The Kerala High Court has held that Income Tax department or GST department cannot retain illegal cash seizied prior to a finalisation of respective proceedings initiated by them.
The appellants are aggrieved by the seizure of cash from their premises by the officers attached to the GST Department of the State in the course of proceedings initiated under Section 74 of the CGST/SGST Act. They submit that the cash so seized was later handed over to the Income Tax Department after intimating the said Department of the seizure of cash.
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The Writ Petitions were filed by the appellants herein seeking a direction to return the seized cash to them since the GST Department did not have the power to seize cash from the premises of any dealer/service provider unless the cash itself formed part of the stock in trade of the dealer/service
provider.
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The Single Judge directed the assessee to approach the Income Tax Department for a release of the cash. The assessee has challenged the order passed by the Single Judge. The appellant submitted that, inasmuch as the initial seizure of the cash by the GST Department of the State was illegal and without jurisdiction, the subsequent handing over of the seized cash to the Income Tax Department, even if pursuant to a notice under Section 132A of the Income Tax Act, would not detract from the fact that the continued withholding of the money, by the respondent authorities, was illegal.
The bench found that the initial seizure of cash from the premises of the appellant being illegal, the continued retention of it by the GST Department of the State, and the handing over of the cash to the Income Tax Department, cannot be seen as legal acts merely because the money was now handed over to the Income Tax Department
pursuant to a requisition sent by them under Section 132A of the IT Act. The initial seizure of the cash by the GST Department was blatantly illegal since it was without the authority of law.
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The Division Bench of Justices A.K. Jayasankaran Nambiar and Easwaran S held that the cash amount seized fromthe premises of the appellants cannot be retained either by the GST Department of the State or the Income Tax Department prior to a finalisation of respective proceedings initiated by them.
The court dispose of the writ Appeals by directing the Income Tax Department (additional 3rd respondent in both the appeals) shall forthwith, and at any rate not later than 10 days from today, release the amount of Rs.10,58,860/- to the appellant in Writ Appeal No. 1934 of 2024 and Rs.29,11,900/- to the appellant in WA No.1962 of 2024 by crediting the amounts in their respective bank accounts.
Further held that “The proceedings under Section 74 (1) of the CGST/SGST Actas against the appellants shall continue from the stage at which they presently stand and shall be completed after giving the appellants an opportunity of being heard. The proceedings initiated by the Income Tax Departmentunder Section 132A for the purposes of completing an assessment under Section 153A, 153C shall also proceed from the stage at which they present”
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