AUGUST 09, 2023

By Vijay Kumar

LET us see four decided cases.

1. Smt Kanishka Matta Vs Union of India And Others - 2020-TIOL-1445-HC-MP-GST

The petitioner before the Madhya Pradesh High Court submitted that search was carried out by Senior Intelligence Officer, DGGSTI, Indore and an amount to the tune of Rs.66 Lakhs was seized. It was vehemently argued that the Department had no power under Section 67(2) of the Central Goods and Services Tax Act, 2017 to effect seizure of cash as cash cannot be treated as "Document, Book or Things" as defined under the CGST Act, 2017.

It was submitted that statements were recorded on 30/05/2020, 31/05/2020, 01/06/2020 and 02/06/2020 and he was tortured in the name of tax terrorism by the authorities.

The department stated that a voluntary statement was made stating categorically that the said cash of Rs.66,43,130/- was the sale proceeds of the illegally sold Pan Masala without payment of GST. This statement was later retracted.

The High Court observed,

The petitioner's contention is that the word "money" is not included in Section 67(2) of the CGST Act, 2017 and therefore, once the "money" is not included under Section 67(2) of the CGST Act, 2017 the Investigating Agency / Department is not competent to seize the same.

The core issue is whether expression "things" covers within its meaning the cash or not. In the considered opinion of this Court, a conjoint reading of Section 2(17), 2(31), 2(75) and 67(2) makes it clear that money can also be seized by authorized officer.

And the High Court held,

the authorities have rightly seized the amount and unless and until the investigation is carried out and the matter is finally adjudicated, the question of releasing the amount does not arise.

2. Arvind Goyal CA Vs Union Of India And Ors - 2023-TIOL-124-HC-DEL-GST

A search was conducted at the residence of the petitioners on 04.12.2020, by officers of GST, AE, Delhi, under Section 67(2) of the Goods and Services Tax Act. During the search, the officers found cash of Rs. 1,22,87,000/- and took possession of it. No seizure memo was drawn in respect of the cash.

The petitioner submitted that the GST officers had no power to seize any cash in exercise of its powers under Section 67(2) of the GST Act and 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.

The High Court observed,

A twist in the tale

The counsel for the Government, submitted that the officers had merely "resumed" cash as is noted in the panchnama and, therefore, the same cannot be considered as seizure. But the Counsel was unable to point out any provision in the GST Act that entitles any officer of GST to merely "resume" cash. The High Court noted:

Another twist

The petitioners had also placed on record certain WhatsApp chats between the officers and the petitioner which indicated that the petitioners and the officers were in touch over a period of time. It also appeared from the said messages that one of the officers had met the petitioners on more than one occasion. Petitioner stated that he was called by the officer to meet in a park.

The Court directed the GST officers to be present in the Court during the next hearing and directed the respondents to forthwith return the amount along with the interest accrued.

Taxpayer’s Rendezvous with officer in a public park

The case came up before the Delhi High Court on 22.05.2023.

The Court was informed that an enquiry was conducted into the conduct of the two officers.

The Court found that messages were exchanged between the petitioner and the GST Superintendent. The WhatsApp message sent by the Superintendent on 12.12.2020 reads as, "tomorrow at the same venue and time". The venue of the meeting was a public park and the Superintendent had fixed the appointment with the petitioner. It is admitted that he had done so in the past as well.

The Superintendent explained that he used to play volleyball in the park, which was near the petitioner’s residence and, therefore, he had often asked the petitioner to meet him there.

The High Court observed,

This practice of the officers of the Department to give/fix appointment and meet persons, whom they have raided, in a public park in this manner, requires to be deprecated. This conduct raises justifiable grounds for suspecting the dealings between the petitioner and the concerned officer. This is not a conduct that is expected from any officer. The messages also indicate that the concerned officer had repeatedly called the petitioner on his mobile phone and the petitioner had not answered. There is no credible explanation for making repeated calls. A very lenient view has been taken by the Enquiry Officer in favour of the Superintendent.

The High Court left the matter for the Department to take remedial steps for ensuring that its house is put in order.

The High Court noted that the grievance of the petitioner has been addressed inasmuch as, the currency taken from the petitioner’s premises, has been returned to the petitioner with interest.

The Court imposed costs of Rs. 25,000/- to be deposited by the Department. It will be open for the Department to recover the same from the officers.

3. Shabu George Vs State Goods & Services Tax Department - 2023-TIOL-382-HC-KERALA-GST

The petitioner is aggrieved by seizure of cash from his premises.

A single Judge of the Kerala High Court held,

I do not think it is proper for this Court to interfere at this stage and direct release of the cash, which is primarily a matter which has to be considered by the Authorities concerned. The writ petition is disposed of directing the 1st respondent to consider and pass orders after hearing the petitioners at the earliest, at any rate within three weeks from the date of receipt of a copy of this judgment.

The aggrieved petitioner filed a writ appeal before a Division Bench.

During the pendency of this writ appeal, the Officer passed an order dated 21.3.2023, disposing the representation preferred by the appellants as per the directions of the single Judge. The stand taken by the Officer was essentially that in view of the specific provisions of Section 67(2) of the CGST Act, which authorises the seizure of 'things', which inter alia includes cash also as held by the High Court of Madhya Pradesh, the authority was justified in seizing the cash and retaining the same pending a culmination of the investigation.

The Division Bench of the High Court [2023-TIOL-382-HC-KERALA-GST] observed,

We must admit to being a bit puzzled by the stand taken by the said Intelligence Officer. In an investigation aimed at detecting tax evasion under the GST Act, we fail 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.

The findings of the Intelligence Officer that 'it is suspicious that this much amount of money kept in the house 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 sources' reveal the extent to which authorities under the Act are misinformed of their powers and the limits of their jurisdiction. The aforesaid findings of the Intelligence Officer could perhaps have been justified had he been an officer attached to the Income Tax department. In the context of the GST Act, the findings are wholly irrelevant.

We find 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. We, therefore, allow this appeal by directing the first respondent to forthwith release to the appellant the cash seized from the premises.

The Government was not happy with this decision and took the matter in Special Leave Petition to the Supreme Court. The Apex Court in its order dated 31-07-2023 observed, (2023-TIOL-118-SC-GST)

We are not inclined to interfere with the judgment and order impugned in this petition. The special leave petition is, accordingly, dismissed.

4. Baleshwari Devi Vs Additional Commissioner, CGST - 2023-TIOL-881-HC-DEL-GST]

In this recent case, the Petitioner impugned the action of the respondent Additional Commissioner (Anti Evasion), CGST, Delhi North in ‘resuming' a sum of Rs.19.50 lakhs from the residential premises of the petitioner.

The Delhi High Court observed -

"8. There is a serious controversy whether the respondents have any authority to seize currency during search proceedings under Section 67 of the CGST Act. However, it is not necessary to examine the controversy in the present case because it is admitted that the respondents have not seized the cash. The seizure memo also does not record seizure of the cash.

9. The respondents have innovatively coined another term 'resume' - to denote taking forcible possession of the assets without recording seizure of the said assets. There is no provision under the CGST Act, which empowers the respondents to "resume" or dispossess any person of his assets, without seizing the same.

10. There is no dispute that the respondents are required to act strictly in accordance with the provisions of the statute and the rules thereunder. Clearly the action of the respondents in dispossessing the petitioner or any of the family members of any of their assets in the proceedings under Section 67 of the CGST Act, without seizing the same, is illegal. The respondents cannot continue with the possession of the currency collected from the petitioner's residence."

So, can cash be seized in a GST raid? That depends on the one who raids? Can’t the Board issue a clarification?

Rendezvous also means date with a secret lover.

Until Next week