The Kerala High court has held that the GST Department’s illegal cash seizure and handover to income tax department under section 132A of the Income Tax Act is also illegal.
The bench of Dr. Justice A.K.Jayasankaran Nambiar and Justice Easwaran S. has observed 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 Income Tax Act.
The appellants/assessee has challenged 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 seized was later handed over to the Income Tax Department after intimating the said Department of the seizure of cash.
The Writ Petitions were filed by the appellants 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.
The Single Judge directed the appellants to approach the Income Tax Department for a release of the cash, and further, directed the GST Department to consider the reply, if any, filed by the appellants to the notice issued to them under Section 74(1) of the CGST/SGST Act and proceed with the adjudication.
The assessee being aggrieved by the single bench’s order filed the appeal.
The assessee contended that 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 court held that The initial seizure of the cash by the GST Department was blatantly illegal since it was without the authority of law. This salutary principle that prevents the expropriation of property or tax from a citizen without the authority of law finds expression in Articles 265 and Article 300A of the Constitution of India.
The court stated that the cash amount seized from the 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 disposed of the petition with various directions.
Firstly, the Income Tax Department shall forthwith, and at any rate not later than 10 days from today, release the amount by crediting the amounts in their respective bank accounts.
Secondly. the proceedings under Section 74 (1) of the CGST/SGST Act as 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.
Thirdly, the proceedings initiated by the Income Tax Department under Section 132A for the purposes of completing an assessment under Section 153A, 153C shall also proceed from the stage at which they presently stand without treating the seizure of the cash amounts aforementioned as being pursuant to a valid requisition issued under Section 132A of the IT Act.
Case Details
Case Title: Centre C Edtech Private Limited Versus The Intelligence Officer
Case No.: WA NO. 1934 OF 2024
Date: 27/01/2025
Counsel For Petitioner: Aditya Unnikrishnan, Sri.Anil D. Nair (Sr.), Smt.Telma Raju
Counsel For Respondent: Government Pleader Smt.Resmitha Ramachandran
