Court orders GST authorities to release seized cash from petitioners, following precedent.

Case Name:

WP(C) No. 30522 of 2023 - T.H. Fazil and Others vs. State Tax Officer and Others

Key Takeaways:

- The court held that the GST authorities do not have the power to seize cash from dealers, as cash is not considered 'stock in trade'. - The court relied on the precedent set by the Kerala High Court in Shabu George & another v. State Tax Officer, which directed the release of seized cash after six months if no show cause notice was issued. - The Supreme Court had dismissed the State's appeal against the Shabu George judgment, upholding the precedent. **Issue:** Whether the GST authorities have the power to seize cash from the petitioners' premises, and whether the seized cash should be released. **Facts:** - The GST authorities seized cash amounting to Rs. 31,50,000/- and Rs. 3,40,000/- from the premises of the petitioners on 22.12.2020, as per seizure memos (Exhibits P1 and P2). - The seized cash included currency denominations of Rs. 2000/-, which will cease circulation by the end of September 2023. - The petitioners challenged the seizure, arguing that the GST authorities do not have the power to seize cash, as it is not considered 'stock in trade'. **Arguments:** - The petitioners' counsel argued that the GST authorities have no power under the Act and Rules to seize cash from dealers, as cash is not 'stock in trade'. - The petitioners relied on the decision in Shabu George & another v. State Tax Officer, where the Kerala High Court held that seized cash must be released if no show cause notice is issued within six months. **Key Legal Precedent:** - Shabu George & another v. State Tax Officer (IB) State Goods & Services Tax Department and others [2023 (4) TMI 252-Kerala High Court]: The Kerala High Court directed the release of seized cash if no show cause notice was issued within six months, stating that there can be no justification for continued retention of the cash. **Judgement:** The court allowed the writ petition and directed the respondents (GST authorities) to release the cash seized from the petitioners and credit the same to their account within five days. The key reasoning was: 1. The court did not dispute the legal position contended by the petitioners' counsel, that the GST authorities do not have the power to seize cash from dealers, as cash is not considered 'stock in trade'. 2. The court relied on the precedent set by the Kerala High Court in Shabu George & another v. State Tax Officer, which directed the release of seized cash if no show cause notice was issued within six months. 3. The Supreme Court had dismissed the State's appeal against the Shabu George judgment, upholding the precedent. 4. The seized cash included currency denominations of Rs. 2000/-, which will cease circulation by the end of September 2023, further necessitating its release. **FAQs:** Q: Why did the court order the release of the seized cash? A: The court ordered the release of the seized cash based on the precedent set by the Kerala High Court in Shabu George & another v. State Tax Officer, which held that seized cash must be released if no show cause notice is issued within six months. Q: What was the legal basis for the court's decision? A: The court relied on the legal position that the GST authorities do not have the power to seize cash from dealers, as cash is not considered 'stock in trade'. Q: What was the significance of the Supreme Court's dismissal of the State's appeal in the Shabu George case? A: The Supreme Court's dismissal of the State's appeal against the Shabu George judgment upheld the precedent set by the Kerala High Court, strengthening the legal basis for the court's decision in the present case. Q: What was the timeline for the release of the seized cash? A: The court directed the respondents (GST authorities) to release the seized cash and credit it to the petitioners' account within five days from the date of the order.

The present writ petition has been filed under Article 226 of the Constitution of India questioning the seizure of cash from the premises of the petitioner vide Exhibits P1 and P2 seizure memos dated 22.12.2020. An amount of Rs.31,50,000/- and Rs.3,40,000/- was seized from the petitioner Nos. 1 and 4 respectively.

2. The learned counsel for the petitioners submits that the GST authorities have no power under the Act and the Rules thereto to seize the cash of a dealer, in as much as the cash seized is not ‘stock in trade’. The learned counsel for the petitioner has also placed reliance on the decision in Shabu George & another v. State Tax Officer (IB) State Goods & Services Tax Department and others [2023 (4) TMI 252-Kerala High Court].

3. The learned Government Pleader does not dispute the legal position as contended by the learned counsel for the petitioners. The cash was seized from the petitioners’ premises on 22.12.2020. The cash seized from the petitioners’ premises includes the currency of denomination of Rs.2000/- and the same would cease circulation by the end of September, 2023. The Division Bench of this Court in Shabu George (supra) has held as follows:

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, 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.

The writ appeal is allowed as above.”

4. Against the said judgment, the State had preferred an SLP before the Supreme Court and the same was dismissed.

Considering the aforesaid facts and the law, the present writ petition is allowed and the respondents are directed to release the cash seized from the petitioners and credit the same to the account of the petitioners within a period of five days from today.

sd/-

DINESH KUMAR SINGH,

JUDGE.