidence or for carrying out tests, but in those cases only samples of the goods are seized). It is your right that before effecting any seizure, the officers explain to you the exact nature of irregularity or the violation that they have in mind. If you have an explanation to offer, do so before the witnesses. If the officers are not convinced with your argument and still proceed to seize the goods you can insist upon recording your explanation in the panchanama. It may help you in future. In any case you must ensure that the correct inventory of the goods are recorded in the panchnama.
++ Upon completion of the search, when the officers collect the evidences in the form of documents and records, you should be alert and vigilant. The records should be properly numbered and listed in the panchnama and only listed documents and records may be taken away by the officers. As for the goods seized, they are never taken away except as samples. The seized goods are generally left with the owner himself under a 'superdiginama' with a direction not to use or dispose off without the permission of the department.
++ Further, upon completion of the search, the officers will submit themselves to a personal search by you. This is a right of the searched person, which may be exercised.
++ Finally, you must insist that a copy of the signed panchnama be given to you at the end of the search.
YOUR DUTIES DURING A SEARCH
++ Whereas you should be firm on safeguarding your legal rights, there is no reason why you should be impolite. Though you feel harassed and humiliated by the entire episode you must realise that the officers are doing their duty. Therefore, your shouting or show of anger or throwing names of influential persons is not going to make them go away. In fact it is their duty to carry out the search and failure to do so renders them liable to departmental action. Thus, be sure that they would carry out their duties and it is in mutual interest, besides also being your duty to ensure that the proceeding are carried out quickly and peacefully. Hence, it is your duty to assist the officers in stocktaking, scrutiny of documents and preparation of panchnama.
TIPS TO AVOID INCONVENIENCE
++ During the search operation, the officers fan out to various palaces, your shop-floor, factory office and store-room to take stock of the raw material and the finished goods, to recover papers and documents, to open your computers. It is always advisable to instruct your trusted employees to accompany the officers and assist them in their work. It helps in many ways. The officers get a feeling that you are assisting in their work; it makes their life simpler as they can ask the person to take out the relevant record; it reduces the mess that is otherwise created during a search operation by the officers pulling all types of records and documents; and it also keeps a check on them as to what they are looking at or what they are doing. As for the stock-taking of goods only the concerned person like the stores' in-charge should be sent.
++ Many assessees insist upon calling their legal counsel during the
search operation. This is not a very good idea. It must be understood that search operation is primarily to gather evidences i.e. facts. At this stage the legal points are not of much relevance. Therefore, the presence of a legal counsel is not of much help. In fact it may aggravate the situation further if your legal counsel believes in starting an argument on legal issues there itself and the officers feel his presence to be annoying. Ideally you should handle a search operation yourself and consult him after the operation, giving him the details of the happenings.
Finally, you should keep it in mind that no extra duty can be charged
from you nor can you be penalised under the law unless there is short payment of duty or certain irregularity and evidence to this effect. Therefore, the same law which empowers the central excise officers to search your premises is your biggest safeguard. This should be your talisman
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