06 May Cash Seizure Laws Deciphered: Perspectives from High Courts
Introduction
Cash seizure during searches conducted by the GST Department is a topic that raises questions about legal authority and procedural fairness. In this article, we explore the nuances surrounding cash seizure, the perspectives of various High Courts, and the implications of their decisions.
Understanding Cash Seizure
When the GST Department conducts searches, it occasionally seizes cash. However, understanding the extent of their power to do so is crucial.
Views of Various High Courts
Kerala High Court
- T.H. Fazil (18-Sep-2023)
Introduction
In the annals of legal discourse, landmark cases often serve as beacons illuminating the intricate contours of jurisprudence. One such case that has garnered attention is T.H. Fazil v. State Tax Officer, a matter that traversed through the corridors of the High Court of Kerala at Ernakulam. Delving into the heart of this legal saga unveils profound insights into the realms of constitutional rights and governmental authority.
Facts of the Case
On the 18th day of September, 2023, W.P.(C) No. 30522/2023 surfaced before the honorable Dinesh Kumar Singh, J. The crux of the matter revolved around the seizure of cash from the premises of the petitioner, amounting to Rs.31,50,000/- and Rs. 3,40,000/- from petitioner Nos. 1 and 4, respectively. The contention arose from the perceived overreach of GST authorities in seizing cash not deemed as ‘stock in trade’. This contention found resonance in prior legal precedents, notably the case of Shabu George & another v. State Tax Officer, wherein similar arguments were posited.
Issue
The central issue at hand pertained to the statutory authority of GST authorities to seize cash and the legality thereof. It pivoted on the interpretation of relevant statutes vis-à-vis the rights of dealers and the extent of governmental powers.
Held
In a decisive pronouncement, the court opined that the retention of seized cash without issuing a show cause notice beyond a reasonable timeframe lacked legal justification. Citing the precedent set forth in Shabu George (supra), the court directed the immediate release of the seized amount to the appellants. This ruling underscored the sacrosanct principle of due process and expeditious adjudication.
- Dhanya Sreekumari
Introduction
Legal battles often serve as crucibles where the heat of justice melts down complexities into clarity. In the hallowed halls of the Kerala High Court, a significant case, Dhanya Sreekumari vs The State Tax Officer (Ib), unfurled a narrative that traversed the realms of taxation, governance, and individual rights. Let’s delve into the intricacies of this legal saga to glean insights into its implications.
Facts of the Case
The case, bearing WPC 21772/2022, unfolded on a pivotal Tuesday, the 27th day of June 2023, before the Honourable Mr. Justice T.R.Ravi. At its core were the petitioners: Dhanya Sreekumari, a distinguished entrepreneur, and Mahesh.M.M., both proprietors of their respective businesses. The State Tax Officer (Ib) and other government entities constituted the respondents’ side.
The petitioners, operating in the domain of food products, faced the seizure of a substantial amount of cash from their premises. The investigative team, representing the state, seized Rs.32,73,900/- in cash, citing alleged tax evasion. Alongside cash, pay-in slips totaling Rs.21,02,000/- were also confiscated.
Issue
Central to the dispute was the authority of taxation officials to seize cash under Section 67 of the CGST Act. The petitioners contested the legality of the seizure, arguing that cash, not constituting ‘stock-in-trade,’ fell outside the purview of permissible seizure under the statute.
Held
In a decisive pronouncement, the court upheld the petitioners’ contention, citing legal precedents and statutory interpretation. Relying on the judgment in W.A.No.514 of 2023, the court ruled that cash, not integral to the petitioners’ business operations, was erroneously seized. The court emphasized that in cases of alleged tax evasion, the seizure of cash must be justified by its nexus to the business’s operations. Consequently, the court directed the immediate release of the seized cash to the petitioners, reiterating the primacy of due process and legal clarity in administrative actions
- Shabu George (24-Mar-2023)
Introduction
Legal battles often serve as the crucible where the heat of justice melts down complexities into clarity. In the corridors of the Kerala High Court, a landmark case, Shabu George vs State Tax Officer (Ib), unfolded a narrative that traversed the realms of taxation, governance, and individual rights. Let’s delve into the intricacies of this legal saga to glean insights into its implications.
Facts of the Case
On a crucial Friday, the 24th day of March 2023, the Honourable Mr. Justice A.K.Jayasankaran Nambiar and Mr. Justice Mohammed Nias C.P. presided over the bench. The case, bearing WA No. 514 of 2023, arose from a writ petition, WP(C) 39406/2022, wherein the appellants, Shabu George and Gigi Mathew, contested the seizure of cash from their premises by the State Tax Officer (Ib) and other tax authorities.
The crux of the dispute lay in the legality of the cash seizure under the CGST Act. The appellants argued that the seizure of cash, not constituting part of their business’s stock-in-trade, was unjustified. Despite their representations, the authorities retained the seized cash, prompting the appellants to seek judicial recourse.
Issue
Central to the case was the interpretation of Section 67(2) of the CGST Act, which authorizes the seizure of ‘things’ during tax investigations. The appellants contended that the seizure of cash, unrelated to their business operations, exceeded the statutory mandate and violated their rights.
Held
In a definitive judgment, the bench upheld the appellants’ contention, emphasizing the need for legal restraint in exercising statutory powers. The court rejected the notion that cash seizure was justified merely based on suspicions of tax evasion. It highlighted that cash, not forming part of the appellants’ business activities, should not have been seized. Moreover, the court criticized the authorities for their prolonged retention of the seized cash without issuing a show cause notice, underscoring the need for procedural fairness.
Consequently, the court ordered the immediate release of the seized cash to the appellants, admonishing the authorities for their overreach and emphasizing the primacy of individual rights and due process.
Delhi High Court
- Goel Metal Udyog
Introduction
In a recent legal development, the Delhi High Court grappled with a pressing issue surrounding the seizure of cash by Goods and Services Tax (GST) authorities. This case, Goyal Metal Udyog vs. Commissioner of Central Goods & Services Tax & Anr, sheds light on the alleged unlawful seizure of cash by tax officials, suspected to be unaccounted money. This article delves into the intricacies of the Delhi High Court’s ruling, focusing on its directive for the immediate release of the seized currency and the potential for a refund.
Facts of the Case
The petitioner, Goyal Metal Udyog, initiated legal proceedings seeking several reliefs, including the cessation of proceedings launched by the respondents and the liberation of Rs. 50,70,000/- confiscated by the authorities. The petitioner’s business premises underwent scrutiny by officers from the Central Goods and Services Tax, Delhi East Commissionerate, on 3rd May 2018.
Issue
The central issue revolves around the legality of the cash seizure by GST authorities. Specifically, the petitioner contests the seizure, arguing that authorities lacked the power to confiscate the cash based solely on suspicion of being unaccounted money.
Held
In a verdict favoring the petitioner, the Delhi High Court deemed the cash seizure unlawful. The court directed the authorities to promptly release the seized currency, emphasizing the necessity for adhering to legal procedures in such matters.
- K.M. Food Infrastructure Pvt. Ltd.
Introduction
In a groundbreaking ruling, the Delhi High Court has delivered a landmark interpretation of the Goods and Services Tax (GST) Act, providing significant relief to taxpayers nationwide. The court’s decision, arising from the case of K.M Food Infrastructure Pvt Ltd and others versus Director General DGGI Headquarters, underscores a pivotal moment in GST law enforcement and taxpayer rights.
Facts of the Case
The case traces its origins to October 4, 2021, when GST officers conducted a search operation at the premises of Mr. Mukesh Kapoor, Director of K.M. Food Infrastructure Pvt. Ltd., and Apparent Marketing Pvt. Ltd. During the search, a substantial amount of cash totaling Rs. 1,90,66,000 was seized. The petitioners argued that this seizure was illegal, arbitrary, and contrary to the legal provisions, requesting the court to order the return of the seized currency.
Issue
The primary issue at hand was whether cash could be considered ‘goods’ under the GST Act, thereby subjecting it to seizure under the provisions of the act.
Held
The Delhi High Court meticulously analyzed the provisions of Section 67 of the CGST Act, emphasizing the clear distinction between ‘goods’ and ‘money.’ The court pointed out that cash is explicitly excluded from the definition of goods. It relied on the principle of ejusdem generis, which states that general terms following specific ones in statutory lists should be interpreted in light of those specific terms. In this context, the court found that the term ‘things’ in Section 67, intended to include items that could be useful or relevant to proceedings under the Act, does not extend to cash. The court noted that cash, not being liable for confiscation under the GST Act for the reasons cited by the respondents, could not be seized. Therefore, the court ordered the return of the seized cash, ruling in favor of the petitioners.
- Jagdish Bansal
Introduction
In a recent judgment, the Delhi High Court has delivered a groundbreaking ruling regarding the seizure of cash under the Central Goods and Services Tax (CGST) Act, 2017. The case of Jagdish Bansal vs Union of India & Anr. addressed the legality of cash seizure during search and seizure operations by tax authorities. This article provides an overview of the court’s decision, highlighting the implications for taxpayers and tax enforcement agencies.
Facts of the Case
The petitioner, Jagdish Bansal, challenged the seizure of cash by tax authorities during a search operation conducted at his residential premises and office. The authorities seized a substantial amount of cash totaling Rs. 65,00,000/- from the residential premises and Rs. 7,00,000/- from the office. The petitioner sought a declaration that the seizure of cash was unlawful, arguing that cash, excluded from the definition of “goods,” cannot be seized under the CGST Act.
Issue
The primary issue before the court was whether cash could be seized under the provisions of the CGST Act, given its exclusion from the definition of “goods.” The petitioner contended that since cash falls within the definition of “money” and not “goods,” it cannot be subject to seizure under the Act.
Held
The Delhi High Court, referencing the judgment in K.M. Food Infrastructure Pvt. Ltd. vs. Director General (DGGI), reiterated that cash is explicitly excluded from the definition of “goods” under the CGST Act. The court held that since cash does not qualify as goods, it cannot be seized under the provisions of the Act. Therefore, the court ruled in favor of the petitioner, declaring the seizure of cash as unlawful. The respondents were directed to remit the seized cash along with interest to the petitioner. However, the court clarified that the respondents could still take appropriate legal action under the Act, notwithstanding the judgment.
- Deepak Khandelwal
Introduction
In a recent ruling, the Delhi High Court addressed a crucial issue concerning the seizure of currency and valuable assets during search operations conducted by tax authorities. The case highlights the limitations of the power vested in the proper officer under Section 67 of the Goods and Services Tax (GST) Act. This article provides an overview of the case, emphasizing the court’s interpretation and its implications.
Facts of the Case
The petitioner, engaged in trading non-ferrous metals, had his residence searched by officers of the GST department. During the search, two silver bars and currency were seized from the petitioner’s residence. Subsequently, the petitioner filed a writ petition, challenging the legality of the search and seizure conducted at his residential premises.
Issue
The primary issue before the court was whether the seizure of currency and valuable assets during search operations conducted under Section 67 of the GST Act was justified. The petitioner argued that the purpose of such operations was not to seize unaccounted income or assets but to unearth tax evasion and ensure taxable supplies were brought to tax.
Held
The Delhi High Court, in its judgment, clarified the purpose of Section 67, emphasizing that it aims to empower authorities to uncover tax evasion rather than seize unaccounted income or assets. The court held that if the assets seized during the search were not relied upon in the subsequent notice issued, they should be returned to the petitioner.
In the present case, as the notice issued did not rely on any of the items seized during the search operations, the court directed the department to release the currency and other valuable assets seized from the petitioner. This ruling underscores the limitations of the proper officer’s power to seize currency and other assets during search operations under the GST Act, reaffirming the importance of adherence to legal procedures and due process.
Gujarat High Court
- Bharat Kumar Pravin Kumar & Co. (26-Oct-2023)
Introduction
The recent judgment by the Gujarat High Court in the case of Bharatkumar Pravinkumar and Co. vs. State of Gujarat has significant implications for the interpretation of the Goods and Services Tax (GST) Act regarding the seizure of cash. This article delves into the details of the case, analyzing the court’s decision and its impact on taxpayers and tax authorities.
Facts of the Case
M/s. Bharatkumar Pravinkumar and Co., a partnership firm engaged in courier services, had its silver bars seized by the Income Tax Department in 2004. Despite payment of taxes, the bars were not released. Upon a Special Civil Application before the Gujarat High Court, the court ordered the release of the silver bars. Subsequently, when the firm sold the bars and received the sale proceeds via cheque, the Revenue Department seized the cash while it was being transferred to the branch office of the firm.
Issue
The primary issue before the court was whether cash could be considered as goods for the purpose of seizure proceedings under the GST Act. The petitioner contended that since cash was neither goods, documents, nor part of the stock in trade, it could not be seized under the provisions of Section 67 of the Central Goods and Services Tax Act, 2017.
Held
The Gujarat High Court, in its judgment, clarified that the CGST Act authorizes the seizure of goods, documents, or things, not cash, especially when the cash is not part of the business’s stock in trade. Additionally, the court emphasized that retaining seized cash for more than six months without issuing a Show Cause Notice (SCN) is unjustified. Relying on Section 67(7) of the CGST Act, the court held that the seized cash must be returned to the petitioner. Furthermore, the court directed the Revenue Department to return the seized amount through digital mode of payment.
Analysis of High Court Decisions
These judgments collectively underscore the principle that cash seizure during GST searches is permissible only under specific circumstances. Cash that does not constitute ‘stock-in-trade’ or is intended for legitimate banking transactions cannot be seized. The courts have emphasized the need for adherence to legal provisions and procedural fairness in such matters.
Conclusion
In conclusion, the issue of cash seizure during GST searches is a complex legal matter that requires careful consideration. While the GST Department has the authority to seize cash under certain conditions, such actions must be justified and comply with legal norms. The judgments delivered by various High Courts provide clarity on the limits of the department’s power in this regard.
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