The Calcutta High Court has quashed an order upholding the seizure of ₹13.04 lakh in cash under Section 67(2) of the West Bengal Goods and Services Tax Act, 2017, holding that the competent authority had failed to comply with an earlier judicial direction and had not addressed the crucial jurisdictional question concerning the power to seize cash under the GST law. 

The bench of Justice Smita Das De however, refrained from finally deciding whether cash can legally be seized as a “thing” under Section 67(2), noting that the issue is already pending consideration before the Supreme Court.

The writ petition arose from the seizure of ₹13,04,000 made on December 1, 2023 by officers of the commercial tax authorities while exercising powers under Section 67(2) of the WBGST Act. The petitioner challenged, among other things, the legality of the cash seizure and the subsequent order dated June 29, 2026 by which the seizure was upheld.

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The central legal issue before the Court was whether cash could be seized by the proper officer under Section 67(2) of the WBGST Act and whether the June 29, 2026 order sustaining the seizure was legally sustainable.

Earlier, on June 9, 2026, the High Court had directed the competent respondent to consider the petitioner’s representation and pass a reasoned order. Although an order dated June 29, 2026 was subsequently issued, it was passed by an officer below the rank of the authority specifically directed by the Court.

The petitioner argued that “money” and “currency” are expressly excluded from the definition of “goods” under Section 2(52) of the WBGST Act. Consequently, cash could not be seized by invoking the power under Section 67(2), which permits seizure of goods, documents, books or other relevant “things” in specified circumstances.

It was further contended that Section 67 is fundamentally intended as an investigative provision to detect tax evasion and secure evidence relevant to GST proceedings. According to the petitioner, the statutory power of search and seizure cannot be converted into a mechanism for recovery of tax dues.

The petitioner also challenged the June 29 order on the ground that it failed to address whether the seized cash constituted “stock in trade”, despite the High Court’s earlier direction requiring the competent authority to consider the representation and pass a reasoned order.

The petitioner relied substantially on the Delhi High Court’s decision in Deepak Khandelwal v. Commissioner of Central GST.

The Delhi High Court had held that the purpose of Section 67 was not recovery of tax but to enable the authorities to unearth tax evasion and ensure that taxable supplies were brought to tax. It also interpreted the expression “things” in its statutory context, holding that the expression could not be expanded to cover anything whatsoever irrespective of whether it contained or yielded material useful or relevant to proceedings under the GST Act.

The judgment further emphasised that search and seizure powers are drastic and invasive of a taxpayer’s rights and private space. Such powers therefore have to be exercised within statutory and constitutional limits and only where the seized material is useful or relevant to proceedings under the Act.

The petitioner also pointed out that the Supreme Court had subsequently dismissed the Revenue’s Special Leave Petition arising from the Deepak Khandelwal ruling, finding no ground for interference under Article 136 of the Constitution.

The State authorities adopted a different interpretation of Section 67(2). Their case was that the cash had not been seized as “goods”, but as a “thing” which was considered useful and relevant to proceedings under the GST Act.

The State relied upon the Madhya Pradesh High Court’s decision in Smt. Kaniska Matta v. Union of India, 2020 SCC OnLine MP 4564, where cash was held capable of being seized as a “thing” under Section 67(2).

The authorities maintained that the cash had not been seized merely for recovery of tax or on the basis that it represented unaccounted wealth. According to the Revenue, it was seized as material evidence in proceedings under Sections 74 and 132 of the GST Act concerning an alleged fake GST invoice racket and alleged round-tripping of funds.

The State further submitted that the apparent conflict between Deepak Khandelwal and Kaniska Matta is already pending before the Supreme Court in SLP (C) Diary No. 44061/2024, in which notice has been issued but no stay has been granted.

The court noted that there is a clear divergence of judicial opinion on whether cash can be seized as a “thing” under Section 67(2).

The Delhi High Court in Deepak Khandelwal had held against treating cash as a “thing” capable of seizure under the provision, whereas the Madhya Pradesh High Court in Kaniska Matta had taken the contrary view. Since the Supreme Court is seized of the issue and there is presently no binding pronouncement from the Apex Court resolving the conflict, the Calcutta High Court declined to finally determine the larger jurisdictional question.

This approach allowed the Court to decide the immediate challenge without entering into a final determination of the wider question concerning the scope of Section 67(2).

The High Court found a separate and significant defect in the June 29, 2026 order.

The Court recalled that its June 9 order had specifically directed respondent No. 3 to consider the petitioner’s representation and pass a reasoned order. However, the subsequent order was passed by an officer below the rank of respondent No. 3.

The Court described this as clear non-compliance and wilful disobedience of its earlier directions. It further found that the impugned order had failed to specifically address the crucial jurisdictional questions—namely, whether cash could be treated as a “thing” under Section 67(2) and whether the seized cash constituted stock in trade.

The High Court also examined the reasoning recorded in the impugned order concerning the alleged fake invoice racket and round-tripping of funds.

The order stated that the cash was seized because it allegedly formed an integral part of the fake invoice racket and had been used for round-tripping. The High Court observed that, if the seizure was indeed for evidentiary purposes rather than recovery of tax dues, the authorities still had to address whether such cash could be retained indefinitely without following due process of law.

The Court stressed that such coercive powers must be exercised with circumspection and supported by recorded reasons.

The High Court ultimately quashed and set aside the June 29, 2026 order on two grounds: first, non-compliance with the Court’s earlier direction dated June 9, 2026; and second, failure of the competent authority to decide the relevant jurisdictional question.

The matter was remanded to respondent No. 3 with a direction to pass a fresh reasoned order in accordance with law within four weeks from the date on which the order is communicated.

The Court specifically directed the competent authority to determine whether the cash seized on December 1, 2023 falls within the expression “things” under Section 67(2) of the WBGST Act and whether it constitutes “stock in trade”. The authority must also determine whether the cash was used as an instrumentality of the alleged offence involving the fake invoice racket.

Pending the fresh decision, the High Court imposed safeguards concerning the ₹13.04 lakh cash.

The respondents have been restrained from appropriating or utilising the seized cash until a fresh order is passed. They have also been directed to prepare a detailed inventory recording the denominations of the seized cash and keep the amount in a Government Treasury or SDR Account.

The petitioner has also been granted liberty to file a supplementary representation within one week and has to be afforded a personal hearing before the competent authority passes the fresh order.

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