Search and Seizure under GST | Basic Provisions & Analysis of the Possibilities

Before going into the nitty-gritty of the seizure of cash, let us first understand the basic seizure provisions as prevalent under GST.

The seizure provisions are covered under section 67(2) of the Central Goods and Services Tax Act, 2017 read with rule 139(2) of the Central Goods and Services Tax Rules, 2017. The gist of the said provision is highlighted hereunder –

• The proper officer, not below the rank of Joint Commissioner, may authorize seizure of goods or documents or books or things;
• The proper officer can authorize the seizure only and only if he has reason to believe that goods (liable to confiscation) or documents or books or things which are useful or relevant to any proceedings are secreted in any place; and
• The proper officer will make an order of seizure in Form GST INS-02. Reading the above provisions, one will surely feel that the GST officers are given wide powers to seize any goods or documents or books or things on the basis of his ‘Reason to believe’.

Notably, the term ‘Reason to believe’ is a common feature in many taxing statues. However, now it is a settled principle of law that prior to applying powers attached with the ‘Reason to believe’ the proper officer should firstly possess corroborative evidence/ incriminating material.  

Further, moving ahead with the seizure provisions covered under section 67(2), the first and second proviso states as under –

The first proviso to section 6(2) states that if seizing of goods is practically not possible, then, the proper officer may order the owner/ custodian of the goods that such goods shouldn’t be removed without prior permission of a notified officer.

The second proviso to section 67(2) states that seized documents/ books/ things can be retained by the officer till it is necessary for examination/ inquiry/ proceedings under the Act.

Going through the above provisions of section 67(2) of the Central Goods and Services Tax Act, 2017, we can conclude that the seizure provision talks about the seizing of ‘goods’ or ‘documents’ or ‘books’ or ‘things’.

Accordingly, for interpreting coverage of cash seizure, we need to analyze ‘cash’ coverage within the terms ‘goods’ or ‘documents’ or ‘books’ or ‘things’.

The term ‘goods’ is defined under section 2(52) of the Central Goods and Services Tax Act, 2017. Accordingly, ‘goods’ simply means every kind of movable property other than money and security. We know that ‘cash’ and ‘money’ are synonyms. The term ‘goods’ excludes ‘money’, hence seizure of cash as ‘goods’ is not possible.

Now coming to the interpretation of the remaining three terms i.e. ‘documents’, ‘books’ and ‘things’ –

1. ‘Document’ is defined under section 2(41) of the Central Goods and Services Tax Act, 2017. It simply means and includes written or printed records of any sort and also an electronic records.
   Going through the above definition, we can conclude that covering ‘cash’ within the scope of ‘document’ is also not possible.
2. The term ‘books’ is not covered within the Central Goods and Services Tax Act, 2017. The general meaning of the term ‘books’ is that books mean a written or printed work consisting of pages glued/ sewn together along with one side and bound in covers.
   
   Obviously, we can easily conclude that ‘cash’ cannot be covered with the term ‘books’ as well.
3. The definition of the term ‘thing’ is also not covered within the Central Goods and Services Tax Act, 2017. Accordingly, the common meaning attached to the term ‘thing’ is to be taken. Commonly, ‘thing’ means an inanimate object distinguished from a living being.
   
   The coverage of the common meaning of the term ‘thing’ is pretty wide. However, in normal practice, we can never even imagine of addressing ‘cash’ as a ‘thing’. Accordingly, here, we can dubitably conclude that covering ‘cash’ within the scope of ‘thing’ is easily not possible.

After going through the above analyses, it can candidly be said that GST law is not clear about the inclusion or exclusion of seizure of cash.

However, if cash seizure cannot be covered within all the four possibilities i.e. ‘goods’ or ‘documents’ or ‘books’ or ‘things’, as discussed hereinabove, we can say that the proper officer cannot seize the cash during search operations.

Importantly, before jumping to the above conclusion, as the GST law is not pretty clear, it is important to go through the relevant judicial rulings in the matter. The same is covered hereunder.

Outrageously, the Hon’ble High Court in the case of Kanishka Matta Vs. Union of India and Others have held that ‘money can be seized by the investigating officer during the course of search’.

As the judgement pronounced by the Hon’ble High Court is contradictory to the conclusion drawn by us, hereinabove, we need to analyze the judgement thoroughly.

The facts of the case are highlighted hereunder –

• The petitioner is the wife of Mr. Sanjay Matta. Mr. Sanjay Matta is the proprietor of the firm named M/s. S. S. Enterprises.
• The proper officer had initiated search operations on residential premises and various godowns operated by Mr. Sanjay Matta and Mr. Sandeep Matta on ‘reason to believe’ that the premises were used for the clandestine storage of goods/ documents/ records/ things.
• During the search of various godowns of Mr. Sanjay Matta, it was found that a huge quantity of tobacco and Pan Masala was stored in the godowns. However, such godowns were neither declared as a place of business nor declared as an additional place of business.
• In the absence to produce any invoices/ bills, various goods were seized. Along with that an unaccounted cash of INR 66,43,130 was also seized.
• Against the seizure order, the petitioner filed a writ petition for the release of the cash seized.

What are the power of the officers under GST?

• The proper officer has no power, vested under section 67(2), to effect seizure of cash amount.
• 'Cash’ cannot be covered within the term ‘goods’ or ‘documents’ or ‘books’ or ‘things’. Accordingly, it is prayed to release the seized cash.

Judicial rulings as pronounced by the Hon’ble High Court –

• Provisions of section 67(2) have two provisos, the first proviso covers the goods and the second proviso covers the documents or books or things;
• The main issue before this court is that whether the expression/ term ‘things’ covers within its meaning the ‘cash’ or not?;
• Held that conjoint reading of provisions of section 2(17) [i.e., definition of business], section 2(31) [i.e., definition of consideration], section 2(75) [i.e., definition of money] and section 67(2) [i.e., seizure], it is clear that money can also be seized by the proper officer;
• Held that the word ‘things’ has to be given wide meaning as per Black’s Law Dictionary (10^th Edition) things covers ‘any subject matter of ownership within the spear of proprietary/ valuable right’;
• High Court concluded that the proper officer has rightly seized the amount from the husband of the petitioner. Further, it was ordered that cash will not be released unless and until the tax investigation is concluded.