Can GST Officer Seize Cash in Search & Seizure Operation?

Introduction –

In any tax administration, power of Inspection, Search and Seizure are essential to protect the interest of the revenue. Such provisions not only protect the interest of the revenue, but also protect the interest of the genuine taxpayers. Department is expected to use these powers effectively to catch tax evaders, who take undue advantage at the cost of genuine tax payers. At the same time, department is also expected to use these powers with utmost caution, only in exceptional circumstances and within the four corners of law. Seizure of cash is one of such tool often used by taxation officers during the course of search and seizure operations. In this article we will try to analyze the validity of cash seizure from GST perspective.

Relevant provision of CGST Act –

Section 67 of CGST Act grants powers of Inspection, search and seizure to GST department. Section 67(2) provides that where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorize in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things.

Thus from dissection of above provision, following conditions must be satisfied to seize any goods documents or books or things

1} there must be proper officer (i.e. rank of Joint Commissioner or above),

2} who has reason to believe

3} there are any goods, documents or books or things,

4} which in his opinion shall be useful for or relevant to any proceedings under this Act

5} are secreted in any place

Analysis-

Now the question which comes before us is whether proper officer can seize cash pursuant to powers granted in 67{2} discussed supra. Whether the term ‘money’ can be treated as ‘document obr ooks of things’ as envisaged in section 67(2) ? This issue was dealt in by Honorable Madhya Pradesh High Court in case of ‘Kanishka Matta v. Union of India and others’ – Writ Petition No. 8204/2020. In this case, Unaccounted cash of ₹ 66,43,130/- was seized along with goods from the residential premises of petitioner. Against the seizure order, the petitioner moved a petition before the High Court with a prayer to release the cash seized from the petitioner vide Panchnama dated 30/05/2020 from the residential premises of the petitioner and her husband. The major point of contention apart from other points made by the petitioner was that, the cash cannot be treated as ‘Document, Book or Things’ and therefore, the department be directed to release the cash. However, Honorable High court analyzed that the word “things” appearing in Section 67(2) of the CGST Act, 2017 carries wide meaning and as per detailed analysis mentioned in order, held that the word ‘thing’ includes money and it cannot be excluded, as prayed by the petitioner from Section 67(2). Hence honorable HC ruled that Cash can be very well seized by proper officer using the powers given u/s 67(2).

However on reading provisions of section 67, it is very clear that just being a “thing” is not the only qualifying requirement to make something eligible for seizure. The proper officer should also form an opinion on whether said “goods, documents or books or things” will be useful for or relevant to any proceedings under this Act It will be interesting to note that this point was not brought to the attention of Honorable MP High Court. So now let us analyze further on this aspect.

As mentioned above, in order to seize cash or for that matter any goods, documents or things, the proper officer must have reason to believe that such seizure will be useful or relevant for further proceedings. Value of cash doesn’t change based on denomination or its serial number or such attributes should not matter in further proceedings. Cash can be inventoried and its value remains the same. So it is very difficult to comprehend that seizure of cash can be useful for or relevant to any proceedings. Even for the sake of analysis, if we assume that such seizure of cash is necessary to protect interest of the revenue, section 83 empowers department to attach any property in order to protect interest of the revenue. As per section 83, if the Commissioner is of the opinion that for the purpose of protecting the interest of the revenue it is necessary so to do, he may, by order in writing, attach provisionally, any property, including bank account, Search can be initiated by Joint Commissioner but section 83 requires Commissioner to form an opinion regarding attachment of property for protection of revenue. So contention that seizure of cash can be made to protect interest of the revenue may not stand as it will amount to replacement of independent opinion to be formed Commissioner by the opinion of Joint Commissioner. Also Joint commissioner must have formed his opinion as provided in section 67 and not in section 83. Both these opinions are for separate purpose and are to be formed by separate specified officers.

It is pertinent to mention that, Section 132 B (1) of the Income-tax Act provides for adjustment of assets seized, against any existing liability. GST act does not have similar provision. Hence seizure of cash found in business premises by GST authorities may be unwarranted, unlike under the Income tax Act where it is provided for ultimate adjustment of the Assets seized towards current tax liability.

Conclusion-

As discussed above, the question whether cash can be useful or relevant for further proceedings was not raised before the Honorable MP High Court. Provisions relating to seizure are differently worded in GST act as compared to earlier Indirect tax laws or for the matter Income Tax Act Whether seizure of Cash by GST authorities can be relevant or useful in further proceedings needs to be judicially tested in times to come. Also cash can be accounted or unaccounted. Whether accounted cash can said to be secreted is also an aspect which needs to be analyzed. Hence this matter needs to be examined on case to case basis and it cannot be concluded that GST authorities have unconditional powers to seize cash during search operations. Let us expect that department would not seize cash unnecessarily just to pressurize tax payer and as a matter of routine during investigation using this judgment.