Seizure of Cash by GST Authorities under Suspicion of Black Money is Illegal: Delhi HC Orders Immediate Release & Potential Refund [Read Order]

The High Court of Delhi has held that the seizure of cash by the Goods and Services Tax (GST) authorities under Section 67(2) of the Central Goods and Services Tax (CGST) Act, 2017 on the suspicion of it being black money is illegal. The court has ordered the immediate release of seized funds and has allowed the possibility of a refund.

The issue was brought before the court by M/S. Goyal Metal Udyog, a business entity operating in Delhi.

The petitioner, represented by Mr. Ruchir Bhatia and Mr. Rakesh Kumar sought several reliefs, including the quashing of proceedings against them, the release of Rs.50,70,000/- seized by the GST authorities and the adjustment of Rs.11,41,750/- against future liabilities.

The controversy arose when the officers of the Anti-Evasion Branch of the CGST, Delhi East Commissionerate, conducted a search at the premises of Goyal Metal Udyog. During the search, the officers discovered Indian currency amounting to Rs.50,70,000/- in a locker.

The petitioner contended that this cash belonged to their family members and had been moved from their residential premises to the business premises due to ongoing renovation work at their home and the presence of numerous laborers.

The revenue authorities issued a summons under Section 70 of the Central Goods and Services Tax Act, 2017, demanding various documents, including those related to sales and purchases over the past five years, bank account statements and details of other related companies.

The cash seized during the search was deposited by the GST authorities with Syndicate Bank in the name of the Commissioner, CGST, Delhi. Despite repeated requests by the petitioner, the seized cash was not released.

To facilitate the release of the cash, the petitioner was asked to deposit tax, interest and penalties totaling Rs.11,41,750/-. Though the petitioner disputed the liability, they deposited the amount based on assurances that the seized cash would be released.

Despite continued efforts by the petitioner, the authorities did not release the seized cash. In response to these developments, the petitioner filed a letter reiterating their request for the release of the seized funds.

The respondent revenue, represented by Mr. Harpreet Singh, Suhani Mathur and Mr. Jatin Kumar Gaur, reiterated the findings.

The bench ruled in favour of the petitioner, stating that the seizure of cash on the grounds of it being unaccounted for is illegal.

The court cited a recent decision in Deepak Khandelwal Proprietor M/s Shri Shyam Metal v. Commissioner of CGST, Delhi West & Anr. as precedent for this ruling.

The bench ordered the immediate release of the seized currency to the petitioner. Furthermore, the court clarified that the period during which the case was pending would be excluded from any applicable limitation periods for further legal proceedings by either party.

In addition to ordering the immediate release of the seized cash, the court addressed the petitioner's request to adjust the amount of Rs.11,41,750/- against future tax liabilities.

The division bench comprising Justice Vibhu Bakhru and Justice Amit Mahajan concluded that the tax authorities cannot seize cash solely on the suspicion of it being unaccounted for without concrete evidence. The ruling also highlights the importance of due process and the rights of taxpayers in such cases.

To Read the full text of the Order CLICK HERE

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