2023 (1) TMI 1028 - HC - GST

GST officers cannot seize cash during search operations as currency doesn't qualify as goods under Section 67(2)

Delhi HC held that GST officers lacked authority to seize cash during search operations under Section 67(2) of GST Act. The court ruled that cash does not ... Search and seizure under Section 67(2) of the GST Act - Seizure of currency - Distinction between goods and currency - Seizure versus forcible dispossession/possession without seizure - Requirement of statutory authority for exercise of draconian powers - Return of unlawfully taken property with interestSearch and seizure under Section 67(2) of the GST Act - Seizure of currency - Seizure versus forcible dispossession/possession without seizure - Requirement of statutory authority for exercise of draconian powers - Return of unlawfully taken property with interest - Validity of the officers taking possession of cash found during search and the legality of retaining such cash without seizure under Section 67(2) of the GST Act; appropriate relief upon finding of illegality. - HELD THAT: - The statutory power under Section 67(2) permits seizure of goods liable for confiscation or documents, books or things that may be useful or relevant to proceedings under the Act. Currency does not fall within the definition of goods and it is prima facie difficult to characterise cash as a 'thing' useful or relevant to GST proceedings; seized books or things may be retained only so long as necessary for examination or inquiry. The respondents, however, contended that no seizure was effected and that the officers merely 'resumed' the cash as recorded in the panchnama. There is no provision in the GST Act authorising officers to 'resume' assets or to forcibly take possession of currency absent seizure under the statutory scheme. The undisputed facts show coercive dispossession of the petitioners' cash during the search but without a seizure under Section 67(2). Such dispossession, being outside the statutory authority, is unlawful. Having found that part of the cash was already returned to one petitioner, the balance taken away must be returned along with accrued interest and ancillary steps taken (release of bank guarantee). The Court accordingly directed restitution and required the concerned officers to appear for further proceedings. [Paras 14, 15, 16, 17, 20]The action of taking away the petitioners' currency during the search was without authority of law; the respondents are directed to forthwith return the balance amount with interest and to release the bank guarantee furnished by petitioner no.1; the concerned officers are directed to appear in Court for further proceedings.Final Conclusion: The Court concluded that the forcible taking of currency from the petitioners' premises during the search, without seizure under the statutory scheme, was unlawful; restitution of the balance with interest and release of the bank guarantee was ordered, and the officers involved were summoned for further proceedings. Issues:Challenge to search operation legalityChallenging authority to seize cashInterpretation of Section 67(2) of the GST ActAnalysis:Challenge to Search Operation Legality:The petitioners filed a petition challenging a search operation conducted at their residence by GST officers under Section 67(2) of the GST Act. The officers found and took possession of cash without drawing a seizure memo. The petitioners argued that the officers had no valid reason to believe that goods liable for confiscation or relevant records were present at their premises, questioning the lawfulness of the search operation.Challenging Authority to Seize Cash:The petitioners contested the action of the officers in seizing cash, claiming it was without legal authority. They argued that the power to seize goods under Section 67(2) of the GST Act is limited to items liable for confiscation or relevant to proceedings under the Act. Cash, being excluded from the definition of goods, cannot be seized. The petitioners emphasized that currency is not useful or relevant for conducting proceedings under the Act, thus challenging the officers' authority to seize cash.Interpretation of Section 67(2) of the GST Act:A crucial issue raised was the interpretation of Section 67(2) of the GST Act regarding the power to seize goods. The court noted that cash does not fall under the definition of goods and questioned whether cash could be considered a 'thing' useful or relevant for proceedings under the Act. The court highlighted that the power to seize items is subject to strict conditions and must be exercised within the statutory framework. The court examined whether the officers' action of taking possession of cash without a seizure memo constituted a lawful seizure.The court found that the officers' action of dispossessing the petitioners of cash during the search operation was illegal and without legal authority. The court directed the respondents to return the remaining amount seized along with accrued interest to the petitioners. Additionally, the court ordered the release of the bank guarantee furnished by one of the petitioners. The court also directed specific officers to be present in court for further proceedings, emphasizing the need for adherence to legal procedures and statutory provisions in search and seizure operations.