2025 (1) TMI 513 - HC - GST

Invocation of extra ordinary writ jurisdiction of this Court under Article 226 of the Constitution of India, 1950 - seeking quashing of the seizure order - Indian currency can be classified as goods under Section 2(52) of the Central Goods and Services Tax Act, 2017 or not - HELD THAT - Upon plaint reading of Clauses (i), (ii), (iii) and (iv) of Sub-Section (1) of Section 130 of the Act, it is evident that goods supplied in contravention of the provisions of the Act with the intent to evade payment of tax, or goods that are unaccounted for and chargeable to tax, as well as the supply of goods chargeable to tax by a tax payer without applying for registration, or where the tax payer contravenes any provisions of the Act with the intent to evade payment of tax, can only be subjected to confiscation. The respondents are directed to return and release a sum of Rs. 23,50,000/- along with the applicable interest to the petitioner, which process be completed with due expedition. Conclusion - Currency is not goods under the Act and cannot be seized under Section 67. The seizure of cash or any other valuables is outside the ambit of Section 2 (52) of the Act and such exercise of powers conferred under Section 67 of the Act, is not sustainable in law. Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether Indian currency can be classified as "goods" under Section 2(52) of the Central Goods and Services Tax Act, 2017, and therefore subject to seizure under Section 67 of the Act.
• The legality of the seizure of Indian currency by the Directorate General of Goods and Services Tax Intelligence (DGGI) during an investigation into alleged fraudulent availment of Input Tax Credit.
• The interpretation of the term "things" in Section 67 of the Act and its applicability to Indian currency.
• The scope and limits of the powers of search and seizure under Section 67 of the Act.
• Whether the seizure of currency as unaccounted wealth falls within the purview of the Central Goods and Services Tax Act, 2017.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Indian Currency as "Goods"

• Relevant Legal Framework and Precedents: Section 2(52) of the Act defines "goods" as every kind of movable property other than money and securities. The judgment references the case of Deepak Khandelwal, where it was determined that currency does not fall under the definition of "goods."
• Court's Interpretation and Reasoning: The court concluded that Indian currency is explicitly excluded from the definition of "goods" as it is classified as "money" under Section 2(75) of the Act.
• Key Evidence and Findings: The court relied on the statutory definitions provided in the Act and the precedent set in the Deepak Khandelwal case.
• Application of Law to Facts: The court applied the legal definitions to conclude that the seizure of currency did not fall within the scope of Section 67, which pertains to "goods."
• Treatment of Competing Arguments: The court rejected the argument that currency could be seized as "goods" under the Act.
• Conclusions: The court held that currency cannot be seized under Section 67 as it is not classified as "goods."

Issue 2: Legality of the Seizure of Indian Currency

• Relevant Legal Framework and Precedents: Section 67 of the Act outlines the powers of inspection, search, and seizure. The judgment also references the case of Rahul Tayal, which found similar seizures unsustainable.
• Court's Interpretation and Reasoning: The court emphasized that Section 67 is not a machinery provision for tax recovery but is intended to aid in proceedings against tax evasion.
• Key Evidence and Findings: The court noted that the currency was seized during a search related to alleged tax evasion but found no evidence linking the currency to specific transactions.
• Application of Law to Facts: The court found that the seizure of currency exceeded the scope of Section 67, which does not authorize the seizure of valuable assets merely as unaccounted wealth.
• Treatment of Competing Arguments: The court rejected the Revenue's argument that the seizure was justified due to the lack of evidence of lawful possession.
• Conclusions: The court concluded that the seizure of currency was illegal and directed its release.

Issue 3: Interpretation of "Things" in Section 67

• Relevant Legal Framework and Precedents: The court referenced the ejusdem generis rule and prior case law, including the Bombay High Court decision in Emperor v. Hasan Mamad, to interpret the term "things."
• Court's Interpretation and Reasoning: The court interpreted "things" to mean items that contain information or records relevant to proceedings under the Act, not including currency.
• Key Evidence and Findings: The court found no evidence that the seized currency had evidentiary value in the proceedings.
• Application of Law to Facts: The court applied the ejusdem generis rule to conclude that "things" did not include currency.
• Treatment of Competing Arguments: The court disagreed with the broader interpretation of "things" that would include currency.
• Conclusions: The court held that the term "things" does not cover currency under Section 67.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "The purpose of Section 67 of the Act is to empower authorities to unearth tax evasion and ensure that taxable supplies are brought to tax. However, the seizure of cash or any other valuables is outside the ambit of Section 2 (52) of the Act and such exercise of powers conferred under Section 67 of the Act, is not sustainable in law."
• Core Principles Established: The judgment establishes that currency is not "goods" under the Act and cannot be seized under Section 67. The powers of search and seizure are limited to items relevant to tax proceedings and do not extend to unaccounted wealth.
• Final Determinations on Each Issue: The court directed the release of the seized currency with applicable interest, stating that the seizure was outside the legal scope of Section 67.

The judgment underscores the importance of adhering to statutory definitions and the intended scope of legislative provisions, particularly in the context of tax enforcement powers.