Introduction: In a recent development, the Kerala High Court has issued an order in the case of T.H. Fazil vs. State Tax Officer, concerning the seizure of cash, including demonetized 2000 Rs notes, from the petitioner’s premises. The court’s decision has significant implications for the retention of seized cash by authorities without issuing show cause notices. This article explores the details of the case, the legal arguments presented, and the Kerala High Court’s ruling.
Detailed Analysis: The T.H. Fazil vs. State Tax Officer case revolves around the seizure of cash from the premises of the petitioner. The cash was seized on December 22, 2020, through Exhibits P1 and P2 seizure memos. The total amount seized was Rs. 31,50,000/-, with Rs. 3,40,000/- seized from petitioner Nos. 1 and 4, respectively.
The petitioner’s counsel argued that the GST authorities had no legal authority under the Act and associated Rules to seize cash belonging to a dealer, especially when the seized cash did not constitute ‘stock in trade.’ The counsel further relied on a precedent, specifically the decision in “Shabu George & another v. State Tax Officer (IB) State Goods & Services Tax Department and others [2023 (4) TMI 252-Kerala High Court],” to support their argument.
Crucially, the learned Government Pleader did not contest the legal position presented by the petitioner’s counsel. Additionally, it was highlighted that the cash seized during the operation included currency notes with a denomination of Rs. 2000/-. Importantly, these notes were set to cease circulation by the end of September 2023.
The Kerala High Court considered the Division Bench’s ruling in the Shabu George case, which held that the retention of seized cash for more than six months without issuing a show cause notice was unjustified. In light of this, the court ordered the immediate release of the seized cash to the appellant. The court directed the first respondent (the State Tax Officer) to release the cash without delay, and at the latest, within a week from the date of receipt of the court’s judgment.
It is worth noting that the State had previously filed a Special Leave Petition (SLP) before the Supreme Court against the Shabu George case judgment, which was subsequently dismissed.
Conclusion: The Kerala High Court’s decision in the T.H. Fazil vs. State Tax Officer case serves as a significant precedent regarding the retention of seized cash by authorities without the issuance of show cause notices. In this case, the court reaffirmed the principle established in the Shabu George case, emphasizing that the prolonged retention of seized cash without proper justification is untenable.
The court’s ruling underscores the importance of procedural fairness in cases involving the seizure of assets by government authorities. It ensures that individuals and entities subjected to such actions are provided with due process and timely resolution. The release of the seized cash in this case is a clear indication of the court’s commitment to upholding the rule of law and protecting the rights of citizens.
This judgment also highlights the significance of legal precedent in shaping the outcomes of similar cases in the future and serves as a reminder of the importance of adherence to legal procedures in tax and financial matters.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The present writ petition has been filed under Article 226 of the Constitution of India questioning the seizure of cash from the premises of the petitioner vide Exhibits P1 and P2 seizure memos dated 22.12.2020. An amount of Rs.31,50,000/- and Rs.3,40,000/- was seized from the petitioner Nos. 1 and 4 respectively.
2. The learned counsel for the petitioners submits that the GST authorities have no power under the Act and the Rules thereto to seize the cash of a dealer, in as much as the cash seized is not ‘stock in trade’. The learned counsel for the petitioner has also placed reliance on the decision in Shabu George & another v. State Tax Officer (IB) State Goods & Services Tax Department and others [2023 (4) TMI 252-Kerala High Court].
3. The learned Government Pleader does not dispute the legal position as contended by the learned counsel for the petitioners. The cash was seized from the petitioners’ premises on 22.12.2020. The cash seized from the petitioners’ premises includes the currency of denomination of Rs.2000/- and the same would cease circulation by the end of September, 2023. The Division Bench of this Court in Shabu George (supra) has held as follows:
Moreover, as the respondent has retained the seized cash for more than six months and is yet to issue a show cause notice to the appellants in connection with the investigation, there can be no justification for a continued retention of the said amount with the respondent. We therefore, allow this appeal by directing the first respondent to forthwith release to the appellant the cash seized from the premises, against a receipt to be obtained from him. The amount shall be released to the appellant without any delay, and at any rate, within a week from the date of receipt of a copy of this judgment.
The writ appeal is allowed as above.”
4. Against the said judgment, the State had preferred an SLP before the Supreme Court and the same was dismissed. Considering the aforesaid facts and the law, the present writ petition is allowed and the respondents are directed to release the cash seized from the petitioners and credit the same to the account of the petitioners within a period of five days from today.