Cash Can’t Be Considered As Goods For The Purpose Of Seizure Proceedings Under GST: Gujarat High Court

The judgment delivered by the division bench of Justices Biren Vaishnav and Mauna M. Bhatt, emphasized that retaining seized cash for more than six months without issuing a Show Cause Notice (SCN) is not justified.

Facts:

According to the factual background of this case, the first petitioner was a partnership firm, and the second petitioner was one of the partners in this firm. The petitioners were operating a courier services business and had obtained registration under the GST Acts.

The petitioners asserted that back in 2004, the Income Tax Department had seized silver bars from them. Despite having paid the required taxes, the silver bars were not returned. Consequently, the petitioners filed a Special Civil Application (No.13920 of 2017) with the High Court seeking resolution.

In 2018, the Court ordered the release of the aforementioned silver bars. Subsequently, the petitioners sold the silver bars on October 19, 2019. They claimed that the sale proceeds were received in the form of checks, and the funds were held in their bank account. The petitioners later withdrew cash from their account in the last week of October 2020 and the first week of November 2021.

The petitioners contended that while they were in the process of transferring the cash to their branch office in Rajkot on November 13, 2020, respondent No.2 issued an order to seize the cash. On September 15, 2021, the petitioners made a representation requesting the release of the seized cash, but their request remained unresolved. Consequently, they have filed this current petition.

Issue:

Whether cash can be considered as goods for the purpose of seizure proceedings under GST?

Verdict:

After carefully reviewing the arguments presented by the advocates representing the involved parties, the Court found it necessary to elucidate the provisions of section 67 of the CGST Act, particularly section 67(2)(3)(7) of the Act. (Section 67 of the Act talks about 'Power of inspection, search and seizure.' )

Upon analyzing the CGST Act and its preamble, the Court noted that the Act was designed to establish provisions for the imposition and collection of tax on the intra-State supply of goods or services or both by the Central Government, along with related matters or incidental aspects thereof.

In the context of subsection (2) of section 67, the Court emphasized that when the proper officer seizes any goods, documents, books, or items, there must be a reasonable belief that these items would be pertinent to proceedings under this Act.

Regarding the affidavit submitted, the Court observed that it clarified the situation – even according to the respondent's case, the proper officer did not consider it a seizure related to unexplained transactions under the Goods and Services Act. Instead, it pertained to the consideration received from the sale of silver bars.

Citing the precedent set in Shabu George Vs. State Tax Officer (IB) [2023] 153 taxmann.com 46 (Kerala), the Court noted that if the cash was not part of the stock in trade, it should not have been seized.

The Court further pointed out that there was no requisition under section 132(A) of the Income Tax Act. Although the State claimed to have notified the Income Tax Department, the petitioner had not classified the cash as stock in trade.

Crucially, the Court observed that the seizure memo was dated 13.11.2020, and as per subsection (7) of section 67, if no Notice is issued within six months of the goods' seizure, they must be returned to the person from whom they were seized.

The Court held, “On this ground thereto, the petitioner is entitled to the prayer that the amount of cash seized i.e. Rs.69,98,400/- to be returned forthwith to the petitioner. Accordingly, the present petition is allowed. The respondents are directed to return an amount of Rs.69,98,400/- to the petitioner.”

“It is open for the respondents to return the amount and transmit the same through digital mode in the bank accounts of the petitioner. Details of which shall be provided to the petitioner within a period of one week from the date of receipt of copy of this order,” the Court concluded.

Appearance: Mr Uchit N Sheth(7336) For The Petitioner(S) No. 1,2 Mr Pranav Trivedi, Ld.Asstt. Government Pleader For The Respondent(S) No. 1,2

LL Citation: 2023 LiveLaw (Guj) 180

Case Title: Bharatkumar Pravinkumar And Co. Versus State Of Gujarat

Case No.: R/Special Civil Application No. 26222 Of 2022

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