Section 67(2) CGST Act Does Not Authorise Seizure Of Cash During Search: Bombay High Court Quashes ₹1 Crore Seizure By GST Intelligence

The Court observed that the statute empowers seizure only of goods, documents, books or things which are relevant to proceedings under the Act and where the proper officer has “reason to believe” that such items are secreted at a place.

The Court was hearing a writ petition challenging seizure orders issued by the Directorate General of GST Intelligence seizing cash amounting to ₹1 crore from the petitioner’s premises and her parents’ residence during search operations.

A Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe observed that “the provisions of Section 67(2) do not mandate the seizure of any cash, and therefore there was no power under which the Respondents could seize the cash from the Petitioner’s premises.”

Background

The petitioner, a proprietor engaged in the trading of ferrous and non-ferrous metals and scrap, challenged two seizure orders issued in June 2023 by officers of the Directorate General of GST Intelligence.

Search operations were conducted at multiple locations connected with the petitioner, including her office premises, another property owned by her, her residence and the residence of her parents. During these searches, the authorities seized cash amounting to ₹60 lakhs from one premises and ₹40 lakhs from the residence of the petitioner’s parents.

The searches were conducted in the course of an investigation into alleged fraudulent input tax credit transactions involving several entities. The respondents alleged that a person associated with the premises was involved in issuing fake invoices without the actual supply of goods and operating multiple fictitious firms to pass on fraudulent input tax credit.

According to the respondents, the seized cash represented proceeds linked to such alleged activities and was therefore liable to seizure under Section 67 of the CGST Act.

The petitioner challenged the seizure, contending that the CGST Act did not empower authorities to seize cash during search operations and that the statutory requirements for seizure had not been satisfied.

Court’s Observation

The High Court examined the scope of powers under Section 67(2) of the CGST Act, which governs search and seizure by tax authorities.

The Court noted that the provision permits seizure of goods liable for confiscation or any documents, books or things which are useful or relevant to proceedings under the Act, provided the proper officer has “reason to believe” that such items are secreted at a particular place.

The Bench observed that the requirement of “reason to believe” forms the foundation for exercise of powers under Section 67(2). However, the seizure orders in the present case did not record any reasons explaining why the cash found at the petitioner’s premises was liable to be seized or how it was relevant to proceedings under the CGST Act.

The Court further held that Section 67(2) does not specifically authorise seizure of cash. In the absence of any statutory provision permitting such seizure, the action of the respondents was held to be without authority of law.

The Bench also found that the procedural safeguards contained in Section 67(7) of the CGST Act had not been followed. Under this provision, if goods seized under Section 67(2) are not followed by the issuance of notice within six months, the seized goods must be returned to the person from whose possession they were taken.

Since no such notice had been issued within the prescribed period, the authorities were under a statutory obligation to return the seized amount.

The Court also took note of statements recorded during the investigation indicating that the seized cash belonged to the petitioner. The respondents had not produced any material to dispute the ownership of the money.

The Bench further expressed concern upon being informed that the seized cash had been handed over by the GST authorities to the Income Tax Department. The Court observed that the respondents had failed to explain under what authority under the CGST Act such a transfer had been made.

Conclusion

The Bombay High Court held that the seizure of cash from the petitioner’s premises was without authority of law and contrary to the provisions of the CGST Act.

Accordingly, the Court quashed the seizure orders dated 27 June 2023 and 28 June 2023 and directed the respondents to release the seized amount of ₹1 crore to the petitioner along with applicable interest within two weeks.

The Court clarified that its findings would not affect any independent proceedings initiated under the Income Tax Act.

Cause Title: Smurti Waghdhare v. Joint Director, Directorate General of GST Intelligence & Ors. (Neutral Citation: 2026:BHC-OS:6209-DB)

Appearances

Petitioner: Advocates Abhishek Rastogi, Pooja Rastogi, Meenal Songire and Aarya More.

Respondents: Advocates Jitendra Mishra, Sangeeta Yadav, Rupesh Dubey and Ashutosh Mishra.

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