Power to Search and Seizure
Search and seizure provisions contained in tax statutes are provided to act as a restraint on evasion of taxes. Such powers are within the constitutional frame work and cannot be considered as violative of Article 19 of Constitution of India.
Power of search and seizure in any system of jurisprudence is an overriding power of the state to provide security and that power is necessarily regulated by law – MP SHARMA VERSUS SATISH CHANDRA. DISTRICT MAGISTRATE - 1954 (3) TMI 1 - SUPREME COURT.
In BABOO RAM HARI CHAND VERSUS UNION OF INDIA - 2014 (9) TMI 144 - GUJARAT HIGH COURT, it has been held that powers to seize and confiscate are quite drastic powers, such that authority exercising the same should have reasons to believe that goods were liable therefore. It was held that passing of a composite order, i.e. panchnama-cum-seizure order is impermissible in law.
Section 67 of CGST Act, 2017 provides for powers of inspection, search and seizure in GST regime.
Retention of Seized Items
As per second proviso to Section 67(2), the goods, documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceeding under the GST law.
Copies of Document Seized
In terms of Section 67(5), the person from whose custody any documents are seized shall be entitled to make copies thereof or take extracts there from in the presence of an authorized officer at such time and place as allowed except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation.
Inventory of Items Seized
As per Section 67(9), where any goods, being goods specified under sub-section (8), have been seized by a proper officer, or any officer authorised by him he shall prepare an inventory of such goods in such manner as may be prescribed.
Seizure of Cash
Accordingly to the definition of goods as per section 2(52) of CGST Act, 2017, “goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
Section 2 (75) defines money as “money” means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value.
Accordingly, cash cannot be considered as ‘goods’ for the purpose of seizure. Money and securities have been specifically excluded from the ambit of ‘goods’. Also, where cash or money does not form part of stock-in-trade of business, it cannot be seized during the course of search at the business premises. However, there can be seizure of goods, documents, books or things a accounts as a consequence of search. Section 67 of the CGST Act, 2017 uses the words – ‘goods’ and is qualified with the condition of being liable for confiscation. The goods that can be seized under Section 67(2) are the goods which the proper officer believes are liable for confiscation. Further cash cannot be covered under the scope of ‘goods’ or ‘things’. Cash will not be covered under ‘goods’ but ‘money’ as defined in section 2(75).
Following judicial pronouncements are relevant in this regard:
- In Shabu George v. State Tax Officer- (2023) 4 TMI 252, it has been held that in an investigation aimed at detecting tax evasion under GST law, cash cannot be seized, especially when cash does not form part of stock in trade of business. Court observed that while it may be a fact that Section 67(2) of the CGST Act authorizes the seizure of things, including cash in appropriate cases, we do not think that the present is a case that called for a seizure of the cash found in the premises of the appellants at the time of the search. The power of any authority to seize any 'thing' while functioning under the provisions of a taxing statute must be guided and informed in its exercise by the object of the statute concerned. In an investigation aimed at detecting tax evasion under the GST Act, we fail to see how cash can be seized especially when it is the admitted case that the cash did not form part of the stock in trade of the appellant's business. It was evident from the order of the Intelligence Officer that the cash that was seized from the premises of the appellants was not the stock in trade of the quarry business that was conducted by the appellant. The findings of the Intelligence Officer that 'it is suspicious that this much amount of money kept in the house of M/s. Shabu as idle and not deposited at bank' and further 'the amount received as gift on the day of marriage has not been recorded in his income tax return and from this it is evident that the money is from illicit sources' reveal the extent to which authorities under the Act are misinformed of their powers and the limits of their jurisdiction. The aforesaid findings of the Intelligence Officer could perhaps have been justified had he been an officer attached to the Income Tax department. In the context of the GST Act, the findings are wholly irrelevant. We find that the seizure of cash from the premises of the appellants was wholly uncalled for and unwarranted. Moreover, as the respondent has retained the seized cash for more than six months and is yet to issue a show cause notice to the appellants in connection with the investigation, there can be no justification for a continued retention of the said amount with the respondent. The court therefore, allowed the appeal by directing the first respondent to forthwith release to the appellant the cash seized from the premises, against a receipt to be obtained from him. The amount shall be released to the appellant without any delay, and at any rate, within a week from the date of receipt of a copy of judgment.
The petition filed by Revenue Authorities before Apex Court has since been dismissed as reported in (2023) 8 TMI 309. It was thus, held that:
- Section 67 of CGST Act, 2017 provides for inspection, search and seizure with proper authorization and reasons therefor.
- There can be seizure of goods, documents, books or things or accounts as a consequence of search.
- However, there may not be any circumstances necessitating recovery of tax dues during the course of search or inspection or investigating proceedings.
- Kerala High Court has held that cash cannot be seized when it does not form part of stock in trade and it was held to be uncalled for and unwarranted.
- SLP filed before Supreme Court stands dismissed.
- In Samyak Metals Pvt. Ltd. v. Union of India - (2023) 6 TMI 183 assessee was forced to deposit tax in lieu of input tax credit including interest and penalty. It was contended that the amount had been recovered by department without passing adjudication order and following of procedure under sections 73 and 74 of CGST Act, 2017 and even after depositing above said amount, no GST DRC-04 had been issued by respondent. It was held that department be ordered to refund the amount impugned to assessee along with simple interest of 6% per annum from the date of deposit till refund is made.
- In Deepak Khandelwal v. Commissioner of CGST, Delhi - (2023) 8 TMI 929, it was held that the word ‘goods’ as defined under sub-section (52) of Section 2 of the Act is in wide terms, but the said term as used in Section 67 of the Act, is qualified with the condition of being liable for confiscation. Thus, only those goods, which are subject matter of or are suspected to be subject matter of evasion of tax. During the course of search under sub-section (2) of Section 67 of the Act, the officer conducting the search may find various types of movable assets. Illustratively, in an office premises, one may find furniture, computer, communication instruments, air conditioners etc. Those assets although falling under the definition of ‘goods’ cannot be seized, if the proper officer has no reasons to believe that those goods are liable to be confiscated. Further, cash (Indian currency) is clearly excluded from the definition of the term ‘goods’ as the same falls squarely within the definition of the word ‘money’ as defined in sub-section (75) of Section 2 of the Act. Having stated the above, we are of the view that it would not be apposite to construe the word ‘things’ under sub-section (2) of Section 67 of the Act to be mutually exclusive to the term ‘goods’. The term ‘goods’ as used in sub-section (2) of Section 67, essentially, relates to goods, which are subject matter of supplies that are taxable under the Act. Admittedly, the goods that can be seized under sub-section (2) of the Act are goods, which the proper officer believes are liable for confiscation.
- In Baleshwari Devi v. Additional Commissioner (Anti-Evasion), CGST (2023) 7 TMI 1230, it has been held that Revenue Department has no power to take possession of the personal assets without official seizure under the Central Goods and Services Tax Act, 2017. The legislature while enacting Section 67 of the GST Act has made abundantly clear that the seizure / confiscation of ‘goods’ is to be done only and only if it helps the revenue in quantifying and demanding the tax and in no case, it is machinery provision for recovery of tax.
- In ArvindGoyal CA v. Union of India & Others - (2023) 1 TMI 1028, a search operation was conducted at the residence of petitioner by the officers of GST who found the cash aggregation Rs. 1,22,87,000 and took the possession of the said cash. The court observed that a plain reading of Section 67(2) of the GST Act indicates that the seizure is limited to goods liable for confiscation or any documents, books or things, which may be ‘useful for or relevant to any proceedings under this Act’. Clearly, cash does not fall within the definition of goods and, prima facie, it is difficult to accept that cash could be termed as a ‘thing’ useful or relevant for proceedings under the GST Act. The second proviso to Section 67(2) of the GST Act also provides that the books or things so seized would be retained by the officer only so long as may be necessary ‘for their examination and for any inquiry or proceedings under the Act’. It was held that seizure of cash during the course of search was without any authority of law and illegal.
- In T.H. Fazil v. State Tax Officer - (2023) 9 TMI 958, cash was seized from petitioners' premises on 22-12-2020 in form of currency of denomination of Rs. 2000, in view of fact that same would cease circulation by end of September, 2023, there was no justification for a continued retention of said amount with department. It was held that GST authorities have no power to seize cash that is not considered as 'stock-in-trade'.
- In Adarsh Tobacco Co. v. State of U.P. - (2022) 3 TMI 998, it was held that goods seized by department fell within definition of tobacco and, therefore, would fall within definition of perishable goods and its release would be regulated by sub-section (8) of Section 67. Assessee having not complied with requirement of release of seized goods which was perishable goods, was not entitled to any direction for its release. Determination of goods being perishable or non-perishable should be in accordance with applicable rules and notifications and same would not upon any fortuitous circumstance whether goods had been actually sold within 14 days or not. Goods which are treated to be perishable under rules and notifications would not be converted into non-perishable goods only because authorities have not acted in terms of Rule 141(2).
However, such appropriation is not a condition under Section 67(2) or (3) and the condition is only that the asset seized must be ‘relied upon’ by the authorities for issue of show cause notice. Thus, in the present case, it was held that the references to the amount in the course of the show cause notice would, justify the retention of the amount till proceedings for adjudication are complete. This view is also supported by the language employed in second proviso which states that the asset seized may be retained by the Department till such time the enquiry or proceedings under the Act are complete. Based upon the aforesaid reasons, the mandamus as sought for by the petitioner was not liable to be granted and hence the same was rejected.
The court observed that the definition clauses are the keys to unlock the intent and purpose of the various sections and expressions used therein, where the said provisions are put to implementation. Section 2(17) defines ‘business’ and section 2(31) defines ‘consideration’. A conjoint reading of sections 2(17), 2(31), 2(75) and 67(2) makes it clear that money can also be seized by authorized officer.
Further, the word ‘ things’ appears in Section 67(2) of the CGST Act, 2017 is to be given wide meaning and as per Black’s Law Dictionary, 10 Edition, any subject matter of ownership within the spear of proprietary or valuable right, would come under the definition of ‘thing’ (page No. 1707). Similarly, Wharton’s Law Lexicon at page Nos. 1869 and 1870 the word ‘thing’ has been defined and it includes ‘money’. It was therefore, held that the tax authorities had rightly seized the amount of cash from the petitioner’s husband as cash is included in the scope of ‘things’.
In following pronouncements also, it has been held that cash or currency cannot be seized under the GST law and that same was to be released or refunded:
************
9911796707
