High Court Orders Relief Over Unlawful Retention of Seized Money

The Allahabad High Court held that cash seized under the Customs Act cannot be retained beyond the statutory period of six months unless a valid extension order is passed with recorded reasons and communicated to the affected person before expiry of the prescribed period. A Division Bench comprising Justice Saumitra Dayal Singh and Justice Indrajeet Shukla directed the Directorate of Revenue Intelligence (DRI) to bear costs for unlawfully retaining and subsequently transferring seized cash of Rs.25.20 lakh despite the expiry of the statutory time limit.

The petitioners approached the High Court seeking release of Rs.25.20 lakh seized by customs authorities on 20 August 2025. They contended that no show cause notice under the Customs Act, 1962 had been issued within six months of seizure and no valid extension order had been communicated to them before expiry of the statutory period on 19 February 2026.

During the proceedings, the DRI relied upon a note-sheet dated 18 February 2026, claiming it constituted an order extending the time for issuance of a show cause notice under Section 110(2) of the Customs Act. However, it was admitted that the document had never been communicated to the petitioners before the expiry of six months. The authorities also acknowledged that no show cause notice concerning the seized cash had been issued till the date of hearing.

The Court examined the note-sheet and found that it merely contained signatures without any indication that the competent authority had independently applied its mind or recorded reasons for granting extension. Referring to settled principles laid down by the Supreme Court, the Bench observed that statutory approvals cannot be granted mechanically and must reflect conscious satisfaction based on relevant material.

“The existence of the signature on the order sheet is nothing more than a rubber stamp, affixed without application of mind.”

The Court held that both mandatory requirements under Section 110(2) had failed: there was neither a valid approval recording reasons for extension nor communication of such extension to the petitioners before expiry of the statutory period. Consequently, the petitioners became entitled to return of the seized cash immediately after the six-month period expired.

“To retain it beyond the period of six months was without jurisdiction.”

The Bench strongly criticised the conduct of the DRI authorities, observing that they had acted beyond their jurisdiction and attempted to frustrate the pending judicial proceedings by transferring the cash during the pendency of the writ petition. The Court held that the petitioners’ right to return of the seized money had already crystallised upon expiry of the statutory period and could not be defeated through subsequent administrative actions.

“The DRI authorities have deliberately attempted to defeat the ends of justice and specifically the present petition.”

Subsequently, upon an application filed by the Department accompanied by an unconditional apology and fresh administrative directions to ensure compliance with judicial proceedings in future, the Court took a lenient view. While maintaining its findings on the illegality of the DRI’s conduct, the Bench reduced the costs from ₹10 lakh to Rs.1 lakh and disposed of the writ petition.

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