2025 (2) TMI 408 - HC - GST

GST Department's Initial Cash Seizure Ruled Illegal; Court Orders Return Within 10 Days, Calls for Legal Procedure Adherence

Centre C Edtech Private Limited, Dhanya V.S, Gayathri. J.A, Versus The Intelligence Officer, Of intelligence Unit, State Goods And Service Tax Department, Kerala, Thiruvananthapuram, Addl. R3 Impleaded The Deputy Director Of Income Tax Investigation.

The HC of Kerala ruled that the initial seizure of cash by the GST Department from the appellants was illegal and without jurisdiction, as the cash was ... Seizure of cash from the premises by the officers attached to the GST Department of the State in the course of proceedings initiated under Section 74 of the CGST/SGST Act - HELD THAT:- There are force in the submissions of the learned Senior counsel for the appellants that the initial seizure of cash from the premises of the appellant being illegal, the continued retention of it by the GST Department of the State, and the handing over of the cash to the Income Tax Department, cannot be seen as legal acts merely because the money was now handed over to the Income Tax Department pursuant to a requisition sent by them under Section 132A of the IT Act. The initial seizure of the cash by the GST Department was blatantly illegal since it was without the authority of law. This salutary principle that prevents the expropriation of property or tax from a citizen without the authority of law finds expression in Articles 265 and Article 300A of the Constitution of India. Conclusion - There are no hesitation to hold that the cash amount seized from the premises of the appellants cannot be retained either by the GST Department of the State or the Income Tax Department prior to a finalisation of respective proceedings initiated by them. Appeal disposed off. The High Court of Kerala heard two Writ Appeals arising from a common order in WP(C). Nos.7967 of 2024 and 7952 of 2024. The appellants challenged the seizure of cash from their premises by the GST Department of the State under Section 74 of the CGST/SGST Act, claiming that the seizure was illegal as the cash did not form part of their stock in trade. The State had seized a total of Rs. 39,70,760 from the appellants, later handing it over to the Income Tax Department under Section 132A of the Income Tax Act.The learned Single Judge directed the appellants to approach the Income Tax Department for the release of the cash and instructed the GST Department to continue with the adjudication process under the CGST/SGST Act. The appellants contended in their appeals that the initial seizure by the GST Department was illegal, and therefore, the continued withholding of the cash by the authorities, even after handing it over to the Income Tax Department, was unlawful.The Court, after considering the arguments, held that the initial seizure of cash by the GST Department was illegal and without jurisdiction. Referring to constitutional provisions and previous case law, the Court emphasized that property or tax cannot be expropriated from a citizen without the authority of law. It cited a Division Bench decision and a Supreme Court ruling that confirmed the illegality of seizing cash not part of a dealer's stock in trade. The Court criticized the State GST Department for disregarding binding precedents.Consequently, the Court ordered the Income Tax Department to release the seized amounts to the appellants within 10 days. It directed the continuation of proceedings under the CGST/SGST Act against the appellants and the proceedings initiated by the Income Tax Department under Section 132A for assessment purposes. The Court clarified that the seizure of cash amounts should not be considered as pursuant to a valid requisition under the Income Tax Act.In conclusion, the Court held that the cash seized from the appellants could not be retained by either the GST Department or the Income Tax Department before finalizing the respective proceedings. The Writ Appeals were disposed of with the above directions, emphasizing the illegality of the initial seizure and the importance of following legal procedures in such cases.