Bombay High Court Orders Immediate Return of Rs 1 Crore Seized by GST Intelligence
The Bombay High Court has delivered a significant ruling, ordering the Directorate General of Goods and Services Tax Intelligence (DGGI), Mumbai zone, to return Rs 1 crore in cash that was seized from a trader's office and her parents' residence in Charni Road. The court found the seizure to be without legal authority and directed the immediate release of the funds.
Court Quashes Seizure Orders as Illegal
Justices Girish Kulkarni and Aarti Sathe quashed and set aside two seizure orders issued by the DGGI. They mandated the "forthwith" release and payment of the amount directly to the bank account of Smruti Waghdhare, the proprietor of Platinum International, a company engaged in metal and scrap trading. The court specified that applicable interest must be paid within two weeks.
The judges stated unequivocally, "We are of the considered view that the impugned seizure orders and consequent seizure of the cash... is without any authority of law and could not have been made under any of the provisions of the CGST Act." This declaration was made during the hearing on Tuesday, highlighting a critical procedural failure by the tax authorities.
Background of the Seizure and Legal Arguments
The DGGI conducted searches on June 27 and 28, 2023, at Waghdhare's office in Laxmi Niwas and her parents' residence at Jitekarwadi. From these locations, officials recovered Rs 60 lakh and Rs 40 lakh, respectively. Advocate Abhishek Rastogi, representing Waghdhare, argued that the cash was kept for the medical treatment of her elderly parents, a claim supported by hospital documents showing her mother's heart ailment.
In defense, DGGI's advocate Jitendra Mishra contended that the seizure was part of an investigation into a massive racket allegedly operated by Waghdhare and her associate Hitesh Chheda. The agency accused them of claiming fake input tax credit without actual movement of goods, with Chheda's office in Laxmi Niwas also being searched.
Court's Reasoning on Procedural Violations
The judges rejected the DGGI's arguments, labeling the seizure of cash as "perverse, arbitrary and without the authority of law." They emphasized that under the CGST Act, seizure must pertain to goods, documents, or things liable to confiscation. For such action, an officer not below the rank of joint commissioner must record a "reason to believe" that the items are liable to be seized.
The court noted that two intelligence officers failed to record this crucial "reason to believe," which forms the "bedrock" of seizure proceedings. By bypassing this requirement, the DGGI acted unlawfully. Citing a Supreme Court judgment from March 1976, the judges asserted, "when this very important condition of 'reason to believe' has not been fulfilled by the respondents, we are of the firm view that the seizure of cash is completely illegal and not justified."
Additional Grounds for Release and Court's Surprise
Furthermore, the court pointed out that no notice was issued to Waghdhare within six months of the seizure, as required by law. This omission alone made the respondents liable to release the cash back to the petitioner. The judges also considered the humanitarian aspect, noting that Waghdhare is a caregiver for her elderly parents, with her mother requiring urgent medical attention for a heart condition.
In a surprising revelation, the court expressed astonishment that the seized cash had been handed over to the income-tax department for further proceedings, questioning the handling of the case beyond the initial seizure.
This ruling underscores the importance of strict adherence to legal procedures in tax enforcement actions and provides relief to the trader amid personal and financial distress.
