Cash not goods as per GST: GST officers have no power to seize cash during search operations; HC

The undisputed facts are that a search operation was conducted at the residence of the petitioners on 04.12.2020, by certain officers of GST, AE, Delhi, West under Section 67(2) of the Goods and Services Tax Act, 2017 (hereafter ‘the GST Act’). During the course of the search, the officers found cash aggregating to ₹1,22,87,000/- and took possession of the said cash. Admittedly, no seizure memo was drawn in respect of the said cash.

The petitioner has challenged the said search operation as unlawful on several grounds. It is contended by the petitioner that the concerned officers could have no reason to believe that any goods liable for confiscation were lying in the premises of the petitioners. It is also claimed that the concerned officers had no reason to believe that any records relevant to the proceedings would be available in the premises.

The petitioner also challenges the action of the concerned officers of taking possession of cash as without the authority of law.

The Bhopal Commissionerate had informed CGST Delhi East Commissionerate that enquiries were conducted in respect of a concern named M/s Samriddhi Enterprises, holding GSTIN 23BSOPP9752K1ZY, which belongs to one Sh. Rakesh Pal and was located at Shop No.2, Kolar Road, Bhopal. He was ostensibly engaged in the trading of betel nuts, but the enquiry revealed that such trading was without actual movement of goods. It was also revealed that there was a saree shop at the said premises operating under the name of ‘Taksh Sarees’. And, no concern with the name Samriddhi Enterprises was operating from the said address.

Apparently, Sh. Rakesh Pal had made a statement that the said concern was opened by petitioner. He also named a few other persons.

Admittedly, the petitioners are not assessees from whom any tax or amount is to be recovered

The laptop and mobile phones, which were taken away by the concerned officers, were subsequently returned to petitioner no.1. However, the cash collected by the officers was deposited in a fixed deposit receipt in the name of the President of India.

In the aforesaid context, the petitioner contends that the GST officers had no power to seize any cash in exercise of its powers under Section 67(2) of the GST Act.

It is contended that the power under Section 67(2) of the GST Act to seize goods could be exercised only if the goods were liable for confiscation. The documents, books or things, could be seized only if the same are useful or relevant to any proceedings under the GST Act.

It is contended on behalf of the petitioners that currency is excluded from the definition of goods and thus cannot be seized as goods. The currency is also not useful or relevant for conducting any proceedings and therefore, there is no question of seizing currency in exercise of section 67(2) of the GST Act.

What Court said?

13. In view of the above, one of the principal question that requires to be addressed is whether cash can be seized by the officers under Section 67(2) of the GST Act. Prima facie, a plain reading of Section 67(2) of the GST Act indicates that the seizure is limited to goods liable for confiscation or any documents, books or things, which may be “useful for or relevant to any proceedings under this Act”. Clearly, cash does not fall within the definition of goods. And, prima facie, it is difficult to accept that cash could be termed as a ‘thing’ useful or relevant for proceedings under the GST Act. The second proviso to Section 67(2) of the GST Act also provides that the books or things so seized would be retained by the officer only so long as may be necessary “for their examination and for any inquiry or proceedings under the Act.”

14. However, there is no occasion for this Court to now examine the aforesaid question as it is the respondents’ stand that the cash was not seized. It is contended that the seizure memo was not prepared as the officers, who had conducted the search operation, had, in fact, not seized any cash.

15. Mr. Harpreet Singh, learned counsel for the respondents, submits that the officers had merely “resumed” cash as is noted in the panchnama and therefore, the same cannot be considered as seizure.

16. However, Mr Harpreet Singh is unable to point out any provision in the GST Act that entitles any officer of GST to merely “resume” assets. Clearly, the petitioners had not handed over the cash to the concerned officers voluntarily. Undisputedly, the action taken by the officers was a coercive action. We find no provision in the GST Act that could support an action of forcibly taking over possession of currency from the premises of any person, without effecting the same. The powers of search and seizure are draconian powers and must be exercised strictly in terms of the statute and only if the necessary conditions are satisfied.

17. In the present case, the GST officers have dispossessed the petitioners of the currency found in their premises during search operations conducted under Section 67(2) of the GST Act but have not seized the currency under the said provision. Plainly, their action in doing so is without authority of law.

For Official Judgment Download PDF Given Below: