The Gauhati High Court has held that the power of GST authorities to seal premises under Section 67(4) of the Assam Goods and Services Tax Act, 2017 cannot be used to keep a taxpayer’s office sealed after completion of search and seizure proceedings.
The bench of Justice Devashis Baruah ruled that the sealing power is specifically linked to the search process and can be exercised only when access to the premises or receptacle is denied.
The bench found that keeping the office under seal for nearly four months after the search had concluded was illegal and contrary to the statutory scheme. It directed the State GST authorities to de-seal the premises and hand over possession to the petitioner by August 12, 2026.
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The petitioner was a tax consultant providing GST, income-tax and allied taxation services through his proprietorship firm, M/s Sharma and Associates. His office was located at Station Road, Bokajan Bazar, Bokajan, in Assam’s Karbi Anglong district.
On April 1, 2026, State GST authorities conducted a search of the office pursuant to an authorization issued under Section 67(2) of the CGST/AGST Act in Form GST INS-01. During the search, various documents, digital signatures and electronic items were seized, with the seizure formally recorded through Form GST INS-02.
The authorities also issued Form GST INS-03, prohibiting the petitioner from removing or dealing with various items, including two desktop computers, six laptops, 426 files, a printer, batteries, inverter, air conditioners and a refrigerator.
The Court noted that the petitioner was not engaged in the taxable supply of these items. They were essentially office equipment being used for his tax consultancy business.
Following the search, the authorities completely sealed the office premises and allegedly took away the keys without issuing an acknowledgement. The petitioner was subsequently arrested in connection with the GST case on April 2, 2026, but was granted bail by the Chief Judicial Magistrate, Kamrup(M), on April 8, 2026.
The GST department defended the action by alleging that the petitioner was involved in passing fraudulent Input Tax Credit through fake tax invoices without actual supply of goods or services.
According to the department’s affidavit, the alleged activities violated the requirements of Section 16(2)(b) and Section 31(1) of the GST Act and attracted the penal provisions of Section 132(1)(b), (f), (i) and (l). The preliminary investigation allegedly indicated tax evasion of ₹6,68,77,172.44.
The department argued that the office needed to remain sealed to prevent tampering with crucial evidence and that the petitioner should not be allowed access to the computers, files and documents until completion of the investigation.
The State further contended that Section 67(7) contemplated a six-month period for issuance of notice in respect of seized goods and that the petitioner should therefore have waited for that period rather than approaching the High Court.
The central issue before the High Court was whether Section 67(4) permitted GST authorities to seal a taxpayer’s premises even after the search and seizure had been completed, particularly when there was no allegation that the taxpayer had denied access to the premises.
The Court closely examined Section 67 of the GST Act, which deals with inspection, search and seizure.
Under Section 67(2), a proper officer having the requisite reasons to believe may authorize search and seizure of goods, documents, books or things that may be relevant to proceedings under the Act. The first proviso permits an order prohibiting the owner or custodian from dealing with goods where seizure of such goods is not practicable.
Section 67(4), however, specifically provides that the authorized officer may seal or break open premises, almirahs, electronic devices, boxes or receptacles where access is denied.
The Court also examined the meaning and scope of the expressions “goods”, “documents”, “books” and “things” appearing in Section 67(2).
It observed that “goods” are defined under Section 2(52), while “document” is defined under Section 2(41). The expressions “books” and “things” are not specifically defined under the Act.
According to the Court, “books” would ordinarily cover physical or electronic accounting records such as sales registers, purchase ledgers, cash books and inventory records. The expression “things”, viewed as a residual category, could cover physical objects such as electronic storage devices, hard drives, barcode scanners or storage receptacles that do not fall within the statutory definition of goods.
Importantly, the Court emphasized that seized books, documents or things must have a correlation with their usefulness or relevance to proceedings under the GST Act.
It specifically observed that an air conditioner, printer, refrigerator, inverter or batteries cannot simply be treated as “things” for purposes of Section 67(2). Such items would fall within the concept of goods, and seizure would depend upon whether they were liable for confiscation.
The Court separately examined the Form GST INS-03 prohibition order.
It held that the first proviso to Section 67(2) is concerned only with goods, not books, documents or things. Therefore, a prohibition order under the relevant GST Rules could operate only in relation to goods that are liable to confiscation.
In the present case, the items listed in the prohibition order—including laptops, desktops, files, refrigerator, air conditioner, inverter and batteries—could not be treated as goods liable to confiscation in the facts before the Court. The Court therefore found the prohibition order unsustainable.
Another important aspect considered by the Court was that although the authorities had formally seized the books, documents and things, their custody was subsequently handed back to the petitioner, subject to restrictions.
The Court found this significant because Section 67(2) requires seized documents, books and things to remain with the proper or authorized officer for as long as necessary for examination, inquiry or proceedings.
The Court observed that handing the seized material back to the petitioner created the impression that the authorities no longer considered those materials necessary to retain.
The Court further noted that Section 67(3) and Section 67(5), read together, demonstrate the statutory framework governing retention and access to seized books and documents.
The most significant ruling came from the Court’s interpretation of Section 67(4).
The Court held that Section 67(4) operates in conjunction with Section 67(2). The power to seal or break open premises is given to the officer authorized to conduct the search and seizure. Crucially, the statute expressly conditions this power on the circumstance that access to the premises or receptacle is denied.
The Court found no material in the record indicating that the petitioner had denied access to his premises.
It therefore rejected the department’s justification for continuing the seal merely because an investigation into alleged fraudulent GST transactions was still underway.
The High Court made a clear distinction between the power to conduct a search and the continuing investigative powers of the GST authorities.
It held that Section 67(4) is not intended to allow authorities to use a taxpayer’s premises as a storage facility for seized goods, books, documents or things.
According to the Court, the power to seal premises exists only in furtherance of the search. It can be exercised when the search proceedings are underway and access is denied. Once the search has culminated in seizure, the power under Section 67(4) ceases in relation to that particular search.
The Court further observed that the GST authorities are required to exercise their statutory powers strictly within the framework provided by the Act and Rules. Any action beyond those statutory limits would amount to an illegal exercise of power.
While the Court recognized that the investigation against the petitioner was still continuing and that the seized material might be required for examination or further proceedings, it held that this could not justify continued sealing of the entire office.
Balancing the interests of the investigation with the petitioner’s right to carry on his professional activities, the Court ordered the authorities to de-seal the premises.
The Court expressly declared that sealing the office and keeping it sealed for approximately four months was illegal, unauthorized and contrary to Section 67(4) of the GST Act.
The judgment did not prevent the GST authorities from continuing their investigation or retaining material that was genuinely necessary.
The Court permitted the department, at the time of de-sealing, to take custody of the books, documents and things earlier marked as Exhibits 1 to 105 if they were still necessary for examination, inquiry or proceedings under the GST Act.
However, the authorities were directed to issue a fresh seizure order and provide a copy to the petitioner. The fresh order would relate back to the original seizure order dated April 1, 2026.
The Court also directed the authorities to consider providing copies of the seized documents if requested by the petitioner, unless they believed that copying or taking extracts would prejudicially affect the investigation.
The High Court set aside and quashed the Form GST INS-03 prohibition order dated April 1, 2026, holding that the goods mentioned in its annexure were not goods liable to confiscation in the circumstances of the case.
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