2023 (8) TMI 929 - HC - GST

Jurisdiction of proper officer to seize u/s 67 - Seizure of unaccounted assets - interpretation of statute - section 67 of GST Act - Seeking unconditional release of goods - two silver bars - Indian currency - Mobile Phones - legality of search and seizure of residential premises. Power of proper officer to seize the currency and other valuable assets u/s 67 of the Act, even though he has no reason to believe that the same are liable for confiscation - HELD THAT - It is at once clear that silver bars being movable assets are not securities within the meaning of Clause (h) of Section 2 of the Securities Contract (Regulation) Act, 1956. The contention that silver bars are securities , as advanced on behalf of the Revenue, is insubstantial. Although the definition of the term securities is an inclusive definition, the same cannot be read in disregard of Subclauses (i) to (iii) of Clause (h) of Section 2 of the Securities Contract (Regulation) Act, 1956 or the scope of that enactment. Plainly, as silver bars do not fall within the definition of securities under Subsection (101) of Section 2 of the Act read with Clause (h) of Section 2 of the Securities Contract (Regulation) Act, 1956. Thus, silver bars are included in the term goods as defined under Sub-section (52) of Section 2 of the Act. 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. The power of search and seizure are drastic powers and are not required to be construed liberally. Further, it is found that the legislative intent of permitting seizure of books or documents or things in terms of Subsection (2) of Section 67 of the Act is crystal clear and it does not permit seizure of currency or valuable assets, simply, on the ground that the same represent unaccounted wealth. The mischief rule or the Heydon s rule (propounded in the year 1584 in Heydon s case 76 ER 637) requires a statute to be interpreted in the light of its purpose. The purpose of the Act is not to proceed against unaccounted wealth. The provision of Section 67 of the Act is also not to seize assets for recovering tax. Thus, applying the principle of purposive interpretation, the power under Section 67 of the Act cannot be read to extend to enable seizure of assets on the ground that the same are not accounted for. The notice dated 10.11.2020 proposes to raise a demand for the month of April, 2019 (which is prior to the date of the search). Although, Mr. Singh contended that the said notice is not a notice issued by the Central Authorities but he does not dispute that the said notice does not rely on any of the items seized during the search operations conducted on 28.01.2020. Moreover, in the counter affidavit, it is alleged that the petitioner had filed ineligible / bogus GST Input Tax Credit on the strength of fake / goodless invoices issued by various bogus / non-existent firms - it cannot be accepted that the notice dated 10.11.2020 is not the notice as referred to under Sub-section (3) of Section 67 of the Act. The respondents are directed to forthwith release the currency and other valuable assets seized from the petitioner during the search proceedings conducted on 28.01.2020 - petition allowed.

Summary

Issues Involved:
1. Legality of the search and seizure of silver bars, Indian currency, and mobile phones.
2. Authority of the proper officer under Section 67 of the Central Goods and Services Tax Act, 2017 (the Act) to seize currency and other valuable assets.
3. Requirement to issue notice within six months of seizure and its implications.
4. Interpretation of the term "goods" and "things" under the Act.

Summary:

Issue 1: Legality of the Search and Seizure
The petitioner requested the release of two silver bars, Rs. 7,00,000/- Indian currency, and mobile phones seized from his residence, arguing the search and seizure were illegal. The petitioner was arrested on 29.01.2020 for alleged offenses under Section 132(1)(i) of the Act and released on bail on 21.03.2020. The petitioner contended that no reliance was placed on the seized items in the notice issued under Section 74 of the Act, and thus, the seized goods should be restored.

Issue 2: Authority Under Section 67
The petitioner argued that currency is not "goods" as defined under the Act and thus cannot be seized. The proper officer's power to seize under Section 67(2) is limited to goods liable for confiscation and documents or things useful for proceedings under the Act. The court examined Section 67 and concluded that the power to seize cash or other assets is not for securing revenue interests but for aiding proceedings against tax evasion.

Issue 3: Requirement to Issue Notice
The court noted that under Section 67(7), if no notice is issued within six months of the seizure, the goods must be returned. The petitioner argued that no notice was issued within the stipulated period, making the seized goods liable for release. The court agreed, stating that the seized items were not relied upon in any subsequent notice, thus requiring their return.

Issue 4: Interpretation of "Goods" and "Things"
The court clarified that "goods" under Section 2(52) of the Act exclude money and securities, and silver bars do not qualify as securities. The term "things" in Section 67(2) must be read ejusdem generis with "documents" and "books," implying items containing information useful for proceedings under the Act. The court rejected the expansive interpretation of "things" to include currency and valuable assets without evidentiary value.

Conclusion:
The court directed the respondents to release the seized currency and valuable assets, emphasizing that the purpose of Section 67 is to unearth tax evasion, not to secure unaccounted wealth. The court also noted that the respondents could continue other proceedings under the Act as per the law.