W.P.(C) 6739/2021

Facts of the Case

The petitioner, proprietor of M/s Shri Shyam Metal and registered under GSTIN 07AGCPK1126B2Z5, was subjected to a search of his residential premises on 28.01.2020 under Section 67(2) of the CGST Act, 2017. Officers seized two silver bars weighing 29.5 kg and 14.5 kg, Rs.7,00,000 in cash, mobile phones, cheque books and other documents (recorded in Form GST INS-02). The petitioner was subsequently arrested under Section 132(1)(i) and later released on bail. A notice under Section 74 dated 10.11.2020 proposed a demand of Rs.24,20,900, including penalty of Rs.12,10,450, but did not rely on any of the items seized on 28.01.2020. The petitioner sought release of the silver bars, cash and other valuables under Section 67(3), contending they had not been relied upon in the notice within the periods prescribed under the Act.

Issues Involved

  1. Whether the proper officer had power under Section 67(2) to seize currency and other valuable assets absent reason to believe they were liable for confiscation.
  2. Whether silver bars and cash fell within the definition of "goods," "securities," or the residuary term "things" under Section 67(2).
  3. Whether seized items not relied upon in the subsequent show cause notice were liable to be returned under Sections 67(3) and 67(7).

Petitioner's Arguments

  • Counsel submitted that the proper officer's power to seize goods under Section 67(2) is confined to goods liable for confiscation, and that cash is not "goods" as statutorily defined, being excluded as "money."
  • It was argued, relying on the pari materia Customs Act provisions and the doctrine of ejusdem generis, that the word "things" must take colour from the preceding words "documents" and "books," and cannot be stretched to cover cash or valuables seized merely as unaccounted wealth.

Respondent's Arguments

  • Revenue counsel submitted that silver bars and cash were not "goods" liable for confiscation but were seized as "things" under Section 67(2), a term he urged should be read expansively (relying on the Madhya Pradesh High Court's Kanishka Matta ruling), and contended silver bars were "securities" excluded from the definition of goods.

Court Order / Findings

  • The Court held that silver bars, being movable property and not falling within the definition of "securities" under the Securities Contracts (Regulation) Act, 1956, are "goods" under Section 2(52), while cash is excluded as "money."
  • The Court held that the word "things" in Section 67(2) must be read ejusdem generis with "documents" and "books," limited to items with informational or evidentiary value relevant to proceedings under the Act, and does not extend to seizure of unaccounted wealth per se, expressly declining to follow the contrary view of the Madhya Pradesh High Court.
  • Since the notice dated 10.11.2020 did not rely on any of the seized silver bars or cash, the Court held they were liable to be returned under Sections 67(3) and 67(7), and directed the respondents to forthwith release the currency and other valuable assets, while clarifying this did not preclude other proceedings under the Act or express any opinion on the petitioner's tax liability. The writ petition was allowed.

Important Clarification

  • Section 67 of the CGST Act is a mechanism to unearth tax evasion and secure evidence, not a machinery provision for recovery of tax or for seizing unaccounted wealth generally — that field belongs to the Income Tax Act.
  • Cash or valuables can be validly seized as "things" only where they carry specific evidentiary value linked to establishing tax evasion (for example, a currency note corroborated by other records); seizure merely because an asset is "unaccounted for" falls outside Section 67(2), and any item not relied upon in the ensuing notice must be returned.

Sections Involved

  • Section 67(2), CGST Act, 2017 — power of search and seizure of goods liable for confiscation, and documents, books or things useful for proceedings.
  • Section 67(3) and 67(7), CGST Act, 2017 — mandate return of seized items not relied upon in a subsequent notice, and of seized goods where no notice issues within six months.
  • Section 2(52), CGST Act, 2017 — defines "goods" as excluding money and securities.

Decision – In Favour of

The decision is in favour of the assessee, with the Court directing release of the seized silver bars, cash and other valuables, without prejudice to other proceedings under the Act.

Case Details

Court: High Court of Delhi at New Delhi
Case Number: W.P.(C) 6739/2021
Coram: Hon'ble Mr. Justice Vibhu Bakhru and Hon'ble Mr. Justice Purushaindra Kumar Kaurav
Date of Judgment: 17.08.2023

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