Seizure of Cash During Search u/s 67

The provisions relating to Inspection, Search, Seizure and Arrest are contained in section 67 to section 72 of CGST Act, 2017. Section 67 talks about the Powers of inspection, search and seizure.  Section 67(2) empowers the proper officer to seize the goods, documents, books or things which shall be useful for or relevant to any proceeding and are secreted in any place. Thus whenever the search is conducted in the premises of the taxpayer, the proper officer has a power to seize the goods, documents etc. However, practically in addition to the books and documents, some cash is also found by the proper officer during search. Hence the question that arises here is whether the proper officer can also seized the cash which was found during search operations.  In this article we will try to find the answer of said question by understanding the relevant provisions of GST.

Before going into detail, let us understand the wording of sub section 2 of section 67 of CGST Act 2017, which states that where the proper officer 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 authorise 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.

From the above provisions of section 67(2) it is clear that goods or documents or books only can be   
seized under GST. Let’s have a look into the definition of “goods” as per CGST Act. As per section 2(52) of CGST Act 2017 "goods" means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.

The “money and securities” are specifically excluded from the definition of goods. Further the term “money”is defined under GST law. As per section 2(75) of CGST Act 2017, "money" means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value.

Thus from the above definition of “goods” and “money” it is clear that cash can not be considered as goods since the money is excluded from the scope of goods and accordingly, cash should not be seized by the proper officer during search.  However, it is important to note that as per the wording of section 67(2) the officer can search and seize such goods, documents or books or things. The word “things” is used here and accordingly, the cash might be covered here.

To have a more clarity in this regard, let’s discuss the judgement of Hon’ble High Court of Madhya Pradesh in the case of Kanishka Matta versus Union of India and Others [2020(08)LCX0078]. The brief facts of the case were as follows;

The search operation was carried out at the premises and a cash was seized from the petitioner. In this case petitioner’s contention was that the word “money” is not included in Section 67(2) and therefore, the department has no right to seize the same. However, the Hon’ble MP High Court held that, the GST Department had rightly seized the amount (Cash) and held that cash is included under the scope of “things”.

However, on the contrary the Hon’ble Delhi High Court in the case of Arvind Goyal versus Union of India & Others [2023(01)LCX0123] held that the action of taking away currency during the course of search proceeding is illegal and without any authority of law. The said case is summarise as follows;

Search operation was conducted and during the course of the search, the officers found cash aggregating to Rs.1,22,87,000/- and took possession of the said cash. It is contended by the petitioner that the concerned officers could have no reason to believe that any goods liable for confiscation were lying in the premises of the petitioners and also claimed that the concerned officers had no reason to believe that any records relevant to the proceedings would be available in the premises. The petitioner also challenges the action of the concerned officers of taking possession of cash as without authority of law. The High Court held that it is clear that the said action of taking away currency was illegal and without any authority of law. The amount of Rs 18,87,000/- has already been returned to petitioner. The respondents are directed to forthwith return the balance amount along with the interest accrued thereon to the petitioners. The bank guarantee furnished by petitioner for release of currency is directed to be released forthwith.

Similarly, in case of Krishna Chaurasia Versus Additional Director General [2024(09)LCX0023]the Hon’ble Delhi High Court has ordered the Department to release the seized cash with interest, as Section 67 of the CGST Act prohibits seizure of currency or valuable assets solely due to unaccounted wealth. The said is summarised as follow;
The sum of Rs.27,00,000/- in cash was found at the office premises of the petitioner and since no satisfactory answer or evidence was furnished by him regarding the source of the aforesaid cash, the same was ‘resumed’ by the officer. The petitioner has filed the present petition, inter alia, praying that directions be issued to the respondents to release the sum of Rs.27,00,000/- which was seized. It is the petitioner’s case that the said seizure was without authority of law. The Hon’ble Court has directed the respondents to forthwith remit the aforesaid amount to the petitioner’s bank account along with the accrued interest.

Also in case of K.M. Foods Infrastructure Pvt Ltd Versus the Director General [2024(02)LCX0053] the High Court held that CGST Officers have no power to seize the cash in exercise of its powers under Section 67 (2) of the CGST Act. As per the facts of the case, a search was carried out by the Officers and various documents/records viz. balance sheets, bilty books, purchase invoices, e-way bills, GST sales ledger, mobile phones etc., belonging to said companies were resumed. They also resumed Indian Currency totalling to Rs. 1,90,66,000/-. Ld. counsel for petitioner contended that the CGST Officers had no power to seize the cash in exercise of its powers under Section 67 (2) of the CGST Act. It is argued that powers under Section 67 (2) of the CGST Act to seize the goods can be exercised only if the goods are liable for confiscation and the currency is excluded from the definition of goods. Whereas Ld. counsel for respondent submits that the Officers had merely resumed the cash, therefore cannot be considered as seizure. Investigation has revealed that there is no evidence that the cash so seized was representing the sale proceeds of unaccounted goods, therefore, it could not have been seized under the provisions of CGST Act as the seizure is limited to the goods liable for confiscation. Therefore, there is no reason for the retention of the cash amount by the respondents. Section 67 (7) states that when no notice in respect thereof is given within six months of seizure of the goods, the goods shall be returned to the person from whose possession they were seized. On this ground also, petitioners are entitled for the return of resumed cash. Undisputedly, petitioners had not handed over the cash to the concerned Officers voluntarily. The action taken by the Officers was therefore a coercive action. CGST Act does not support such an action of forcibly taking over the possession of the currency from the premises of any person.  This court do not find any justification for the resumption of the cash and its continued retention by the respondents. Petitions are therefore allowed.

Further, in case of Bharatkumar Pravinkumar and Co versus State of Gujarat [2023(10)LCX0196] the Gujarat High Court held that cash would not be considered as goods for the purpose of seizure proceedings, and it is not justified to retain cash seized by the Revenue Department.

Thus from the above detailed discussion and by referring the various judgements we can reach the following conclusion;

Conclusion: The department is not authorised to seize the cash during search proceedings since the cash is not considered as goods for the purpose of seizure.

Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.