Notice Lacked Reasons to Show Wrongful Availment Of ITC: Delhi High Court Releases Seized Currency, Other Valuable Assets

The Delhi High Court has directed the release of the currency and other valuable assets seized from the petitioner during the search proceedings.

The bench of Justice Vibhu Bakhru and Justice Purushaindra Kumar Kaurav has observed that the notice under Section 74 of the CGST Act does not specify any particular reasons to show that "input tax credit has been wrongly availed of or utilised."

The petitioner carries on business trading in non-ferrous metals. The petitioner/assessee sought directions be issued to the respondents to unconditionally release the two silver bars, Indian currency, and mobile phones, which were seized by the respondents from the residential premises of the petitioner. The petitioner sought the search of his residential premises and the seizure effected to be declared illegal.

The petitioner contended that the proper officer does not have any powers under Section 67 to seize currency as the same is not ‘goods’ as defined under the CGST Act. The proper officer has the power to seize the goods under Sub-section (2) of Section 67 only if he has reasons to believe that they are liable for confiscation. The goods seized are liable to be returned if no notice in respect of the said goods is served within a period of six months from the date of seizure.

The notice proposed to raise a demand for the month of April 2019. It was alleged that "the petitioner had filed an ineligible or bogus GST input tax credit on the strength of fake/goodless invoices issued by various bogus or non-existent firms". Thus, it follows that the demand for CGST or SGST raised in the notice dated November 10, 2020, issued under Section 74 of the Act would take into account the said allegation.

The petitioner urged that if a notice is not given within a period of six months from the date of seizure of the goods and the said period is not extended within the said period of six months, the seized goods are liable to be returned.

The department contended that silver bars and cash seized by the proper officer were not covered under the definition of goods, and therefore, there was no requirement for issuing any show cause notice for confiscation of the same. The silver bars and cash were seized as ‘things’ and not as ‘goods’ that were liable for confiscation. He referred to the definition of the word ‘goods’ under the Act and contended that ‘money’ and ‘securities’ were excluded from the said definition. The silver bars were ‘securities’ and were seized.

The issue raised was whether the proper officer has any power to seize cash or other assets, which is required to be addressed bearing in mind the aforesaid scheme of Section 67 of the CGST Act.

The court directed the department to release the currency and other valuable assets seized from the petitioner during the search proceedings conducted on January 28, 2020.

The court clarified that they are not precluded from instituting or continuing any other proceedings under the Act in accordance with the law. Nothing stated in this order shall be construed as an expression of opinion on the petitioner’s liability to pay any tax, penalty, or interest under the CGST Act.

Case Title: Deepak Khandelwal Proprietor Versus Commissioner Of CGST

Citation: 2023 LiveLaw (Del) 709

Date: 17.08.2023

Counsel For Petitioner: Rajesh Jain

Counsel For Respondent: Harpreet Singh

Click Here To Read The Order