August 27, 2025
Clause Encounters of the Tax Kind
DEEPAK Khandelwal carries on the business of trading in non-ferrous metals, in the name of his proprietorship concern, Shri Shyam Metal and is registered under the Central Goods and Services Tax Act. So far, no offence!
On 28.01.2020, he had some uninvited guests from the Delhi GST Department who found some attractive things/goods/cash in his premises, which they promptly seized. The seized goods included:
1. 44 kgs of silver bars.
2. Cheque books of various banks.
3. Sale bill book.
4. Green Colour Saraswati Notebook with just one page written.
5. Mobile Phones of various brands like Redmi, OnePlus, iPhone.
6. Hard Cash of 7 lakh Indian Rupees.
The next day, the CGST officers were pleased to arrest him for alleged offences punishable under Clause (i) of Sub- section (1) of Section 132 of the Act. After about two months in jail, he was released on bail on 21.03.2020 by the Chief Metropolitan Magistrate. After coming out of jail, on 23.03.2021, he requested the Additional Commissioner, CGST to release the goods, documents and cash seized from his premise on 28.01.2020. These were not released even after one year from the date of seizure.
Now, what should he do? Well, there is a High Court and off he went to knock at the doors of the High Court.
The Delhi High Court in its order dated 17.08.2023, in, observed:
18. It is clear from the plain language of Sub-section (2) of Section 67 of the Act that only those goods can be seized, which the proper officer has reasons to believe are liable for confiscation. Insofar as seizure of documents or books or things is concerned, the same is permissible provided the proper officer is of the opinion that the said documents or books or things shall be useful or relevant to any proceedings under the Act.
23. In terms of Sub-section (7) of Section 67 of the Act where goods are seized under Sub-Section (2) of Section 67 of the Act and no notice, in respect thereof, is given within the period of six months of seizure of the goods, the goods are required to be returned to the person from whom the same were seized.
31. Cash (Indian currency) is clearly excluded from the definition of the term "goods" as the same falls squarely within the definition of the word "money" as defined in Sub-section (75) of Section 2 of the Act.
32. The term "goods" as used in Sub-section (2) of Section 67, essentially, relates to goods, which are subject matter of supplies that are taxable under the Act. Admittedly, the goods that can be seized under Sub-section (2) of the Act are goods, which the proper officer believes are liable for confiscation.
40. It is clear from the schematic reading of Section 67 as well as other provisions of the Act that the purpose of Section 67 of the Act is not recovery of tax; it is not a machinery provision for enforcing a liability. The purpose of Section 67 of the Act is to empower authorities to unearth tax evasion and ensure that taxable supplies are brought to tax.
42. The legislative intent of empowering seizure of documents or books or things is for enabling their use in aid of the proceedings under the Act. Thus, seizure of such documents or books or things is conditional upon the proper officer's opinion, that the same are useful for or relevant to such proceedings.
55. The Revenue has averred in its counter affidavit that cash and silver bars in question were seized because the petitioner could not produce any lawful evidence of its purchase/possession and they appeared to be sale proceeds from the goodless/fake invoices being transacted by the petitioner. The search and seizure operations under Section 67 of the Act are not for the purpose of seizing unaccounted income or assets or ensuring that the same are taxed. The said field is covered by the Income Tax Act, 1961. Thus, even if it is assumed that the petitioner could not produce any evidence of purchase of the silver bars or account for the cash found in his possession, the same were not liable to be seized under Sub-section (2) of Section 67 of the Act. The power of the proper officer to seize books or documents or things does not extend to seizing valuable assets for the reasons that they are unaccounted for or may be liable to confiscation under any other statute. Concededly, there is no material to indicate that the particular silver bars or cash were received by the petitioner in specie against any particular fake invoice.
It is clear that the silver bars and the cash were seized only on the ground that it was unaccounted wealth and not as any material which was to be relied upon in any proceedings under the Act.
62. Thus, even if, it is accepted, which we do not, that the proper officer could seize the currency and other valuable assets in exercise of powers under Sub-section (2) of Section 67 of the Act, the same were required to be returned by virtue of Sub-section (3) of Section 67 of the Act because the silver bars and currency have not been relied upon in the notice issued subsequently.
63. In view of the above, the petition is allowed. The respondents are directed to forthwith release the currency and other valuable assets seized from the petitioner during the search proceedings conducted on 28.01.2020.
Now, what does the Revenue do? For them, the Supreme Court is free and nearby. So, Revenue went in SPECIAL LEAVE PETITION to the Supreme Court which on 14.08.2024, dismissed the SLP, with the observation: (Commissioner of CGST vs Deepak Khandelwal - )
Delay condoned.
No case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India.
End of the road for revenue? That concept does not exist; they can build roads.
Revenue filed a Review petition in the Supreme Court. As per the Supreme Court Rules, a review petition shall be filed within thirty days from the date of the judgment or order sought to be reviewed. This order was delivered on 14.08.2024 and the review petition had to be filed before 14.09.2024. It was filed on 18.12.2024 with a delay of 95 days. The Supreme Court has been very kind and condoned the delay, but dismissed the review petition on 19.08.2025 observing: (Commissioner of CGST vs Deepak Khandelwal - )
We have gone through the Review Petition and the connected papers filed therewith. In our opinion, no case for review of order is made out. The review petition is dismissed.
Interestingly, there is another case pending in the Supreme Court on the same issue - same cash, same clause, same confusion.
On 06.08.2020, a search was conducted by the officers of the Central Goods and Services Tax Department ('CGST'), under Section 67 of the Central Goods and Services Tax Act, 2017. During the course of search Rs. 25 Lakhs currency was recovered from the outer compartment and a sum of Rs. 62,40,000/- was recovered from the inner compartment, which were promptly seized. And the case also reached the Delhi High Court, which observed, (Anshul Jain Vs Commissioner of CGST - )
8. This Court in its judgment Deepak Khandelwal Proprietor M/s Shri Shyam Metal Vs. Commissioner of CGST, Delhi West & Anr, (), had held that the concerned authorities do not have the power to cease cash found during the search conducted under Section 67 (1) of the CGST Act.
9. In view of the above, the currency ceased is required to be returned to the petitioner. We, accordingly, direct the concerned authority to remit the aforesaid amount into the bank account of the petitioner. We have been informed that the said amount has been deposited in the interest-bearing account. Accordingly, this Court directs the concerned authorities to remit the amount along with the interest accrued into the bank account of the petitioner within one week from today, the details of which would be provided by the petitioner.
The Special Leave petition against this order is pending in the Supreme Court. On 09.12.2024, the Supreme Court observed:
The short question of law that falls for our consideration is whether the Officers of the G.S.T. are empowered to seize cash at the time of raid of the premises of the assessee in exercise of their powers under Section 67(2) of the G.S.T. Act.
In short, we need to interpret the expression "and seize or may himself search and seize such goods, documents or books or things".
Whether the term "things" should be read ejusdem generis with goods, documents or books.
Positively not end - options are open. Turns out, GST officers aren't treasure hunters-they're tax detectives. But when the map runs out, Revenue redraws the terrain.
Until next week
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