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Ques: Section 67(11) -Where the proper officer has reasons to believe that any person has evaded or is attempting to evade the payment of any tax, he may, for reasons to be recorded in writing, seize the accounts, registers or documents of such person produced before him and shall grant a receipt for the same, and shall retain the same for so long as may be necessary in connection with any proceedings under this Act or the rules made thereunder for prosecution.

Where above apply and what is difference in section 67(2) seize and section 67(11) seize. Pls give practical example

Ans:

Under Section 67(11) of the CGST Act, 2017, the proper officer is empowered to seize accounts, registers, or documents of a person if there are reasons to believe that the person has evaded or is attempting to evade tax. This power can be exercised for reasons recorded in writing, and a receipt must be granted to the person whose documents are seized. The seized records are retained only for so long as necessary for any proceedings under the Act, including prosecution. Practically, this provision is invoked in cases of suspected tax evasion, such as a taxpayer underreporting sales or claiming ineligible input tax credit (ITC). For example, if during an audit or investigation, the officer finds discrepancies suggesting deliberate concealment of taxable supplies, the officer may seize invoices, books of accounts, or digital records under Section 67(11).

The difference between Section 67(2) and Section 67(11) lies in the scope and intent of seizure. Section 67(2) deals with seizure during inspection of premises in relation to determination of tax liability, generally as part of a routine or scheduled inspection. It allows the officer to seize goods, documents, or accounts as a precautionary or investigative measure in connection with the ongoing proceedings to determine tax liability. In contrast, Section 67(11) specifically targets situations where there is reason to believe evasion or attempted evasion, often indicating deliberate intent, and the seizure may also be used to initiate prosecution proceedings.

Practical Example:

  • Section 67(2) Seizure: During a scheduled GST inspection at a factory, the officer notices missing invoices for certain stock and seizes them temporarily to determine the correct tax liability.
  • Section 67(11) Seizure: During an investigation, the officer uncovers evidence that a taxpayer is intentionally underreporting sales to evade GST. The officer seizes the complete accounting records and digital data to preserve evidence for potential prosecution, issuing a receipt and retaining records until the investigation is concluded.

This distinction is critical as Section 67(11) seizures are linked to suspected evasion and potential criminal proceedings, whereas Section 67(2) seizures are typically part of tax determination or compliance verification

Ques: The noticee/taxpayer is a supplier i.e. Nikita Trading Company who is in receipt of demand-cum-show cause notice u/s 74 & 122 of the CGST Act, 2017 asking the supplier as to why penalty equivalent to Rs. 1,60,000 /- (SGST-Rs. 56,000 /-, SGST-Rs. 56,000 /- and Cess-Rs. 48,000 /-) should not be imposed u/s 122(1) (i) of the CGST Act, 2017 read with section 127 of the Act and also read with section 20 of the IGST Act, 2017 for issuance of invoices without supply of goods in violation of the provisions of the Act or the rules made there under.

please find judgement in favour of the supplier/taxpayer (Nikita Trading Co).

Ans:

As noted, Nikita Trading Company (the Noticee) is alleged to have issued invoices without actually supplying goods to the customers, in violation of the CGST Act and rules. The Department has issued a Show Cause Notice under Section 74 (determination of tax not paid or short-paid or input tax credit wrongly availed or utilised under fraud/wilful misstatement or suppression of facts) and under Section 122 (penalty for certain offences) read with Section 127 (furnishing of false information or documents) of the CGST Act and also read with Section 20 of the IGST Act. The penalty in question is totalling approximately Rs. 1,60,000 (SGST Rs. 56,000 + SGST Rs. 56,000 + Cess Rs. 48,000) under Section 122(1)(i) and related provisions. The notice is directed to the supplier (the Noticee). The key allegation is issuance of invoices without supply and thereby violation of the Act/rules.
Legal provisions & interpretation
– Section 122(1)(ii) of the CGST Act provides that a taxable person who “issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder” is liable to penalty.
– Section 122(1)(i) covers “supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply” – separate from (ii).
– Section 127 deals with furnishing false information or documents.
– Section 20 of the IGST Act provides for jurisdictional aspects and certain cross-references for penalties, when a supply involves inter-state trade.
– A crucial clarification by the Central Board of Indirect Taxes and Customs (CBIC) in Circular No. 171/03/2022-GST dated 06.07.2022 states as follows: in the scenario wherein a registered person issues a tax invoice without any underlying supply of goods or services or both, such transaction would not qualify as “supply” under Section 7 of the CGST Act and accordingly no tax liability can be imposed under Section 73/74 on that entity for that invoice; however, penalty under Section 122(1)(ii) can still be invoked.
– The above clarifications emphasise that demand under Sections 73/74 (tax-recovery) requires “supply” as defined under Section 7. But penalty under Section 122 may apply even if there is no supply, provided invoices are issued without supply.
– Further, it has been held in the case law that proceedings for penalty under Section 122 are independent of tax-demand under Section 74 and do not automatically abate if Section 74 is closed.
Grounds in favour of the taxpayer (Nikita Trading Company)
Based on the above, the taxpayer has certain potential arguments:
Absence of actual supply or failure to prove supply: If the taxpayer can show that the alleged invoices corresponded to genuine supplies (or alternatively, that there was no issuance of invoice without supply), then the Department’s foundational allegation may fail. If there is no underlying supply and the taxpayer can provide documentation showing supply, delivery, acceptance, payment etc., then the element of “invoice without supply” may be rebutted.
Incorrect invocation of Section 74/tax demand: If indeed the invoices were issued but there is no supply, then as per the CBIC Circular, no tax liability arises under Section 73/74 because “supply” is a prerequisite for tax demand under those sections. The circular makes clear that only penalty under Section 122(1)(ii) can apply. If the show cause notice treats the matter primarily as a tax demand under Section 74 (rather than purely a penalty case), that could be a ground of challenge.
Onus of proving the contravention: The taxpayer may argue that the adjudicating authority must record clear findings on the essential ingredients of Section 122 – meaning issuance of invoice or bill without supply in violation of Act/rules. The taxpayer should request full disclosure of evidential basis (supplier records, delivery proofs, acceptance, books of account). If the Department’s case is weak in establishing invoice-without-supply, then the penalty may be reduced or set aside.
Natural justice / procedural issues: If the show cause notice or adjudication fails to give proper hearing, fails to address the taxpayer’s replies, or fails to restrict itself to the grounds specified in the SCN (see Section 75(7) of CGST Act) then the order may be vulnerable. In one recent case the Court found non-consideration of replies to be a ground.
Quantum of penalty vs. nature of contravention: Section 122 provides that the penalty is “ten thousand rupees or an amount equal to the tax evaded … whichever is higher” in many cases. If the taxpayer can show that no tax was evaded (i.e., the invoice without supply did not lead to tax liability or ITC wrongful claim), the penalty charge may be argued as disproportionate. The taxpayer may argue for reduction under principles of proportionality.
Distinction between offence types: If taxpayer did not issue invoice without supply (but only wrongly issued invoice for supply etc.), the proper clause may be Section 122(1)(i) rather than (ii). Mis-classification may be a point of defence.
Application to your case – Assessment of strength of the taxpayer’s defence
Applying the above to Nikita Trading Company: If the SCN primarily alleges issuance of invoices without supply, then the taxpayer should focus on demonstrating the supply chain, delivery, acceptance etc. If the Department has not clearly established “no supply” and instead proceeds to demand tax under Section 74 (claiming tax liability) but the invoices were without supply, then the taxpayer can press the circular argument that tax demand under Section 74 is not sustainable and only penalty under Section 122 is permissible.
If the Department has already issued the SCN under Section 122 (which appears to be so) plus Section 74, then the taxpayer can argue that the notice is flawed in conflating tax demand and penalty, or at least seek to limit liability to penalty under Section 122 rather than full tax demand.
Also, in respect of the quantum (Rs. 1,60,000) – if the taxpayer can show that the tax component (on which the penalty is based) is much lower or non-existent, or that the taxpayer did not obtain any undue benefit (ITC wrongful claim) then a reduction is possible.
Finally, the taxpayer should ensure that full procedural compliance (replying to SCN, furnishing records, hearing opportunity) is met, and should examine whether the show cause notice has specified exact grounds, whether the adjudicating officer addressed the taxpayer’s objections, etc.
Conclusion
In conclusion, Nikita Trading Company has viable legal grounds to challenge or narrow the scope of the demand/penalty notice. The key favourable points are: (i) circular clarification that issuance of invoice without supply does not give rise to tax demand under Sections 73/74 (only penalty under Section 122 applies); (ii) the need for the Department to clearly prove issuance of invoice without supply; and (iii) procedural safeguards including reply, hearing, and adherence to the grounds in the SCN. The taxpayer should prepare a detailed response citing the CBIC Circular 171/03/2022-GST (06.07.2022) and relevant case law (e.g., favourable High Court observations on Section 122) to argue that either (a) no tax demand is maintainable and only the penalty may apply, or (b) even the penalty should be moderated given the facts of supply, benefit etc.

Ques: we deal in sale of gift card voucher and purchase at same value but having confusion that gift voucher is under gst is exempt but confuse how to show in gst return along with hsn code

Ans: Your business involves the purchase and sale of gift vouchers or gift cards at the same face value, and there is confusion regarding the applicability of GST and its reporting in returns. Under Section 2(118) of the CGST Act, 2017, a voucher is defined as an instrument representing a right to receive goods or services in the future, and the actual supply occurs only at the time of redemption. The CBIC Circular No. 32/06/2018-GST dated 12th February 2018 clarifies that taxability of vouchers depends on whether the underlying supply is identifiable at the time of issue; if identifiable, GST applies at the time of issue, and if not, GST applies at the time of redemption. In your case, as you purchase and sell vouchers at face value without any margin or commission, there is no element of consideration or value addition by you, and therefore, these transactions do not constitute a supply under Section 7 and are outside the scope of GST, as also supported by rulings such as M/s Premier Sales Promotion Pvt. Ltd. and M/s Kalyan Jewellers India Ltd., which held that sale of prepaid gift vouchers by intermediaries is not taxable until redeemed. Consequently, such transactions should not be included in taxable turnover in GSTR-1 or GSTR-3B, but for accounting transparency they may be reported under Table 3.1(e) of GSTR-3B as non-GST outward supplies. Regarding HSN/SAC codes, since these are financial instruments and not goods or services per se, no HSN is strictly required; however, if your system mandates a code, any commission or margin earned on voucher sale can be classified under SAC 9971 or 9983 (financial/business support services), while pure face-value resale without margin requires no HSN. In summary, the purchase and sale of gift vouchers at par value is outside GST scope, no HSN is required, and reporting can be limited to non-GST outward supplies, whereas any commission element will be treated as taxable supply of service at the time of resale or redemption, and should be shown in GSTR-1 and GSTR-3B accordingly, consistent with legal provisions, circular clarifications, and advance rulings.

Caution: The above opinion is framed based on the limited information available and merely a personal opinion. We will not be responsible for any damage or loss in whatever manner consequent to any action taken on the basis of any content of this opinion. We suggest you take a detailed opinion for better clarity based on extensive information and research thereof.

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