Revenue Department cannot seize cash during the inspection

The Kerala High Court has ruled that the Revenue Department cannot seize cash during an inspection if it is not part of the assessee's stock-in-trade. In a case involving a manufacturer of idly and dosa batter, the court found that cash seized was not a 'thing' that ought to have been seized under the CGST Act. Consequently, the court directed the Revenue Department to release the seized cash back to the petitioner.

The Hon'ble Kerala High Court in DhanyaSreekumari v. State Tax Officer (IB) [WP(C) No. 21772 of 2022 dated June 27, 2023] held that cash not being a stock-in-trade of the assessee, was not a thing that ought to have been seized and directed the Revenue Department to release the cash seized to the assessee.

Facts

Dhanya Sreekumari("the Petitioner") is engaged in the manufacture and sale of Idly, dhosa batter etc. An inspection was conducted by the Revenue Department ("the Respondent") in the manufacturing unit and at the residence of the Petitioner and seized INR 32,73,900 as cash and pay-in slips amounting INR 21,02,000 and passed a seizure order dated June 13, 2022.

The Petitioner contended that pay-in-slip for depositing a further sum of INR 8,00,000 was also present in the safe from which a sum of INR 11,71,900 was seized, but the same had not been noted in the order of seizure.   

Petitioner preferred representation before the Respondent to return the seized cash as early as on June 22, 2022 but no action was taken by the Respondent.

The Petitioner was of the view that seizure of cash was unwarranted since the investigation was on alleged evasion of tax thus, the Respondent is not entitled to seize cash by invoking the power available under Section 67 of the Central Goods and Services Tax Act, 2017 ("the CGST Act").

The Petitioner filed writ before the Hon'ble Kerala High Court to release the cash.  

Issue

Whether Revenue Department can seize cash during the inspection?

Held

The Hon'ble Kerala High Court in WP(C) No. 21772 of 2022 held as under:

• Observed the contention of Revenue Department that, the word 'things' in Section 67(2) of the CGST Act will include cash also and hence the seizure of cash was very much in accordance with the law.
• Opined that, cash not being a stock-in-trade of the Petitioner, was not a thing that ought to have been seized, and the seizure was one year back, so there is no reason to retain it any further.
• Held that, court directed the respondent to release the cash seized from the Petitioner.

Our Comments

The Hon'ble Kerela High Court has correctly held that cash is not a stock-in-trade thus cannot be seized. Attention is invited to the similar case Arvind Goyal CA v. Union of India & Ors. [W.P.(C) 12499/2021 dated January 19, 2023] wherein the Hon'ble Delhi High Court held that seizure under Section 67 of the CGST Act is limited to goods liable for confiscation or any documents, books or things which may be useful for or relevant to any proceedings and ‘cash' does not fall within the definition of ‘goods' therefore, the action of GST officers of taking away currency was illegal and without any authority of law.