Cash seized from premises ought to be released and Taxpayer is not precluded from filing application for refund, if due

Considering the provisions of Section 67 of the CGST Act 2017, the High Court of Delhi clarified that the provisions of sub-section (2) of Section 67 did not permit seizure of cash, in course of search and seizure operations conducted as per Section 67 of the CGST Act.

A Division Bench of Justice Vibhu Bhakru and Justice Amit Mahajan was hearing a petition challenging the vires of an order directing the Assessee to deposit tax with interest and penalty in respect of about Rs 50 Lakhs in Indian currency which had been recovered during search and seizure operations.

The Assessee-Petitioner was represented by Mr. Ruchir Bhatia, Advocate, whereas the Respondent-Revenue was represented by Mr. Harpreet Singh, Senior Standing Counsel.

Briefly, the Assessee is a sole proprietorship and filed GST returns as such. During the relevant period, the Assessee’s premises were subjected to search operations by the Anti Evasion branch of the jurisdictional CGST Commissionerate. The Assessee’s stock of raw material and finished goods were searched and the same were found to be duly recorded in books of account. The officers also found about Rs 50 Lakhs in Indian currency.

The Assessee claimed that the cash belonged to the family members of the Assessee’s proprietor and had temporarily been stored here in the business premises since the residential premises were under construction.

Thereafter, summons under Section 70 of the CGST Act were issued to the Assessee, calling upon it to produce various documents pertaining to sales and purchases made during the preceding 5 years, statements of bank accounts for the preceding 5 years, and details of all other related companies along with documents pertaining to sales and purchases.

The cash seized from the premises of the petitioner was deposited by the Department with Syndicate Bank in the name of the Commissioner, CGST, Delhi. The Assessee continued to pursue the Department for the release of the said cash and original documents, however, the cash so seized was not released.

The Assessee claimed to have been called upon by the Department to deposit tax, interest and penalty, amounting to Rs. 11,41,750/- which would be payable in the event, the cash seized represented proceeds of undisclosed sales. Although the Assessee claimed to not be liable to pay any amount, the tax amount was nevertheless paid by the Assessee, with the assurance that the seized cash would be released.

The Assessee made several entreaties to the Department to release the seized cash, however, the cash was not released. Hence the present petition came to be filed, to challenge the legality of the seizure of the cash.

On hearing the contentions of both parties, the Bench observed that the issue of seizure of supposedly illicit cash, stands settled by the judgment of this Court in the case of Deepak Khandelwal, wherein the Court had clearly laid down that the provisions of Section 67 did not empower the Department to seize cash, as the same was not covered under any of the items listed in Sub-section (2) of the Section 67, which could be seized during search operations.

In light of the said decision, the Bench directed that the cash seized from the Assessee’s premises be released to the Assessee.

Considering the Assessee’s plea that the tax of about Rs 11.41 Lakhs deposited by it, be adjusted against some future liability, the Bench found there to be no dispute that such amount was deposited voluntarily. Hence the Bench held that the Assessee was not precluded from filing application for refund of such amount, if otherwise due.

With these directions, the Revenue was directed to remit within one weeks’ time, the cash seized from the Assessee’s premises.

Cause Title: M/s Goyal Metal Udyog vs Commissioner of CGST & Anr. [W.P(C) 7618/2019 / 2023-Enterslice-16-HC-Del-GST]

Click here to read/download the order

Goyal-Metal-Udyog-vs-Commissioner-of-CGST-Anr