If Cash Is Not Part Of Stock-In-Trade Of Taxpayer’s Business, Then Its Seizure In GST Tax Evasion Investigation Is Unjustified: Kerala HC

Emphasizing that the power to seize any ‘thing’, including cash, under the taxing statute must be guided by the object of the statute, the Kerala High Court ruled that the seizure of cash from the premises of the petitioner under the Central Goods and Services Tax Act (CGST Act), was wholly unwarranted, especially when the cash did not form part of the stock in trade of the petitioner's business.

While disagreeing with the Intelligence Officer's stand, the Division Bench of Justice A.K. Jayasankaran Nambiar and Justice Mohammed Nias C.P observed that, although Section 67(2) of the CGST Act permits the seizure of ‘things’, including cash, in appropriate cases, the present situation did not warrant the seizure of cash from the petitioner's premises during the investigation.

The Bench highlighted that the authority's power to seize any item under a taxing statute should be guided by the purpose of the statute.

Therefore, where the investigation aimed to detect tax evasion under the GST Act, the Bench found it unjustifiable to seize cash, especially when it was evident that the cash did not belong to the petitioner's business's stock-in-trade related to the quarry business.

Advocate K.N Sreekumaran appeared for the Appellant, whereas Government Pleader M.M Jasmine appeared for the Respondent.

In a nutshell, the petitioner had filed the present writ appeal challenging the judgment of a Single Judge. The Single Judge disposed of the writ petition by directing the State Tax Officer (IB) to consider and pass orders on a representation made by the petitioner for the release of cash that was seized from their premises during an investigation under the GST Act. The petitioner contended that the seizure of cash was unwarranted, particularly because the investigation was related to alleged tax evasion under the GST Act. However, the Single Judge did not accept this argument.

The Bench while criticizing the findings of the Intelligence Officer, stated that they reveal a misinterpretation of their powers and jurisdiction under the GST Act.

The Intelligence Officer's conclusions, such as suspecting the cash kept in the petitioner's house as idle and not deposited in a bank, and assuming that the money received as a gift during a marriage was from illicit sources, were deemed irrelevant and outside the scope of the GST Act, added the Bench.

The High Court also took into consideration that the State Tax Officer had retained the seized cash for an extended period of more than six months and had not issued a show-cause notice to the petitioner regarding the investigation.

Given this delay and lack of action, the High Court found no justification for the continued retention of the seized amount by the State Tax Officer.

As a result, the High Court directed the State Tax Officer to immediately release the seized cash to the petitioner.

Cause Title: Shabu George and Ors v. State Tax Officer (IB) and Ors.

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