Seizure Of Cash During GST Search: High Court Of Karnataka
Quashes Seizure Of Cash Under GST – B. Kusuma Poonacha & Anr. Vs. Senior
Intelligence Officer, DGGI
Background
of the Case
The petitioners, B.
Kusuma Poonacha (Petitioner No. 1) and J.K. Manjunath (Petitioner
No. 2), approached the High Court challenging a seizure order dated 21
September 2022 issued by the Senior Intelligence Officer, DGGI, Bangalore
Zonal Unit, under Section 67(2) of the CGST Act, 2017.
The dispute arose when
officers of the DGGI conducted a search at Petitioner No. 1’s residence
on 20 September 2022. During this search, they seized:
- Various goods and electronic devices
- Cash amounting to Rs. 1,71,07,500/-
Petitioner No. 1, an
employee of M/s Vihaan Direct Selling (India) Pvt. Ltd., alleged that
her statement attributing the cash to her employer was taken under coercion.
She later withdrew this statement through an affidavit dated 27 September 2022.
Petitioner No. 2 claimed ownership
of the seized cash, supporting it with communications and an affidavit, and
requested its return. The DGGI, however, retained the cash for more than a year
without initiating further proceedings.
Case Details:
- Case Number:
Writ Petition No. 25864 of 2023 (T-RES)
- Neutral Citation:
2024:KHC:7186
- Date of Order:
20 February 2024
- Court:
High Court of Karnataka at Bengaluru
Petitioners’
Submissions
The petitioners,
represented by Senior Counsel V. Raghuraman, advanced the following key
arguments:
- Cash is not “things” under Section
67(2): The term “things” in Section 67(2) of the CGST
Act does not include money. Therefore, the seizure of cash was without
authority of law.
- No “reasons to believe” recorded:
Before conducting the search and seizure, the officer must have written
“reasons to believe” that the items are relevant to proceedings. No such
reasons were shown regarding the cash.
- Seizure order silent on cash
confiscation: While the order mentioned
electronic devices, it lacked any justification for confiscating cash.
- Retention beyond statutory limit:
Section 67(7) allows retention of seized goods or things for only six
months (extendable by another six months). In this case, cash was held for
over a year without notice.
- Coercion in statement recording:
The statement linking cash to the employer was allegedly taken under
duress and promptly retracted.
- No further proceedings initiated:
After the seizure, no adjudication or prosecution was commenced,
indicating arbitrary retention.
The petitioners relied on
judgments from various High Courts (Delhi, Gujarat, Kerala) holding that cash
is not “things” under Section 67(2) and cannot be seized in such manner.
Respondents’
Submissions
The DGGI, represented by
counsel Vanita K.R., opposed the petition, stating:
- The cash was part of the financial
transactions of M/s Vihaan Direct Selling (India) Pvt. Ltd. and relevant
for GST proceedings.
- The seizure was lawful under Section
67(2) as the cash was connected with suspected tax evasion.
- Investigation was still in progress
and nearing completion.
- Relied on the Madhya Pradesh High
Court’s decision in Smt. Kanishka Matta vs. Union of India, which
allowed seizure of cash as “things”.
Court’s
Analysis
The High Court framed two
main issues:
1. Whether
“things” in Section 67(2) includes cash/currency?
2. Whether
the seizure order was valid and lawful?
Key Observations:
- The CGST Act defines “goods” but
explicitly excludes “money”.
- The term “things” is undefined;
however, Delhi High Court in Deepak Khandelwal held that cash is
not covered under “things” for seizure purposes unless it is goods liable
to confiscation.
- The Madhya Pradesh High Court’s
contrary view in Kanishka Matta was not followed by other High
Courts.
On procedural lapses:
- The DGGI failed to record proper
“reasons to believe” for seizing cash.
- No subsequent proceedings were
initiated within the statutory time frame of Section 67(7).
- Retention of cash for over a year
without notice was a violation of the Act.
Decision
The High Court:
- Quashed
the seizure order insofar as it pertained to the cash of Rs. 1,71,07,500/-.
- Directed the respondents to return
the seized cash to the petitioners along with applicable interest.
- Emphasized that officers must
strictly adhere to statutory safeguards before exercising search and
seizure powers under GST.
Key
Takeaways
- Cash is not automatically covered
under “things” in Section 67(2) CGST Act.
- Authorities must record specific,
written “reasons to believe” before seizing any asset.
- Retention of seized property beyond
statutory limits without proceedings is unlawful.
- This judgment strengthens protection
against arbitrary seizure under GST law.
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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