Finding that the legislative intent of permitting seizure of books or documents or things in terms of Subsection (2) of Section 67 of the CGST Act, 2017 is crystal clear and it does not permit seizure of currency or valuable assets, simply, on the ground that the same represent unaccounted wealth, the Delhi High Court held that in terms of Sub-section (3) of Section 67 of the Act, the documents, books, and things seized under Sub-section (2) which have not been relied upon for issuance of a notice, under the Act or Rules made thereunder, are required to be returned to the person from whom the such items were seized within a period not exceeding thirty days from the issuance of notice.

The High Court held so while considering a petition seeking directions be issued to the respondents to unconditionally release the two silver bars and mobile phones which were seized by the respondents from the residential premises of the petitioner.

The Division Bench of Justice Vibhu Bakhru and Justice Purushaindra Kumar Kaurav observed that “The purpose of the Act is not to proceed against unaccounted wealth. The provision of Section 67 of the Act is also not to seize assets for recovering tax. Thus, applying the principle of purposive interpretation, the power under Section 67 of the Act cannot be read to extend to enable seizure of assets on the ground that the same are not accounted for”.

Advocate Rajesh Jain appeared for the Petitioner, whereas Advocate Harpreet Singh appeared for the Respondent.

The brief facts of the case were that the petitioner carries on business of trading in non-ferrous metals, inter alia, in the name of his sole proprietorship concern, Shyam Metal. A search was conducted at the petitioner’s residence under Sub-section (2) of Section 67 of the CGST Act, 2107 wherein certain items and currency were seized from the ground floor of the petitioner’s residence. This resulted in arrest of the petitioner alleging that he had committed offences punishable under Clause (i) of Sub- section (1) of Section 132 of the Act. Later, the petitioner was released on bail. However, the Sales Tax Officer issued a notice under Section 74 of the Act proposing a demand of ₹24,20,900/- including penalty of a sum of ₹12,10,450/-. The petitioner’s request for release of the goods, documents, and cash seized from his premise, also stood rejected, even after lapse of one year from the date of the seizure.

After considering the submission, the Bench noted that the power of inspection under Sub-section (1) of Section 67 of the Act is conferred to unearth any evasion of tax or any attempt to evade tax.

Thus, the Bench observed that Sub-section (1) of Section 67 of the Act is not a provision for recovery of tax or for securing the same.

The Bench went on to state that the plain language of Sub-section (2) of Section 67 of the Act provides that only those goods can be seized, which the proper officer has reasons to believe are liable for confiscation.

“Insofar as seizure of documents or books or things is concerned, the same is permissible provided the proper officer is of the opinion that the said documents or books or things shall be useful or relevant to any proceedings under the Act”, added the Bench.

The Bench therefore emphasized that seizure of documents or books or things are only for the purpose of examination or inquiry or any proceedings under the Act, and the seized documents or books or things can be retained only so long as it is necessary for their examination, any inquiry, or proceedings under the Act.

The High Court elucidated that purpose of Section 67 of the Act is to empower authorities to unearth tax evasion and ensure that taxable supplies are brought to tax.

However, once the department is secured in this regard, either by discharge of such liability or by such security or bond as the concerned authority deems fit, the Court clarified that the goods are required to be released in terms of Sub-section (6) of Section 67 of the Act.

The High Court also clarified that the search & seizure operations under Section 67 of the Act are not for the purpose of seizing unaccounted income or assets or ensuring that the same are taxed, since the said field is covered by the Income Tax Act, 1961.

Thus, even if it is assumed that the petitioner could not produce any evidence of purchase of the silver bars or account for the cash found in his possession, the same were not liable to be seized under Sub-section (2) of Section 67 of the Act, added the Court.

The High Court therefore directed the respondents to forthwith release the currency and other valuable assets seized from the petitioner during the search proceedings.

Cause Title: Deepak Khandelwal Proprietor v. Commissioner of CGST and Anr. [Neutral Citation: 2023: DHC: 5823-DB]

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Delhi High CourtJustice Vibhu BakhruJustice Purushaindra Kumar KauravCGST Act

Pankaj Bajpai