HC Orders Release of Rs. 1 Crore Cash Seized by GST Officers; Holds Action Illegal:

HC Orders Release of Rs. 1 Crore Cash Seized by GST Officers; Holds Action Illegal Smurti Waghdhare, proprietor of M/s Platinum International, moved the Bombay High Court challenging seizure orders passed by officers of the Directorate General of GST Intelligence. During search operations carried out on 27 and 28 June 2023, officials seized Rs. 1 crore in cash Rs. 60 lakh from a property owned by the petitioner and Rs. 40 lakh from her parents’ house. The search was part of an investigation into an alleged fake Input Tax Credit (ITC) network linked to suspected bogus firms issuing invoices without actual supply of goods. The petitioner argued that the action was unlawful. According to her, cash does not fall within the category of items that can be seized under Section 67 of the Central Goods and Services Tax Act, 2017. She also pointed out that the officers had neither recorded a valid “reason to believe” connecting the cash with GST proceedings nor issued the mandatory notice within six months, making the continued retention of the money illegal.

Main Issue: Whether GST officers can seize and retain cash during a search under Section 67 of the Central Goods and Services Tax Act, 2017 without recording proper reasons and issuing the required notice within the prescribed time.

Decision: The Bombay High Court ruled in favour of the petitioner and set aside the seizure orders. The Court found that the authorities had not shown any material linking the cash to GST violations, nor had they recorded the required “reason to believe” before seizing it.

The Bench also noted that the department failed to issue a notice within the six-month period required under the law. Another point that troubled the Court was that the seized money had later been handed over to the Income Tax Department, even though GST officers had no clear power to do so. In these circumstances, the Court directed that the entire Rs. 1 crore be returned to the petitioner with interest within two weeks, while clarifying that any separate proceedings by the Income Tax authorities could continue independently.

To Read Full Judgment, Download PDF Given Below