State Tax Officer (IB) & Ors. Vs Shabu George & Anr. (Supreme Court of India)
The Supreme Court of India recently upheld a Kerala High Court judgment in a dispute involving the seizure of cash by the GST Department and its subsequent transfer to the Income Tax Department. In the case of State Tax Officer (IB) & Ors. Vs. Shabu George & Anr., the Supreme Court dismissed the special leave petition filed by the GST authorities, thereby affirming the illegality of the cash seizure and its handling.
The Kerala High Court had earlier addressed the grievances of the appellants, whose premises were searched under Section 74 of the CGST/SGST Act, leading to the seizure of ₹39,70,760. The GST authorities subsequently transferred this amount to the Income Tax Department under a requisition issued under Section 132A of the Income Tax Act, 1961. The appellants contended that the GST Department had no authority to seize cash unless it constituted stock-in-trade, making the initial seizure unlawful.
The Kerala High Court had ruled in favor of the appellants, directing the Income Tax Department to release the seized amounts to the respective appellants. It also clarified that the GST Department could not retain the cash or hand it over to another authority without proper legal grounds. Additionally, the court ordered both the GST and Income Tax proceedings to continue independently, without relying on the cash seizure as valid under the respective Acts.
Judicial precedents played a significant role in the ruling. The Division Bench of the Kerala High Court in Sabu George & Ors. Vs. Sales Tax Officer (IB) & Ors. had earlier held that the GST Department’s power to seize property does not extend to cash unless it is stock-in-trade. This principle was subsequently upheld by the Supreme Court. The judgment reinforced constitutional safeguards under Articles 265 and 300A, which protect against unlawful taxation and deprivation of property.
In its final order, the Supreme Court dismissed the special leave petition, confirming the High Court’s directions for the immediate release of funds by the Income Tax Department and the continuation of proceedings under the CGST/SGST Act and the Income Tax Act.
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