GST Dept. Can’t Seize Cash Without Evidentiary Link to Tax Evasion: Calcutta High Court

The Calcutta High Court has held that the Goods and Services Tax (GST) department has no power to seize or seal cash merely on suspicion of it being unaccounted, unless the currency itself has direct evidentiary relevance to proceedings under the GST law. The bench of Justice Om Narayan Rai directed the immediate de-sealing of Rs. 24 lakh seized during a search operation conducted against a furniture manufacturing company in Siliguri The case arose from a writ petition challenging a search and seizure operation carried out under Section 67 of the Central Goods and Services Tax Act, 2017 at the petitioner’s business premises and residential office. The petitioners alleged that the entire exercise was conducted in violation of statutory safeguards, including absence of “reasons to believe,” lack of independent witnesses, and improper documentation during seizure proceedings. The petitioners contended that the GST officers exceeded their jurisdiction by sealing Rs. 24 lakh found during the search. It was argued that money is expressly excluded from the definition of “goods” under the CGST Act, and therefore cannot be seized under Section 67. The petitioners further asserted that the seized cash was never shown to have any nexus with tax evasion or clandestine supplies. The petitioners also highlighted serious procedural lapses, including the absence of independent witnesses during the search, reliance on company employees as panch witnesses, and failure to obtain witness signatures on the seizure order issued in Form GST INS-02. Defending the seizure, the GST department stated that the cash was detained after the person present at the premises failed to satisfactorily explain its source or provide documentary evidence at the time of the search. According to the department, the cash was suspected to be proceeds of unbilled and clandestine taxable supplies. The department also submitted that since unaccounted cash falls within the domain of the Income Tax Department, they had already informed the Income Tax authorities and initiated steps to hand over the seized amount. It was further argued that reasons to believe need not be disclosed to the taxpayer, as long as such reasons exist on official records. After examining the statutory framework, the Court undertook a detailed interpretation of Section 67 of the CGST Act, emphasizing that seizure powers are limited to goods liable to confiscation or documents, books, or “things” that are useful or relevant to GST proceedings. The Court noted that the Act specifically excludes money from the definition of goods, thereby placing strict limits on the power to seize cash. The Court reiterated that Section 67 is not a recovery mechanism, but an investigative tool intended to unearth tax evasion. Cash, unless required in its physical form as evidence to establish a specific transaction or modus operandi, cannot be seized merely for being unaccounted The Court observed that the GST department’s affidavit failed to demonstrate how the seized currency notes would be useful or relevant to any adjudication or prosecution under the GST law. There was no assertion that the cash could be traced in species to any particular taxable transaction or relied upon as evidence in future proceedings. In the absence of such linkage, the Court held that the action of sealing the cash exceeded statutory authority and amounted to an unlawful exercise of power. The High Court directed the GST authorities to forthwith de-seal the Rs. 24 lakh, allowing the petitioners to use the amount in accordance with law. However, the Court clarified that this relief does not confer legitimacy on the possession of the cash and does not bar action by the Income Tax Department or any other competent authority if the money is later found to be unlawfully held. While granting relief on the cash seizure issue, the Court kept open the larger question concerning the validity of the entire search and seizure operation, particularly whether the mandatory “reasons to believe” existed. The GST authorities have been granted time to file an affidavit-in-opposition, while the petitioners have been allowed to respond thereafter. The Court also restrained the department from communicating or uploading any final adjudication order on the GST portal without prior leave of the Court, even though the investigation and issuance of show-cause notices may continue in accordance with law. Case Details Case Title: Puspa Furniture Pvt. Ltd. & Anr. Vs. Union Of India & Ors. Case No.: WPA 19155 of 2025 Date: 10.12.2025 Counsel For Petitioner: Hasi Saha Counsel For Respondent: Bhaskar Prosad Banerjee Click Here To Read Order Read More: Centre Empanels 29 IRS Officers for Promotion as Principal Commissioners for 2026

GST Dept. Can’t Seize Cash Without Evidentiary Link to Tax Evasion: Calcutta High Court

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