Top Stories Is Cash a “Thing” under GST Section 67(2)? Supreme Court to Decide [Read Judgement] The key issue is whether the term “things” should be interpreted as ” ejusdem generis (of the same kind) with “goods, documents, or books,” or if it has a broader meaning that includes cash By Navasree A.M – On December 11, 2024 10:48 am – 5 mins read The Supreme Court is to decide whether Cash qualifies as ‘Thing’ for the purposes of Section 67(2) of Goods and Services Tax ( GST Act ).
A bench comprising Justices J.B. Pardiwala and R. Mahadevan will examine whether GST officers are empowered to seize cash during raids on an assessee’s premises under the authority granted by Section 67(2). The provision allows officers to “search and seize such goods, documents, books, or things.” Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here The key issue is whether the term “things” should be interpreted as ” ejusdem generis (of the same kind) with “goods, documents, or books,” or if it has a broader meaning that includes cash. The SLP was filed by the Commissioner of GST against the order passed by the Delhi High court.
The High Court has ruled in favour of the assessee. Relying on the same High court’s judgment in Deepak Khandelwal Proprietor M/s Shri Shyam Metal Vs. Commissioner of CGST, Delhi West & Anr, it was held that “the concerned authorities do not have the power to cease cash found during the search conducted under Section 67(1) of the CGST Act.” The High Court directed the department to return the seized cash with interest. Thus, the GST department preferred SLP before the Supreme Court, which will be heard soon. The Supreme Court also condoned the delay in filing the SLP. Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
Is Cash a “Thing” Under GST Section 67(2)? Section 67(2) of the Goods and Services Tax (GST) Act empowers GST officers to search premises and seize goods, documents, books, or other “things” when they believe that taxable goods are concealed or records are withheld to evade tax. Section 67(2) grants powers to a proper officer, not below the rank of Joint Commissioner, to conduct searches and seize goods, documents, books, or other items deemed necessary for GST proceedings. If, based on an inspection under Section 67(1) or other credible information, the officer has reasons to believe that goods liable for confiscation or relevant documents, books, or “things” are hidden, he can take action. The officer may either personally search and seize such items or authorize another central tax officer in writing to carry out the search and seizure. The first proviso addresses situations where seizing goods is not feasible. In such cases, the officer can serve an order to the owner or custodian of the goods, prohibiting their removal, transfer, or handling without prior permission.
The second proviso stipulates that any documents, books, or other items seized must not be retained indefinitely. The officer must hold onto these items only for as long as is necessary to conduct their examination and conclude any inquiries or proceedings under the Act. Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here Supreme Court observation in State Tax Officer (IB) vs Shabu George The Supreme Court of India upheld the Kerala High Court’s decision in Shabu George vs. State Tax Officer, holding that the Revenue Department cannot seize cash that is not part of stock-in-trade in a Goods and Services Tax (GST) investigation. The respondent-Shabu George argued that statutory provisions authorizing the seizure of “things” do not extend to cash unless it is stock-in-trade. The cash in question was allegedly received as wedding gifts and unrelated to any business. The Kerala High Court found the seizure “wholly uncalled for and unwarranted,” criticizing the Revenue Department for retaining the cash without issuing a show-cause notice.
The Kerala High Court in the case of Shabu George Vs. State Tax Officer (IB) which, after considering the decision of Madhya Pradesh High Court, held in favour of the assessee holding that the power of any authority to seize any ‘thing’ while functioning under the provisions of a taxing statute must be guided and informed in its exercise by the object of the statute concerned. The High Court observed that once it is found that the cash did not form a part of stock in trade, it could not have been seized. In this matter, the cash was the amount received as a wedding gift as mentioned by the department. According to the revenue, the amount was not shown in his income tax returns. The high court noted that findings of the Intelligence Officer could perhaps have been justified had he been an officer attached to the Income Tax department.
“In the context of the GST Act, the findings are wholly irrelevant. We find that the seizure of cash from the premises of the appellants was wholly uncalled for and unwarranted” observed the bench. Aggrieved, the Revenue Department appealed to the Supreme Court. However, a bench of Justices BV Nagarathna and Ujjal Bhuyan dismissed the Special Leave Petition, confirming the High Court’s judgment and concluding that the seizure was unjustified. High court Observations on whether Cash can be considered as a ‘Thing’ for Seizing In 2023, the Gujarat high court, in the case of Bharatkumar Pravinkumar And Co. vs State of Gujarat had observed that the Cash cannot be considered as a thing for the purposes of seizing the goods under the GST Act. Further in the matter of Arvind Goyal CA Vs Union of India and other, the Delhi High court, where it was held that the cash does not fall within the definition of term “goods” and it is also difficult to accept that cash could be termed as a “thing” useful for or relevant for proceedings under the GST Act. Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here In the Arvind Goyal CA case, it stated that the second proviso to Section 67(2) of the GST Act also provides that the books or things so seized would be retained by the officer only so long as may be necessary “for their examination and for any inquiry or proceedings under the Act.
In the case of Deepak Khandelwal Proprietor M/s Shri Shyam Metal v. Commissioner of CGST, Delhi West & Anr.(17.08.2023), the Delhi High Court provided important insight into the interpretation of the term “things” under Section 67(2) of the GST Act. The court ruled that the term “things” must be interpreted as ” ejusdem generis (of the same kind) with the preceding terms “documents” and “books”. This restricts its meaning to items that store or contain information relevant to proceedings under the Act, such as electronic devices like pen drives, hard disks, and mobile phones. In this above -mentioned case, the court stated that the legislative intent behind using the term “things” was to encompass materials that could yield relevant information for tax proceedings.
It clarified that the term does not include “any and everything”. The power of search and seizure is invasive and must be exercised with caution, adhering to constitutional safeguards and the purpose for which such power is conferred. The court further held that unaccounted cash or assets, such as silver bars, cannot be seized under Section 67(2) unless they hold evidentiary value in specific tax proceedings. For instance, a currency note tied to tax evasion through documented evidence, like a diary, may qualify as relevant material. However, in the case at hand, the seized cash and silver bars were deemed to represent unaccounted wealth and lacked direct relevance to any proceedings under the Act.
The court, therefore, ruled such seizures impermissible under the provisions of the CGST Act. As a conclusion, the interpretation of cash as a ‘thing’ under the GST Act for the purpose of seizure remains unresolved, with varying observations from different High Courts based on individual judicial perspectives. Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here Most of the High Courts ruled that ‘Cash’ cannot be considered as a ‘Thing’ and cannot be seized. And even the apex court upheld the decision of the Kerala High Court affirming that Cash cannot be seized unless it is stock in trade. The seizure is only applicable when the cash is stock-in trade otherwise not. With the Supreme Court set to address this important question of law, a definitive and uniform clarification is expected, allaying any lingering vagueness.