Facts of the Case:
In this case, the petitioner, a registered GST assessee engaged in the business of manufacturing and wholesale trading of jewellery, was subjected to a surprise inspection on 16.08.2023 during which jewellery and gold bullion stock were seized. The petitioner disputed the department’s allegation regarding excess stock and contended that he was compelled to pay GST amounting to ₹32,62,640 on the date of inspection. Subsequently, another inspection was conducted on 25.01.2024 pursuant to an authorization letter dated 24.01.2024. During this inspection, departmental officers recorded the petitioner’s statement and took possession of certain files and documents.
The petitioner challenged the authorization dated 24.01.2024 on the ground that it violated a subsisting status quo order passed by the High Court in earlier proceedings. When the writ petition challenging the authorization was taken up, the department informed the Court that the authorization letter had been withdrawn, and the writ petition was accordingly closed. Thereafter, the petitioner sought return of the files and documents taken during the inspection conducted on 25.01.2024.
Issue:
Whether the GST authorities could retain documents, files and statements obtained during a search conducted pursuant to an authorization that was subsequently withdrawn, and whether such retention could be justified under Section 67 of the CGST Act.
Held That:
The High Court held that the power to seize and retain documents under Section 67 of the CGST Act is intrinsically linked to the existence of a valid authorization issued under Section 67(2). Once the authorization letter dated 24.01.2024 was withdrawn by the department itself, the very foundation of the search and seizure proceedings ceased to exist. Consequently, the authority to retain the files, documents, and statements obtained during such inspection also stood extinguished.
The Court distinguished the issue of admissibility of evidence obtained during an allegedly illegal search from the question of retention of seized materials. While acknowledging judicial precedents holding that evidence gathered through an illegal search may, in certain circumstances, remain admissible, the Court emphasized that the present dispute concerned the department’s entitlement to retain materials seized pursuant to an authorization that had been withdrawn. Since the department had voluntarily abandoned the authorization without reserving any liberty to retain the fruits of the search, it could not subsequently claim any right over the documents obtained thereunder.
Accordingly, the Court directed the department to immediately return all files and documents taken from the petitioner during the inspection conducted on 25.01.2024 and allowed the writ petition.
This decision serves as an important safeguard against unauthorized retention of records by GST authorities. It underscores that while courts may not always exclude evidence obtained through an irregular search, the department cannot continue to retain documents and records when the very authorization empowering such seizure has been withdrawn or rendered non-existent. The ruling strengthens procedural protections available to taxpayers against unlawful exercise of search and seizure powers under Section 67 of the CGST Act.
Case Name: M/s. Bhima Enterprises, Represented by its Accountant Versus The Joint Commissioner, Office of the Central GST & Excise, The Superintendent, Office of the Central GST & Excise, The Inspector, Office of the Central GST & Excise, Tirunelveli dated 05.08.2026
Citation No. 2026 Taxo.online 2264
