Court orders immediate release of Rs. 24 lakh, citing lack of relevance to GST proceedings
In a significant judgment, the Calcutta High Court has ruled against the seizure of cash by GST authorities unless it is demonstrably relevant to proceedings under the Central Goods and Services Tax (CGST) Act, 2017. The court's decision came in response to a writ petition filed by Puspa Furniture Pvt. Ltd., challenging the legality of a search and seizure operation conducted at their premises.
The GST authorities had seized Rs. 24 lakh from the petitioners' premises, suspecting it to be unaccounted cash linked to clandestine supply of taxable goods and services without proper invoices. However, Justice Om Narayan Rai held that under Section 67 of the CGST Act, money cannot be considered as "goods" and thus cannot be seized unless it is relevant to specific taxable transactions under investigation.
The judgment emphasized the procedural safeguards required during search and seizure operations, including the presence of independent witnesses and proper documentation. The court noted that in this case, the GST authorities failed to demonstrate that the cash was relevant or useful to any proceedings under the Act.
Justice Rai referenced the definition of "goods" under Section 2(52) of the CGST Act, which excludes money from its purview, reinforcing that cash cannot be seized as goods. The court cited previous judgments, including Commissioner of CGST v. Deepak Khandelwal, where similar issues of cash seizure were addressed.
In a detailed affidavit submitted by GST authorities, it was revealed that the cash was seized due to the petitioner's inability to provide satisfactory explanations or documentary evidence regarding the cash. Despite the authorities' action, the cash remained in the petitioners' custody.
The court has directed the immediate de-sealing of the cash, allowing Puspa Furniture Pvt. Ltd. to use the amount as per legal provisions. However, the judgment clarified that this does not validate the possession of the cash by the petitioners, and other revenue authorities are free to investigate if the cash is found to be held illegally.
The judgment also addressed the broader issue of the validity of the search and seizure proceedings, directing GST authorities to file affidavits in opposition and allowing petitioners to respond. It emphasized the necessity for GST authorities to demonstrate "reasons to believe" for initiating such proceedings.
The case brings to light the limitations on GST authorities' powers concerning cash seizures and underscores the importance of adhering to procedural safeguards during such operations. The decision sets a precedent for similar cases and provides clarity on the interpretation of search and seizure provisions under the CGST Act.
Bottom Line:
Under Section 67 of the CGST Act, 2017, GST authorities are not empowered to seize cash unless the cash can be demonstrated to be useful or relevant to any proceeding under the Act or linked to specific taxable transactions under investigation.
Statutory provision(s): Central Goods and Services Tax Act, 2017 Section 67, Constitution of India, 1950 Article 226
Puspa Furniture Pvt. Ltd. v. Union of India, (Calcutta) : Law Finder Doc id # 2823025
