Court orders tax authorities to return seized cash, rules seizure unlawful under GST Act.

Case Name:

Jagdish Bansal, Proprietor, M/S Shivam Iron Store vs. Union of India & Anr. (Delhi Highcourt)

Key Takeaways:

- The court relied on its previous judgment in K.M. Food Infrastructure Pvt. Ltd. vs. Director General (DGGI) 2024: DHC: 1081-DB, which established that cash is excluded from the definition of "goods" under the GST Act.

- The seizure of cash by tax authorities was deemed unlawful, as the Act only allows for the seizure of goods liable for confiscation.

- The court ordered the tax authorities to return the seized cash to the petitioner, along with interest.

- However, the court clarified that the tax authorities are not precluded from taking any other action or instituting proceedings against the petitioner under the Act, in accordance with the law.

Issue:

Whether the seizure of cash by the tax authorities from the petitioner's residential and office premises was lawful under the Central Goods and Services Tax (GST) Act, 2017.

Facts:

- On November 30, 2022, a search and seizure operation was carried out at the petitioner's residential premises and office.

- Cash amounting to Rs. 65,00,000/- and Rs. 7,00,000/- was seized from the petitioner's residential premises and office, respectively.

- The petitioner sought a declaration that the seizure of cash by the tax authorities was unlawful.

Arguments:

- The petitioner argued that the seizure of cash was unlawful under the GST Act, as cash does not fall within the definition of "goods" under the Act.

- The tax authorities likely argued that the seizure was lawful under the provisions of the GST Act, which allows for the seizure of goods liable for confiscation.

Key Legal Precedents:

- The court relied on its previous judgment in K.M. Food Infrastructure Pvt. Ltd. vs. Director General (DGGI) 2024: DHC: 1081-DB, wherein it interpreted Section 67 of the Central Goods and Services Tax Act, 2017.

- In the cited case, the court held that "cash" is clearly excluded from the definition of "goods" and falls within the definition of "money" under Section 2(75) of the Act.

- The court further held that since cash is not considered "goods," it could not have been seized under the provisions of the Act, as seizure is limited to goods liable for confiscation.

Judgment: - The court allowed the petition and directed the tax authorities to forfeit/remit the seized cash to the petitioner, along with interest. - However, the court clarified that the tax authorities are not precluded from taking any other action or instituting proceedings against the petitioner under the Act, in accordance with the law.

FAQs:

Q1: What was the main issue in this case?

A1: The main issue was whether the seizure of cash by the tax authorities from the petitioner's premises was lawful under the Central Goods and Services Tax (GST) Act, 2017.

Q2: What was the court's decision?

A2: The court ruled that the seizure of cash was unlawful under the GST Act, as cash does not fall within the definition of "goods" under the Act. The court ordered the tax authorities to return the seized cash to the petitioner, along with interest.

Q3: What legal precedent did the court rely on?

A3: The court relied on its previous judgment in K.M. Food Infrastructure Pvt. Ltd. vs. Director General (DGGI) 2024: DHC: 1081-DB, which established that cash is excluded from the definition of "goods" under the GST Act and cannot be seized under the Act's provisions.

Q4: Can the tax authorities take any further action against the petitioner

A4: Yes, the court clarified that the tax authorities are not precluded from taking any other action or instituting proceedings against the petitioner under the Act, in accordance with the law.

Q5: What was the significance of this case?

A5: This case reinforced the legal principle that cash cannot be seized under the provisions of the GST Act, as it does not fall within the definition of "goods" under the Act. It also highlighted the limitations on the tax authorities' powers of seizure under the GST Act.

1. Mr. Sanjib Kumar Mohanty, learned counsel appearing for the respondent no.1 submits that he has been appearing in these proceedings through VC, however, his presence has not been noticed in orders dated 22.12.2023, 03.01.2024 and 11.01.2024 though he had appeared for respondent no.1.

2. In view of the above, the presence of Mr. Sanjib Kumar Mohanty, Advocate shall be read in orders dated 22.12.2023, 03.01.2024 and 11.01.2024 as having been appeared for respondent No.1.

3. Petitioner seeks a declaration that seizure of cash by respondent no.2 from the residential premises and office of the petitioner was unlawful.

4. A search and seizure operation was carried out at the premises of the petitioner (i.e. the residential premises as well as shop of the petitioner) on 30.11.2022 and cash in a sum of Rs. 65,00,000/- and Rs.7,00,000/- was seized from the residential premises and office of the petitioner respectively.

5. Reference may be had to the judgment of this Court in K.M. Food Infrastructure Pvt. Ltd. vs. Director General (DGGI) 2024: DHC: 1081-DB wherein in similar circumstances this Court while interpreting provision of Section 67 of the Central Goods and Services Tax Act 2017 (herein referred to as) has held that ‘cash’ is clearly excluded from the definition of the term ‘goods’ and would fall with the definition of ‘money’ as defined in Section 2 (75) of the Act. This Court has further held that since cash is not goods, it could not have been seized under the provision of the Act, as seizure is limited to the goods liable for confiscation.

6. The ratio of the said judgments squarely applied to the facts of the present case. Accordingly, we hold that there is no justification for resumption of cash and its continued retention by the respondents.

Accordingly, the petition is allowed and respondents are directed to forfeit/remit the said cash seized from the premises of the petitioner to the petitioner along with interest. It is however clarified that respondents are not precluded from taking any action or instituting any other proceedings under the Act in accordingly with law.

7. This petition is disposed of in the above terms.

SANJEEV SACHDEVA, J

RAVINDER DUDEJA, J

FEBRUARY 26, 2024