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TaxTMI 
Search and seizure
Section 67 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) gives powers to proper officer for inspection, search and seizure. According to Section 67(2) of the Act if the proper officer has reasons to believe that any goods, which are liable for confiscation, or any documents or books or things, which in his opinion will be useful or relevant for any proceedings under the Act, are secreted at any place; he may either search and seize the said goods, documents or books or things.
The second proviso to Section 67(2) of the Act provides that insofar as seized documents or books or things are concerned, the same shall be retained only so long as it is necessary for their examination and for any inquiry or proceedings under the Act.
Section 67(3) provides that the documents or books or things produced by the taxable person or any other person ‘which have not been relied upon’ for the issue of notice under the Act or Rules made thereunder shall be returned to such person, within the period not exceeding 30 days from the issue of such notice.
Section 67(7) of the Act provides that where goods are seized and no notice is given within the period of 6 months of seizure of the goods, the goods are required to be returned to the person from whom the same were seized.
Section 67(11) of the Act provides that the proper officer may seize accounts, registers or documents produced before him if he has reason to believe that any person has evaded or attempting to evade payment of tax. However, it is necessary for him to record the reasons in writing for seizure of the accounts, register or documents. However, such accounts, registers or documents can be retained only as long as it is necessary in connection with any proceedings under the Act or the rules made thereunder for prosecution.
Issue
The issue to be discussed in this article is as to whether the proper officer can seize cash and other valuable articles such as silver bars under Section 67 of the Act with reference to decided case law.
Case law
In Deepak Khandelwal Proprietor M/s. Shri Shyam Metal Versus Commissioner Of CGST, Delhi West & Anr. - 2023 (8) TMI 929 - DELHI HIGH COURT, the petitioner is carrying on the business in non-ferrous metal. The Department conducted a search in the premises of the petitioner on 28.01.2020 under Section 67(2) of the Act. During the search the Departmental officers seized certain items and currencies. The Departmental officers seized silver bars and sale bill books and cheque books of various banks. The petitioner was arrested on 29.01.2020 under Section 132 (1) (i) of the Act. The petitioner was released on bail 21.03.2020.
The petitioner was issued with a notice dated 11.11.2020 under section 74 of the Act demanding and tax to the tune of Rs.24.20 lakhs. The petitioner, by letter dated 23.03.2021, requested the Additional Commissioner, Central Tax GST, West Delhi, to release the goods, documents and cash seized from his premise on 28.01.2020. He contended that even if s. 67(7) of the CGST Act is applied, no notice had been issued within 6 months from the date of seizure, thereby making the items eligible for return.
The petitioner filed a writ petition before the High Court since no action has been taken by the Department for the return of seized goods. The petitioner submitted the following before the High Court-
- The proper officer does not have any powers under Section 67 of the Act to seize currency as the same is not ‘goods’ as defined under the Act.
- The proper officer has the power to seize the goods under section 67(2) of the Act only if he has reasons to believe that the same are liable for confiscation.
- The goods seized are liable to be returned if no notice in respect of the said goods is served within a period of 6 months from the date of seizure of the said goods.
- Since no notice under section 67(2) of the Act was issued in respect of the seized silver bars, which fall within the definition of goods, within the stipulated period of 6 months, the said goods are liable to be released.
- The currency neither fell within the definition of the terms ‘goods’ nor could be considered as ‘things’.
- The term ‘things’ was required to be construed by applying the doctrine of ejusdem generis, as taking colour from the preceding words, ‘documents’ and ‘books’.
The Revenue contended the following before the High Court-
- The silver bars and cash seized by the proper officer were not covered under the definition of ‘goods’ and therefore, there was no requirement for issuing any show cause notice for confiscation of the same.
- The silver bars and cash were seized as ‘things’ and not as ‘goods’ that were liable for confiscation.
- The terms ‘money’ and ‘securities’ were excluded from the said definition.
- Silver bars were ‘securities’ and were seized as such.
- The proper officer had the power to seize ‘things’ under Sub-section (2) of Section 67 of the Act and the said term was required to be interpreted in an expansive manner.
The High Court considered the question for its determination as to whether the proper officer has the power to seize the currency and other valuable assets under Section 67 of the Act, even though he has no reason to believe that the same are liable for confiscation.
In this regard, the High Court analysed the provisions of Section 67 of the Act, Section 2(52) of the Act which defines the term ‘goods’, Section 130 of the Act and section 2(h) of the Securities Contract (Regulation) Act, 1956 which defines the term ‘securities’.
On analysis of the above sections, the High Court observed that silver bars being movable assets are not securities within the meaning of Section 2 (h) of the Securities Contract (Regulation) Act, 1956. The contention that silver bars are ‘securities’, as advanced on behalf of the Revenue, is insubstantial. Thus, silver bars are included in the term ‘goods’ as defined under section 2(52) of the Act.
The High Court also observed that Cash (Indian currency) is clearly excluded from the definition of the term ‘goods’ as the same falls squarely within the definition of the word ‘money’ as defined in section 2(75) of the Act.
The High Court observed that the purpose of Section 67 of the Act is not recovery of tax; it is not a machinery provision for enforcing a liability. The purpose of Section 67 of the Act is to empower authorities to unearth tax evasion and ensure that taxable supplies are brought to tax. The seizure is only allowed to support ongoing proceedings, and if the seized items are not relevant to those proceedings, they cannot be seized or must be returned according to section 67(3) of the Act. The Delhi High Court thereafter clarified that section 67 of the Act is not intended for asset seizure as a means of tax recovery, and therefore, applying the principle of purposive interpretation, the Court held that the scope of section 67 of the Act cannot be extended to justify the seizure of assets merely on the basis that they are unaccounted for. Therefore, the High Court ruled in the favour of the petitioner, ordering the return of the seized items and cash.
The Department, therefore, preferred a review petition before the Supreme Court through a Special Leave Petition No. 18536 of 2024. [COMMISSIONER OF CGST Versus DEEPAK KHANDELWAL- 2025 (8) TMI 1293 - SC Order] The Supreme Court’s dismissal of this SLP, affirming the Delhi High Court’s ruling, is a significant development in the interpretation of section 67 of the Act on 19.08.2025. The Court restates that unless they are directly related to tax evasion proceedings, the GST search and seizure laws cannot be used as an excuse to seize valuable items like cash and silver bars. Through this ruling, the Court has prevented any overreach and upheld the restricted scope of tax authorities’ authority under GST law.