09.06.2023: Seizure Of Cash Not Forming Part Of Stock In Trade Wholly Unwarranted – Cash Directed To Be Released – Kerala High Court

The Hon’ble High Court of Kerala vide its order dated 24.03.2023 in Shabu George, Gigi Mathew Vs. State Tax Officer (IB) State Goods & Service Tax Department & Others in WA No. 514 of 2023, held that the Cash which is not forming part of the assessees business, cannot be seized during a search under Section 67 of the CGST Act, 2017.  Further, it was found that the seizure of Cash from the premises of the appellant was wholly uncalled for and unwarranted.

The Appellants (Writ Petitioners) filed the writ appeal before the Hon’ble High Court against the order passed in WP (C) No. – 39406 of 2022, whereby the learned Single Judge directed the first respondent State Tax Officer (IB) to consider and pass orders on a representation submitted by the appellants herein for release of the cash that was seized from his premises in connection with an investigation done by the authorities under the GST Act.  Further, the learned single Judge did not accept the contention of the appellant that the seizure of cash was unwarranted especially when the investigation itself was for alleged evasion of tax due from the appellants under the GST Act.

Appellant’s Submissions: –

  • It was submitted on the behalf of the appellants that the statutory provisions authorize the seizure of ‘things’ from the premises of the assessee who is proceeded against under the GST Act. The word ‘things’ would include cash in appropriate cases.  However, in the instant case the seizure of cash was wholly unwarranted as the cash did not form part of stock in trade of any business carried on by the appellant.
  • That the inspection of the premise was conducted on 09.06.2022, nothing was heard from the authorities till November 2022, when the appellant preferred a representation seeking a return of the cash seized from his premises. Further, it was submitted that the appellant has still not been served with any show cause notice pursuant to the seizure of cash from his premises.
  • That during the pendency of this writ appeal, the Intelligence Officer passed an order dated 21.03.2023, disposing/rejecting the representation preferred by the appellants as per the directions of the learned single Judge.

Held: –

  • The Hon’ble Court after considering the submissions made, facts of the case, relevant provisions and perusal of the order rejecting the representation, found that that the stand taken by the Intelligence Officer is essentially that in view of the specific provisions of Section 67(2) of the CGST Act, which authorises the seizure of ‘things' includes cash also as held by the High Court of Madhya Pradesh in the judgment dated 26.08.2020 in WP (C) No. – 8204 of 2020.  Thus, it was held that the Authority was justified in seizing the cash and retaining the same pending a culmination of the investigation.
  • It was found by the Hon’ble Court that Section 67(2) of the CGST Act authorizes the seizure of things, including cash in appropriate cases, however, in the instant case the cash seized was not found in the premises of the appellants at the time of search.
  • Further, the power of any authority to seize any ‘thing' while functioning under the provisions of a taxing statute must be guided and informed in its exercise by the object of the statute concerned. In an investigation aimed at detecting tax evasion under the GST Act, the Hon’ble Court failed to see how cash can be seized especially when it is the admitted case that the cash did not form part of the stock in trade of the appellant's business.
  • It was observed by the Hon’ble Court that it is evident from the order of the Intelligence Officer that the cash that was seized from the premises of the appellants was not the stock in trade of the quarry business that was conducted by the appellant.
  • The findings of the Intelligence Officer that ‘it is suspicious that this much amount of money kept in the house of M/s. Shabu as idle and not deposited at bank' and further ‘the amount received as gift on the day of marriage has not been recorded in his income tax return and from this it is evident that the money is from illicit sourcesreveal the extent to which authorities under the Act are misinformed of their powers and the limits of their jurisdiction.
  • It was found by the Hon’ble Court, that the aforesaid findings of the intelligence officer could have been perhaps justified had he been an officer attached to the Income Tax department. However, in the context of GST Act, the findings are wholly irrelevant.
  • Therefore, it was found by the Hon’ble Court that the seizure of cash from the premises of the appellants was wholly uncalled for and unwarranted. Moreover, as the respondent has retained the seized cash for more than six months and is yet to issue a show cause notice to the appellants in connection with the investigation, there can be no justification for a continued retention of the said amount with the respondent.

The Hon’ble Court with the above findings, allowed the appeal with the directions to the first respondent to immediately release the cash seized from the premise to the appellant, against a receipt to be obtained from him.  The amount shall be released to the appellant without any delay, and at any rate, within a week from the date of receipt of a copy of this judgment.

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