Facts of the Case:

In this case, the GST authorities conducted search proceedings under Section 67 at multiple premises including the petitioner’s office, another premises owned by her, her residence, and the residence of her parents. During the search, the department issued seizure orders in Form GST INS-02 and seized cash amounting to ₹1 crore (₹60 lakh from one office premises and ₹40 lakh from the residence of the petitioner’s parents). The authorities justified the seizure on the basis of an ongoing investigation into an alleged fake ITC racket involving one Hitesh Chheda, who was suspected of operating several bogus firms issuing fake invoices.

The petitioner challenged the seizure before the High Court under Article 226 of the Constitution contending that cash cannot be seized under Section 67(2) of the CGST Act, and that the seizure orders were passed without recording the mandatory “reason to believe.”

Issue:

Whether cash can be seized during GST search proceedings under Section 67(2) of the CGST Act, 2017 as “goods, documents, books or things. Whether the seizure of cash without recording “reason to believe” and without following statutory procedure was valid in law.

Held that:

The Court observed that Section 67(2) of the CGST Act empowers the proper officer to seize goods liable to confiscation or documents, books, or things which are useful or relevant for proceedings under the Act. However, such power can be exercised only when the officer records a “reason to believe” that such items are secreted at a place and are relevant to the proceedings. In the present case, the Court found that the authorities failed to record any reasons demonstrating “reason to believe” that the seized cash was relevant to any proceedings under the GST law. The seizure orders did not disclose any material establishing such belief.

The Court further noted that no notice was issued within six months as required under Section 67(7) of the CGST Act, 2017, which mandates that if no notice is issued within six months of seizure, the seized goods must be returned to the person from whose possession they were taken.

Additionally, the Court expressed serious concern that the seized cash had been handed over to the Income Tax Department, despite there being no power under the GST law permitting such transfer.

The Bombay High Court held that the seizure of cash by the GST authorities was illegal, arbitrary and without authority of law.

Case Name: Smurti Waghdhare Versus Joint Director Directorate General of GST Intelligence, Mumbai, Senior Intelligence Officer Directorate General of GST Intelligence, Mumbai, Intelligence Officer Directorate General of GST Intelligence, Mumbai. dated 10.03.2026

To read the complete judgement 2026 Taxo.online 584