11 九月 2023

Cash not forming part of stock-in-trade of business cannot be seized during investigation aimed at detecting GST evasion

Supreme Court approves Kerala HC decision

The Supreme Court has in the case State Tax Officer (IB) v. Shabu George dismissed the Special Leave Petition filed by the Revenue department against the Kerala High Court decision holding that in an investigation aimed at detecting tax evasion under the provisions of the GST, cash cannot be seized especially when it is the admitted case that the cash did not form part of the stock in trade of the assessee's business.

The High Court had observed that the findings recorded by the Intelligence Officer (relying on Section 67(2) of the CGST Act, 2017 which authorises seizure of things), that ‘it is suspicious that this much amount of money kept in the house as idle and not deposited at bank’, were wholly irrelevant. According to the High Court, the findings could have only been justified had the officer been an officer attached to the Income Tax department.

Section 67 is not to seize assets, which are not subject matter of evasion, for recovering tax

It may also be noted that recently the Delhi High Court has also held that power under Section 67 of the CGST Act cannot be read to extend to enable seizure of assets on the ground that the same were not accounted for.

The Court in the case Deepak Khandelwal Proprietor M/s Shri Shyam Metal v. Commissioner also held that provision of Section 67 is also not to seize assets for recovering tax. According to the Court, the word ‘things’ cannot be read expansively to include any and everything notwithstanding that the same may not yield and / or provide any material useful or relevant to any proceedings under the Act. It was thus of the view that only those goods, which are subject matter of or are suspected to be subject matter of evasion of tax, are liable to be seized.

The Department was directed by the Court to release the silver bars and Indian currency, which were seized from the residential premises during search only on the ground that it was ‘unaccounted wealth’.

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