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POWER TO EFFECT SEIZURE OF CASH FROM THE REGISTERED PERSON

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POWER TO EFFECT SEIZURE OF CASH FROM THE REGISTERED PERSON
By: Mr.†M. GOVINDARAJAN
October 14, 2020
All Articles by: Mr.†M. GOVINDARAJAN       View Profile
  • Contents

Seizure of goods

Section 67(2) of the CGST Act provides that where the proper officer, not below the rank of Joint Commissioner, either pursuant to an inspection carried out or otherwise, has reasons to believe that any goods liable to confiscation or any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place, he may authorize in writing any other officer of central tax to search and seize or may himself search and seize such goods, documents or books or things.

The first proviso to the said section provides that where it is not practicable to seize any such goods, the proper officer, or any officer authorized by him, may serve on the owner or the custodian of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer.

The second proviso to the said section provides that the documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act.

Seizure of money

The issue to be discussed in this article whether ‘money’ can be seized by the proper officers while in inspection and search.  Whether the term ‘money’ ca be treated as ‘document or books of things’ as provided in second proviso to section 67(2)?  The High Court in the following case law held that money can be seized by the investigating officer in the course of search.

In Kanishka Matta v. Union of India and others’ – 2020 (9) TMI 42 – MP High Court (decided on 26.08.2020), the petitioner is the wife of Shri Sanjay Matta who is the he Proprietor of the firm functioning in the name and style of S. S. Enterprises.  The Firm is in the business of Confectionery and Pan Masala items.  Searches were conducted on 30.05.2020 and 31.05.2020 at the residential premises of Shri Sanjay Matta and Shri Sandeep Matta and various godowns operated by them on the reasonable belief that the aforesaid premises are being used to clandestinely store goods / records / documents / things. During the searches it was found that huge quantity of Pan Masala and tobacco were lying / stored in the various godowns of Shri Sanjay Matta which are neither declared as principal place of business nor as additional place of business as mandatorily required under Section 22 of CGST Act, 2017 read with Rule 8 of CGST Rules, 2017.

Goods comprising of Pan Masala, Tobacco, Mouth Freshener, Confectionery, etc. valued at ₹ 2.59 Crores were seized under Section 67(2) of the CGST Act read with Section 129 of the CGST Act and Section 130 of CGST Act from six godowns operated by Shri Sanjay Matta and his brother Shri Sandeep Matta as no bills / invoices could be produced by them. Unaccounted cash of ₹ 66,43,130/- was also seized from the residential premises of Shri Sanjay Matta.

Against the seizure order the petitioner moved this petition before the High Court with a prayer to release the cash amounting to ₹ 66,43,130/- seized from the petitioner vide Panchnama dated 30/05/2020 from the residential premises of the petitioner and her husband.

The petitioner submitted the following before the High Court-

  • The Department has got no power vested under Section 67(2) of the Central Goods and Services Tax Act, 2017 to effect seizure of cash amount either from the petitioner or from her husband.
  • The cash cannot be treated as ‘Document, Book or Things’ as per the definition under the definition clause of the CGST Act, 2017 and therefore, the respondents be directed to release the cash, which they have seized.
  •  The sale proceeds were kept by the petitioner and her husband and the respondents have illegally seized the money without their being any provision of law.
  • The statement of the petitioner's husband was recorded on 30.05.2020, 31.05.2020, 01.06.2020 and 02.06.2020 and he was tortured in the name of tax terrorism by the authorities. 
  • The seizure of cash is violative of Article 14 of the Constitution of India. 
  • The raid on the residential premises of petitioner and her husband is again violative of Article 19.

The Directorate of Revenue Intelligence submitted the following before the High Court-

  • The documents and cash were seized in terms of Section 67(2) of the CGST Act, 2017 and the Order of Seizure in Form GST INS-02 dated 30/05/2020 was issued.
  • Shri Sanjay Matta, the husband of the petitioner, made a voluntary statement stating categorically that the said cash of ₹ 66,43,130/- was the sale proceeds of the illegally sold Pan Masala without payment of GST.
  • The present petitioner is certainly not registered with GST Department and the investigation reveals that cash / documents seized, do not pertain to the applicant.
  •  The petition deserves to be dismissed as the petitioner does not have locus to file the present petition.
  • Keeping in view Section 67(2) of the CGST Act, 2017 read with definition Clause makes it very clear that the respondents were justified in seizing the amount from the petitioner and the statute empowers them to do so.

The High Court heard the case and the submissions put forth by both the parties.  The respondents have submitted the Case Diary in a sealed cover before this Court.  The case diary reveals that seizure was done under Section 67(2) of the CGST Act, 2017 under a reasonable belief that the aforesaid are the proceeds of the illicit supply of goods namely Tobacco and Pan Masala and would be useful for further investigation. Panchnama dated 30.05.2020, 31.05.2020 and 05.06.2020 were also brought to the notice of the Court. The case diary also reveals that Shri Sanjay Matta in his statement before the officers have stated categorically that the value of the goods sold without any bills and invoices during the period April, 2019 to May, 2020 would be approximately 40.11 Crores in cash and the GST on the said clandestine clearance works out to ₹ 18.77 Crores.

The petitioner's contention is that the word ‘money’ is not included in Section 67(2) of the CGST Act, 2017 and therefore, once the ‘money’ is not included under Section 67(2) of the CGST Act, 2017 the Investigating Agency / Department is not competent to seize the same.  This Court has carefully gone through Section 67 of the CGST Act, 2017 and the expression used in sub-section (2) of Section 67 is ‘confiscation of any documents or books or things, which in proper officer's opinion shall be useful for or relevant to any proceedings under this Act, are secreted in any place’.   Sub-section (2) has two provisos and first proviso relates to goods and the second proviso refers to documents or books or things so seized shall be retained.

The core issue before this Court is that whether expression ‘things’ covers within its meaning the cash or not. In the considered opinion of this Court, the CGST Act, 2017 has to be seen as a whole and the definition clauses are the keys to unlock the intent and purpose of the various sections and expressions used therein, where the said provisions are put to implementation.   The High Court analyzed the various provisions of the Act in relation to this case. 

The High Court analyzed Section 2(17) which defines ‘business’ and Section 2(31) which defines ‘consideration’. In the considered opinion of the High  Court a conjoint reading of Section 2(17), 2(31), 2(75) and 67(2) makes it clear that money can also be seized by authorized officer.  The word “things” appears in Section 67(2) of the CGST Act, 2017 is to be given wide meaning and as per Black's Law Dictionary, 10th Edition, any subject matter of ownership within the spear of proprietary or valuable right, would come under the definition of ‘thing’ (page No.1707). Similarly, Wharton's Law Lexicon at page No.1869 and 1870, the word ‘thing’ has been defined and it includes “money”. It is a cardinal principle of interpretation of statute that unreasonable and inconvenient results are to be avoided, artificially and anomaly to be avoided and most importantly a statute is to be given interpretation which suppresses the mischief and advances the remedy (Interpretation of statute by Maxwell, 12th Edition, page No.199 to 205). The same preposition of law is propounded in Craies on Statute Law, (7th Edition, page No.94).

The High Court held that keeping in view the aforesaid interpretation of the word ‘thing’ money has to be included and it cannot be excluded as prayed by the petitioner from Section 67(2)

The petitioner in respect of ‘confessional statements’ argued that the husband of the petitioner has retracted at a later stage.  The High Court relied on the Supreme Court judgment in ‘SURJEET SINGH CHHABRA VERSUS UNION OF INDIA [1996 (10) TMI 106 - SUPREME COURT] in which the Supreme Court held that ‘confessional statements’ made before Customs Officer though retracted within six days is an admission and binding since Custom Officers are not Police Officers.   The High Court held that in the present case also the statements were made confessing the guilt by the husband of the petitioner and later on he has retracted from that statement as stated in the writ petition and therefore, in light of the Supreme Court's judgment no relief can be granted in the present writ petition on the basis of aforesaid ground keeping in view the judgment of Supreme Court.

The High Court held that keeping in view the totality of the circumstances of the case, the material available in the case diary and also keeping in view Section 67(2) of the CGST Act, 2017, this Court is of the opinion that the authorities have rightly seized the amount from the husband of the petitioner and unless and until the investigation is carried out and the matter is finally adjudicated, the question of releasing the amount does not arise.

 

By: Mr.†M. GOVINDARAJAN - October 14, 2020

 

 

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