Facts of the Case

The petitioner, a sole proprietor engaged in trading iron scrap, was subjected to a search by the Directorate General of GST Intelligence (DGGI) in connection with alleged fraudulent availment of Input Tax Credit by another entity.

During the search conducted on 15.02.2021, various documents, electronic devices, and Indian currency amounting to ₹23,50,000 were seized from the petitioner’s residence.

The petitioner challenged the seizure order (INS-02), seeking quashing of the same and release of the seized cash along with interest, contending that such seizure was illegal under the provisions of the CGST Act.

Issues Involved

  1. Whether Indian currency can be treated as “goods” under Section 2(52) of the CGST Act, 2017.
  2. Whether cash can be seized under Section 67 of the CGST Act.
  3. Whether seizure of cash for being “unaccounted wealth” is permissible under GST law.

Petitioner’s Arguments

  • The seized cash does not fall within the definition of “goods” under the CGST Act.
  • Section 67 does not empower authorities to seize currency merely because it is unaccounted.
  • The seizure was arbitrary, illegal, and beyond statutory powers.
  • Reliance was placed on precedents where similar seizures were held unsustainable.

Respondent’s Arguments

  • The seized amount represented proceeds of alleged fake invoicing and tax evasion.
  • The petitioner failed to provide lawful evidence regarding possession of the cash.
  • The seizure was justified as part of investigation into GST evasion. 

Court Findings / Order

Key Findings:

  • Cash is not “goods”: Indian currency is explicitly excluded from the definition of “goods” under Section 2(52) and falls within “money” under Section 2(75).
  • Limited scope of Section 67:
    • Section 67 is meant for inspection, search, and seizure to aid proceedings, not for recovery of tax or seizure of unaccounted assets.
  • Doctrine of ejusdem generis applied:
    • The term “things” in Section 67 must be read in context with “documents” and “books”, meaning items that have evidentiary value.
  • Seizure of cash not justified:
    • Cash cannot be seized merely because it is unaccounted or suspected to be linked to tax evasion.
  • GST law vs Income Tax law:
    • Action against unaccounted money falls within the domain of the Income Tax Act, not GST law.

Final Order:

  • The writ petition was allowed.
  • The respondents were directed to release ₹23,50,000 along with applicable interest to the petitioner.

Important Clarifications by Court

  • Section 67 is not a recovery mechanism; it only facilitates investigation.
  • Seizure powers must be exercised strictly within statutory limits.
  • Cash can only be seized if it has direct evidentiary relevance in proceedings, not merely as unaccounted wealth.
  • Authorities are not barred from initiating other lawful proceedings under the Act. 

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/61017122024CW169002024_111348.pdf 

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