Delhi HC orders provisional release of seized silver after finding authorities conducted "charade" of release and immediate re-seizure

Delhi HC ordered provisional release of seized silver to petitioner after finding respondents conducted a "charade" by releasing silver from their office then immediately re-seizing it at ground floor of same premises. Court found no grounds for believing silver was being secreted at the location. HC directed respondents to release and deliver silver to petitioner's residence upon deposit of Rs.16,00,000 with court registry within one week, with delivery scheduled for specific date and time.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the power under Section 67(2) of the Central Goods and Services Tax Act, 2017 to search and seize extends to valuable movable assets (silver bars/coins) found at premises where the search was conducted for alleged clandestine removal of packing materials.

2. Whether goods that constitute unaccounted wealth but are not the subject-matter of taxable supplies ordinarily susceptible to confiscation under the CGST Act can be seized under Section 67.

3. Whether, upon interim judicial intervention directing release of seized goods, the Revenue may re-seize such goods at a different part of the same premises or by recharacterizing possession, and what protections/remedies the court may grant pending final adjudication (including deposit for release).

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Scope of Section 67(2) CGST Act: seizure power vis-à-vis valuable movable assets (silver)

Legal framework: Section 67(2) empowers a Proper Officer who has reason to believe that any goods liable for confiscation or any documents/books/things useful or relevant to proceedings under the Act are secreted at any place, to search and seize such goods, documents, books or things.

Precedent treatment: The Court follows and applies its earlier reasoning in Deepak Khandelwal Proprietor M/s Shri Shyam Metal v. Commissioner of CGST, which construed the scope of Section 67(2) and limited seizure to goods which the Proper Officer has reason to believe are liable for confiscation; the wider term "things" must be read in light of "documents and books" and thus confined to items containing information useful to proceedings.

Interpretation and reasoning: The Court reasons that the statutory definition of "goods" (movable property other than money and securities) cannot be read in isolation; the expression in Section 67(2) relates to goods that are the subject-matter of taxable supplies and which the officer believes are liable for confiscation. Although "things" is wide, it should be read to denote informational items akin to documents and books. Consequently, valuable movable assets discovered incidentally, which are not themselves linked to the taxable supply under investigation, cannot be seized merely because they represent unaccounted wealth.

Ratio vs. Obiter: Ratio - Section 67(2) seizure power is limited to goods believed to be liable for confiscation and to documents/books/things that are informationally relevant; it does not authorize seizure of valuable assets solely on account of being unaccounted wealth. Observations clarifying the ambit of "things" as colouring from "documents and books" are integral to the ratio.

Conclusion: The seizure of silver bars/coins under Section 67(2) in circumstances where the search related to alleged clandestine removal of packing materials was beyond the statutory power and therefore impermissible.

Issue 2 - Seizure of unaccounted wealth not being subject of taxable supplies; effect of subsequent investigation suggesting trading in silver

Legal framework: Section 67 presupposes "reason to believe" that a taxpayer has suppressed transactions relating to supply of goods/services; Section 130 (confiscation provisions) applies where goods are liable for confiscation as per Act.

Precedent treatment: The Court relies on the same precedent (Deepak Khandelwal) to hold that mere possession of valuable movable assets or failure to produce purchase evidence does not, by itself, render such assets liable to be seized under Section 67 unless linked to taxable supplies or confiscation proceedings.

Interpretation and reasoning: The Court distinguishes between discovery of assets representing unaccounted wealth and goods that form the subject-matter of the tax proceedings. It accepts that subsequent factual investigation may reveal trading in silver, but stresses that such future findings cannot validate a prior seizure under Section 67 unless, at the time of seizure, there was reason to believe the goods themselves were liable for confiscation. The respondents remain free to continue investigation and, if reason to believe arises that silver relates to suppressed supplies, to initiate appropriate proceedings under the Act.

Ratio vs. Obiter: Ratio - Seizure under Section 67 requires contemporaneous reason to believe goods are liable for confiscation; future investigative hypotheses do not retroactively justify an earlier seizure. Obiter - Guidance that respondents may proceed under the Act if fresh reason to believe emerges is ancillary but practically guiding.

Conclusion: Silver not shown to be the subject of the taxable supply under investigation cannot be constitutionally/sectorally retained as seized goods under Section 67; however, administrative action may be taken later if proper grounds arise.

Issue 3 - Re-seizure following court-ordered release and interim remedy by deposit for return of goods

Legal framework: Judicial power to grant interim relief and to set aside seizures that exceed statutory authority; inherent power to impose conditions such as security/deposit to protect revenue pending final adjudication.

Precedent treatment: The Court applies its prior direction (in the case followed) ordering release of seized silver and affirms that seizure beyond statutory power cannot stand. It treats post-release attempt to re-seize as impermissible overreach of the earlier order.

Interpretation and reasoning: The Court observes that releasing the silver in compliance with its order and a subsequent attempt to repossess the same at another floor of the same building reflects an attempt to circumvent judicial orders. Finding no basis to believe the silver was secreted at the respondents' premises, the Court characterizes the re-seizure as improperly executed. To balance protection of the Revenue and the rights of the petitioner, the Court exercises its discretion to permit release of goods subject to a security deposit (quantified by Revenue counsel), thereby preserving the Revenue's contingent interest while correcting excessive seizure practice.

Ratio vs. Obiter: Ratio - A court may direct release of goods seized beyond statutory authority and may, in its discretion, condition release on security/deposit to protect the Revenue pending final adjudication. Observations that the respondents may continue investigation and take appropriate action later are supplementary.

Conclusion: The Court directed immediate release of the silver and, to protect Revenue interests, ordered conditional release upon deposit of a specified sum with the Court; respondent's attempt to re-seize after judicial release was prima facie improper and could not validate continued detention absent statutory basis.

Consolidated Outcome and Directions (as integral to ratio)

The Court concluded that seizure under Section 67(2) is confined to goods believed to be liable for confiscation and to documents/books/things of informational value; seizure of valuable movable assets solely as unaccounted wealth is beyond Section 67(2). Where prior judicial orders mandate release, re-seizure without fresh statutory basis is impermissible. The respondents remain at liberty to investigate and initiate proceedings if, on further inquiry, proper grounds to believe in confiscation of such goods emerge; meanwhile, the Court may condition release on adequate security to protect revenue interests.

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