Court orders release of ₹50.7 lakh cash seized by GST authorities, citing lack of power to seize unaccounted cash.

Case Name:

M/S. Goyal Metal Udyog vs. Commissioner of Central Goods & Services Tax & Anr.(High Court of Delhi)

Key Takeaways:

- The court upheld the petitioner's contention that the seizure of cash was illegal and that the GST authorities lacked the power to seize cash on the suspicion of it being unaccounted.

- The court directed the release of the seized cash amount of ₹50.7 lakh to the petitioner.

- The court clarified that the authorities could take appropriate steps regarding the ₹11.41 lakh deposited by the petitioner towards tax, interest, and penalty, and the petitioner could file for a refund if eligible.

Issue:

Whether the GST authorities had the power to seize cash from the petitioner's business premises on the suspicion of it being unaccounted.

Facts:

- The petitioner's business premises were searched by the GST officers on 03.05.2018.

- During the search, the officers found ₹50.7 lakh cash in a locker, which they seized on the suspicion of it being unaccounted.

- The petitioner claimed that the cash belonged to his family members and was brought to the business premises due to renovation work at their residence.

- The petitioner was asked to deposit ₹11.41 lakh towards tax, interest, and penalty, which he did on the assurance that the seized cash would be released.

- However, the authorities did not release the seized cash despite the petitioner's requests.

Arguments:

- The petitioner argued that the seizure of cash was illegal and that the GST authorities lacked the power to seize cash on the suspicion of it being unaccounted.

- The respondents (GST authorities) did not dispute the petitioner's claim regarding the lack of power to seize cash on the suspicion of it being unaccounted.

Key Legal Precedents: - The court cited its recent decision in "Deepak Khandelwal Proprietor M/s Shri Shyam Metal v. Commissioner of CGST, Delhi West & Anr." (Neutral Citation No. 2023:DHC:5823-DB), which held that the GST authorities lacked the power to seize cash on the ground of it being unaccounted.

Judgement:

- The court allowed the petition and directed the respondents (GST authorities) to release the seized cash amount of ₹50.7 lakh (along with interest) to the petitioner within one week.

- Regarding the ₹11.41 lakh deposited by the petitioner towards tax, interest, and penalty, the court clarified that the authorities were not precluded from taking appropriate steps, and the petitioner could file for a refund if eligible.

- The court excluded the period spent during the pendency of the present petition from the limitation period for any future proceedings by either party.

FAQs:

Q1. What was the court's reasoning for ordering the release of the seized cash?

A1. The court relied on its recent decision in the "Deepak Khandelwal" case, which held that the GST authorities lacked the power to seize cash on the ground of it being unaccounted. The court found the seizure of cash in the present case to be illegal based on this precedent.

Q2.Can the GST authorities take any action regarding the ₹11.41 lakh deposited by the petitioner?

A2. Yes, the court clarified that the authorities were not precluded from taking appropriate steps regarding the ₹11.41 lakh deposited by the petitioner towards tax, interest, and penalty.

Q3.Can the petitioner claim a refund of the ₹11.41 lakh deposited?

A3.Yes, the court stated that the petitioner was not precluded from filing an appropriate application for a refund of the said amount, if otherwise due.

Q4.What was the court's direction regarding the limitation period?

A4.The court directed that the period spent by the parties during the pendency of the present petition, from the date it was instituted till the date of the order, shall be excluded from the period of limitation, as may be applicable to any future proceedings instituted by either party.

Q5.What was the timeline for the release of the seized cash?

A5.The court directed the respondents (GST authorities) to remit the proceeds of the fixed deposit (along with interest) to the petitioner's bank account within one week from the date of the order.

1. The petitioner has filed the present petition, inter alia, praying as under:

“i) Issue a writ of certiorari or any other writ, order or direction in the nature thereof quashing the proceedings by the Respondents against the Petitioner;

ii) Issue a writ of mandamus or any other writ, order or direction in the nature thereof directing the respondents to release the amount of Rs.50,70,000/- seized by the Respondents;

iii) allow the Petitioner to adjust the amount of Rs.11,41,750/- against future liability;

iv) award costs of this Petition; and/or;

v) pass such other order or orders as may be deemed fit and appropriate under the facts and circumstances of the case.”

2. The petitioner carries on business, inter alia, in the name of his sole proprietorship concern, Goyal Metal Udyog and has filed This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

The Order is downloaded from the DHC Server on 12/09/2023 at 12:35:51 the present petition in the name of the said concern. The petitioner’s business premises were searched by the Officers of the Anti-Evasion Branch of the Central Goods and Service Tax, Delhi East Commissionerate, on 03.05.2018.

3. The petitioner claims that during the search, the concerned officers examined the stocks of raw material and finished goods and found that the same were duly recorded in the books of accounts and record. However, during the search, the Officers also found Indian currency amounting to ₹50,70,000/-, which was lying in a locker.

4. According to the petitioner, the same belonged to the family members of the petitioner. It was brought from the residential premises to the business premises as their residential house was under renovation and there were large number of labourers working in the premises.

5. Thereafter, summons under Section 70 of the of the Central Goods and Services Tax Act, 2017 (hereafter ‘the CGST Act’) was issued, calling upon the petitioner to produce various documents including all documents relating to sales and purchases effected during the preceding five years; the statement of bank account for the preceding five years; and the details of all other related companies along with documents relating to sales and purchases.

6. The cash seized from the premises of the petitioner was deposited by the respondent with Syndicate Bank in the name of the Commissioner, CGST, Delhi.

7. The petitioner continued to pursue the respondent for the release of the said cash and original documents, however, the cash so seized was not released.

8. The petitioner states that he was called upon by the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 12/09/2023 at 12:35:51 respondents to deposit tax, interest and penalty, amounting to₹11,41,750/- which would be payable in the event, the cash seized represented proceeds of undisclosed sales. It is claimed that although no such amount was payable, he deposited the said amount on 23.11.2018, on the assurance that the cash seized, would be released.

9. Thereafter, the petitioner requested the respondents to release the amount of cash seized. But his requests were in vain and no steps in this regard were taken by the respondents.

10. The petitioner issued another letter dated 24.05.2019, reiterating his request. But the respondents dis not accede to the said request.

11. It is the petitioner’s case that seizure of cash is illegal and the respondents had no power to seize cash on the suspicion that it was unaccounted cash.

12. In the aforesaid context, the petitioner has prayed for release of the cash so seized as well as for adjusting the amount of tax, penalty and interest deposited (₹11,41,750/-), against its future liability.

13. In so far as the power under Section 67(2) of the CGST Act, to seize cash on the ground that it is unaccounted cash is concerned, the said issue is covered in favour of the petitioner by the recent decision of this Court in Deepak Khandelwal Proprietor M/s Shri Shyam Metal v. Commissioner of CGST, Delhi West & Anr. : Neutral Citation No. 2023:DHC:5823-DB.

14. Thus, the currency seized is required to be released to the petitioner.

15. In so far as the petitioner’s prayer for adjustment of₹Rs.11,41,750/- against future liability is concerned, it is not This is a digitally signed order.The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 12/09/2023 at 12:35:51 disputed that the petitioner had deposited it voluntarily. The respondents have not accepted that the said amount is refundable to the petitioner. Mr Singh, learned counsel appearing for the respondents submits that apparently, no steps were taken by the respondents in regard to the tax deposited as the present petition was pending. Thus, we consider it is apposite to clarify that the respondents are not precluded from taking any steps in regard to the said duty so deposited. The petitioner is also not precluded from filing an appropriate application for refund of the said amount, if otherwise due.

16. It is clarified that the period spent by the parties during the pendency of the present petition, that is, from the date this petition was instituted till date, shall be excluded from the period of limitation, as may be applicable to proceedings that may be instituted by either of the parties.

17. The petition is allowed in the aforesaid terms.

18. The respondent is directed to remit the proceeds of the fixed deposit (along with interest) to the bank account of the petitioner, within a period of one week from today.

VIBHU BAKHRU, J

AMIT MAHAJAN, J

AUGUST 22, 2023