Cash Falls Outside Section 67(2) CGST Seizure Power

The petitioner, proprietor of M/s. Platinum International and a GST registered trader in ferrous and non-ferrous metals and scrap, challenged two seizure orders dated 27 June 2023 and 28 June 2023 issued in Form GST INS-02 by the Senior Intelligence Officer and Intelligence Officer of the Directorate General of GST Intelligence, Mumbai Zonal Unit. The officers had seized cash of INR 40 lakhs from her parents' residence and INR 60 lakhs from another premises she owned at Laxmi Nivas, Charni Road, aggregating to INR 1 crore.

The searches were carried out alongside parallel proceedings against one Mr. Hitesh Chheda of M/s. Leo Ferromet, who was arrested under Section 132(1) of the CGST Act. The petitioner contended she was not a related person of Mr. Chheda and that the cash seizure had no statutory basis under the CGST Act.

Issue

Whether currency in the form of cash can be seized by GST officers under Section 67(2) of the CGST Act, 2017 as 'goods, documents, books or things' useful or relevant to any proceedings under the Act.

Holding

The Division Bench of Justice G. S. Kulkarni and Justice Aarti Arun Sathe held that the seizure of cash by the respondents was without any authority of law and could not have been made under any provision of the CGST Act. The Court quashed and set aside both impugned seizure orders.

Reasoning

The Bench accepted the petitioner's submission that Section 67(2) authorises the proper officer to seize only goods, documents, books or things which may be useful or relevant to proceedings under the Act and which have been secreted. Cash does not fall within the ambit of those categories. The provision is not a general search and seizure power and cannot be stretched to cover currency that has no nexus with the supply of goods or services being investigated.

The Court was further troubled by the respondents' action of purporting to hand over the seized cash to the Income Tax Department, observing that it was at pains to understand from where the respondents had sourced the power under the CGST Act to do so. No such power exists in the statute.

Directions

The Court directed Respondent Nos. 2 and 3 to forthwith release INR 40 lakhs and INR 60 lakhs directly to the petitioner in her bank account, together with applicable interest, within two weeks of the order being made available. The Bench clarified that its findings do not reflect on any pending or initiated income tax proceedings against the petitioner.

Takeaway

For GST practitioners, the ruling reinforces that cash recovered during a Section 67 search is not seizable under the CGST Act, and any handover of such cash to other tax authorities lacks statutory backing.