CGST Act | Supreme Court to Examine Whether Cash Can Be Seized Under Section 67 of the CGST Act
The Supreme Court of India is set to address a crucial legal question: Can tax authorities seize cash during a Goods and Services Tax (GST) search under Section 67 of the Central Goods and Services Tax Act, 2017? The issue has come into focus due to conflicting rulings by the Delhi High Court and the Madhya Pradesh High Court, prompting the Supreme Court to take up the matter for clarification.
Conflicting High Court Rulings on Cash Seizure
The dispute arises from differing interpretations of the legal scope under Section 67 of the CGST Act, which grants tax authorities the power to conduct searches and seizures during investigations. While the Delhi High Court ruled that cash cannot be seized under this section, the Madhya Pradesh High Court took a contrary stance, allowing such seizures. This inconsistency has left businesses and tax professionals uncertain about the permissible boundaries of GST enforcement actions.
Recently, a bench comprising Justices PS Narasimha and Sandeep Mehta issued a notice in response to a petition from tax authorities challenging the Delhi High Court’s decision. The Delhi High Court had directed tax officials to refund cash that had been seized from the respondents during a GST search, leading to the appeal now before the Supreme Court.
Legal Basis and Implications of Section 67
Section 67 of the CGST Act allows authorities to conduct searches and seize goods, documents, and other items if they have reasons to believe that tax evasion is occurring. However, whether "cash" falls within the scope of this section remains a contentious issue. Proponents of cash seizure argue that unaccounted cash can be a sign of tax evasion, justifying its confiscation during a search. On the other hand, opponents contend that the term “goods” under the CGST Act does not include cash, and thus its seizure lacks legal backing.
The Supreme Court’s upcoming decision is expected to provide clarity on this issue and set a precedent that will affect future GST enforcement actions. A ruling in favor of allowing cash seizures could give tax authorities broader powers during investigations, potentially increasing scrutiny on businesses suspected of evading taxes. Conversely, a decision against such seizures could restrict the scope of enforcement and require authorities to explore alternative methods of securing compliance.
Awaiting Clarity from the Supreme Court
This case is being closely watched by the business community, tax professionals, and legal experts, as the Supreme Court’s ruling will have significant implications for the GST framework and its enforcement. The judgment is expected to establish clearer guidelines on what authorities can and cannot do under Section 67, providing much-needed clarity on the treatment of cash during GST investigations.
As the Supreme Court considers the issue, the decision will not only resolve the current legal ambiguity but also shape the future of tax enforcement in India, balancing the need for compliance with the rights of taxpayers.
