GST Officers Cannot Seal Or Seize Cash Under CGST Act Section 67; Calcutta High Court Orders Immediate De-Sealing Of Rs 24 Lakh
Safiya Malik
The High Court of West Bengal at Calcutta Single Bench of Justice Om Narayan Rai held that GST officers cannot, while exercising search and seizure powers under Section 67 of the Central Goods and Services Tax Act, 2017, seal or seize cash merely on the premise that it is unaccounted. The court was dealing with a challenge by a taxpayer to a GST search at its business and residential premises, during which officials restrained access to Rs. 24 lakh kept at the premises on suspicion that it represented proceeds of taxable supplies made without invoices. Finding that Section 67(2) does not authorise such detention of cash in the circumstances shown the bench directed the authorities to immediately de-seal the Rs. 24 lakh.
The writ petition was filed by Puspa Furniture Pvt. Ltd. and another petitioner challenging the search and seizure proceedings conducted by the CGST authorities under Section 67 of the CGST Act, 2017 at the petitioners’ office-cum-residential and factory premises. The petitioners contended that the search was conducted without recording valid “reasons to believe” and without compliance with statutory safeguards, including the presence of independent witnesses and proper execution of panchnama and seizure documents. During the search, cash amounting to ₹24 lakh was sealed at the premises and kept under the petitioners’ custody, preventing its use.
Pursuant to an earlier court direction, the CGST authorities filed an affidavit stating that the cash was treated as unaccounted and suspected to be linked to clandestine supply without invoices. The authorities also stated that the Income Tax Department had been informed to take over the cash. The petitioners argued that GST authorities lacked jurisdiction to seize or seal cash, relying on judicial precedents. The respondents defended the action, asserting lawful initiation of search proceedings and contending that reasons to believe need not be communicated to the assessee.
“We are at the interim stage.” The Court recorded that the respondents had submitted that they would be able to satisfy the Court that “good reasons exist to believe that the petitioners have indulged in activities that warrant initiation of search and seizure proceeding in accordance with Section 67 of the 2017 Act,” and therefore an opportunity to file affidavit-in-opposition was required.
The Court observed that “if it can be demonstrated that reasons to believe which forms the very basis of initiation of these proceedings are absent, then in that case the entire action may be held to be without jurisdiction and this Court would have authority to interfere even under Article 226 of the Constitution of India.”
At the interim stage, the Court stated that “it is, therefore, required to be decided as to whether the respondent GST authorities have power to seize cash.” Upon examining Section 67(2) of the CGST Act, 2017, the Court observed that “a meaningful reading thereof would lead to the conclusion that the GST authorities can seize goods or documents or books or things if they have reasons to believe that such goods or documents or books or things shall be useful or relevant to any proceeding under this Act.”
Referring to Section 2(52) of the CGST Act, the Court recorded that “a perusal of the said definition clearly reveals that money stands excluded from the purview of goods.”
The Court noted the reasoning adopted by the Delhi High Court and recorded that “the purpose of Section 67 of the Act is not recovery of tax; it is not a machinery provision for enforcing a liability.” It further recorded that “documents or books or things cannot be confiscated and have to be returned,” and that such items “are required to be retained only for so long as it may be necessary for their examination and for any inquiry or proceedings under the Act.”
The Court observed that “cash or other assets, which are not required in species in aid of any proceedings, but represent unaccounted wealth, cannot be seized under Section 67 of the Act.” It further recorded that seizure of currency would be permissible only where “a particular currency note or any particular asset has evidentiary value to establish the Revenue’s case.”
After examining the affidavit filed by the department, the Court observed that “it has not been stated with any degree of conviction that the currency notes that have been seized shall be useful or relevant to any proceeding to be undertaken by the GST Authorities against the petitioner under the said Act of 2017 or that the same could be correlated or traced to any transaction.”
In such circumstances, the Court recorded that “the action of the respondent GST authorities in seizing cash and sealing the same in the custody of the petitioners is beyond the power domain of the GST authorities in the facts of the present case.”
The Court directed that “the GST authorities are hereby directed to forthwith de-seal the said amount of Rs. 24 lacs so as to enable the petitioners to use the same in accordance with law.”
The Court clarified that “the order is being passed only in view of the peculiar facts of this case where GST authorities have not been able to demonstrate that the seized cash shall be useful or relevant to any proceeding to be undertaken by the GST Authorities against the petitioner under the said Act of 2017 or is relatable to any transaction that they require to establish vis a vis the petitioner.”
“This direction of de-sealing would by itself not be treated as a stamp of validity on the petitioners’ custody/possession of the said amount and the other wings of the revenue authorities – whether GST or Income Tax or any other statutory authority would be free to take such action as may be permitted or permissible in law if the petitioners are found to be in possession of the said amount de hors law.”
“This order shall not be treated as a passport by the petitioner to bypass any action that can be taken against the petitioner if retention or possession of the said cash by the petitioners is otherwise found to be illegal. The respondent GST authorities shall file their affidavit-in-opposition within four weeks from date,” and that “the petitioners shall be at liberty to file affidavit-in-reply thereto within two weeks thereafter.”
“While the respondents shall be free to proceed with the investigation and issue show-cause notices and shall also be entitled to conclude the said proceedings by passing a final order in accordance with law… yet the respondents shall not communicate such order to the petitioners or upload the same on the GST portal without the leave of the Court.”
“The petitioners shall cooperate in the investigation and the adjudication proceeding,” and “the proceeding shall be conducted in accordance with the guidelines of the Central Board of Indirect Taxes.”
Advocates Representing the Parties
For the Petitioners: Mr. Himangshu Kumar Ray, Mr. Subhasis Podder, Mr. Sushant Bagaria, Mr. Gaurav Chakraborty, Mr. Animitra Roy
For the Respondents: Ms. Hasi Saha; Mr. N. Chatterjee; Mr. Tanoy Chakraborty; Mr. S. Sanyal; Ms. Prithu Dudhoria; Mr. Bhaskar Prosad Banerjee; Mr. Abhradip Maity
Case Title: Puspa Furniture Pvt. Ltd. & Anr. v. Union of India & Ors.
Case Number: WPA 19155 of 2025
Bench: Justice Om Narayan Rai
