Introduction: The classification of ‘cash‘ as a ‘thing‘ under Section 67 of the CGST Act has sparked legal debate. This article delves into interpretations, court cases, and the ongoing discourse.
In terms of Sub-section (1) of Section 67 of the Act, the proper officer, not below the rank of Joint Commissioner, is empowered to authorize any officer of the central tax to inspect any place of business of a taxable person or persons engaged in the business of transporting or storing of goods.
However, such inspection can be authorized only if the proper officer has reasons to believe that the taxable person has:-
(i) suppressed any transaction relating to supply of goods or services or both; or (ii) suppressed the stock of goods in hand; or
(ii) has claimed input tax credit in excess of his entitlement; or
(iii) has otherwise contravened any provision of the Act or the Rules made thereunder, to evade payment of tax.
Such inspection can also be authorized if the proper officer believes that any person who is engaged in the business of transporting goods, or operating a warehouse or a godown or any other place, is keeping goods that have escaped payment of tax or has kept his accounts or goods in such a manner, which is likely to cause evasion of tax payable under the Act.
In terms of section 67 proper officer may only seize goods, documents or books or things if if the proper officer has reasons to believe that any goods, which are liable for confiscation, or any documents or books or things, which in his opinion will be useful or relevant for any proceedings under the Act
The expression ‘goods’ is defined in Sub-section (52) of Section 2 of the Act clearly excludes money. The term “money” neither fell within the definition of the terms ‘goods’ nor could be considered as ‘things’. The term ‘things’ was required to be construed by applying the doctrine of ejusdem generis, as taking colour from the preceding words, ‘documents’ and ‘books’.
Ejusdem Generis is a latin maxim and it means “of the same kind and nature”. This legal principle states that when a list of specific items is followed by general words, the general words are interpreted to include only items of the same type as those specifically listed.
Recently in a case of DEEPAK KHANDELWAL PROPRIETOR M/S SHRI SHYAM METAL Versus COMMISSIONER OF CGST, DELHI WEST & ANR. on 17/08/2023 honorable Delhi High court said that,
“46. It is clear from the Scheme of Section 67 of the Act that the word ‘things’ is required to be read, ejusdem generis, with the preceding words ‘documents’ and ‘books’. It is apparent that the legislative intent of using a wide term such as ‘things’ is to include all material that may be informative or contain information, which may be useful for or relevant to any proceedings under the Act. Although, documents and books are used to store information; they are not the only mode for storing information. There are several other devices that are used to store information or records such as pen-drives, personal computers, hard disks, mobiles, communication devices etc. The word ‘things’ would cover all such devices and material that may be useful or relevant for proceedings under the Act. The word ‘things’ must take colour from the preceding words, ‘documents’ and ‘books’. It denotes items that contain information or records, which the proper officer has reason to believe is useful for or relevant to the proceedings under the Act. The context in which the word ‘things’ is used makes it amply clear that, notwithstanding, the wide definition of the term ‘things’, the same is required to be read ejusdem generis with the preceding words. It is apparent that the legislative intent in using a word of wide import is to include all possible articles that would provide relevant information, records, and material which may be useful for or relevant to proceedings under the Act.
47. We are unable to accept that the word ‘things’ must be read expansively to include any and every thing notwithstanding that the same may not yield and / or provide any material useful or relevant to any proceedings under the Act as contended on behalf of the Revenue. It is necessary to bear in mind that power of search and seizure is a drastic power; it is invasive of the rights of a taxpayer and his private space. Conferring of unguided or unbridled power of this nature would fall foul of the constitutional guarantees. It necessarily follows that such power must be read as circumscribed bythe guidelines that qualify the exercise of such power, and the intended purpose for which it has been granted. As stated above, it is contextually clear that exercise of such power is restricted only in cases where in the opinion of the proper officer, seizure is useful for or relevant to any proceedings under the Act. The second proviso of Sub-section (2) and Sub-section (3) of Section 67 of the Act makes it amply clear that the purpose of seizure is for the purpose of relying on the same in proceedings under the Act.
48. There may be cases where the Revenue finds that a particular currency note or any particular asset has evidentiary value to establish the Revenue’s case. Illustratively, a delinquent dealer supplies goods without invoices only on presentation of a currency note that bears a particular number. The presentation of the currency note is used as a means of authenticating the identity of the purchaser. The number of the particular currency note is recorded in diary maintained by the purchaser. The Revenue Officer ascertains this modus operandi of evasion of taxes. The currency note, correlated with the diary, would be relevant in establishing evasion of tax in respect of certain goods. Undoubtedly, in such cases, the currency note is material that yields information as to the modus adopted for evading tax; the proper officer may seize the currency note for its evidentiary value and relevance in establishing evasion of tax in proceedings under the Act. The same may be relied upon in the proceedings that may ensue. The particular currency note in such a case would yield certain information when read in conjunction with the diary. It is material to note that such currency note can be retained for so long as may be necessary for its “examination and for any enquiry or proceedings under the Act”. Signature Not Verified Digitally Signed By:DUSHYANT Signing Date:17.08.2023 Cash or other assets, which are not required in species in aid of any proceedings, but represent unaccounted wealth, cannot be seized under Section 67 of the Act. This Court had pointedly asked Mr. Harpreet Singh, whether there was any material showing information that the currency or the silver bars that were seized could be traced in species to any transaction which the Revenue required to establish in any proceedings. However, the answer to the same was in the negative. It is, thus, clear that the silver bars and the cash were seized only on the ground that it was ‘unaccounted wealth’ and not as any material which was to be relied upon in any proceedings under the Act.”
And also in the case of The Hon’ble Delhi High Court in Arvind Goyal CA v. Union of India & Ors. has held that, seizure under Section 67 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’.
But the MP High court took a contrary view in the matter of Kanishka Matta Vs Union of India and Others and held that money can also be seized by authorized officer.
Conclusion: The classification of ‘cash’ as a ‘thing’ under Section 67 of the CGST Act is a contentious issue, with varying interpretations from different courts. While the Delhi High Court leans towards an expansive interpretation, emphasizing contextual limitations, the contrary view by the MP High Court adds complexity to the debate. The ultimate clarity on this matter awaits further legal developments and potential clarifications from higher judicial authorities.
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