SEIZURE OF CASH IN GST SEARCH AND RECENT PRONOUNCEMENTS

Search and seizure provisions contained in tax statutes are provided to act as a restraint on evasion of taxes. Such powers are within the constitutional frame work and cannot be considered as violative of Article 19 of Constitution of India.

Power of search and seizure in any system of jurisprudence is an overriding power of the state to provide security and that power is necessarily regulated by law - MP SHARMA Versus SATISH CHANDRA. DISTRICT MAGISTRATE -1954 (3) TMI 1 - Supreme Court (LB).

In BABOO RAM HARI CHAND Versus UNION OF INDIA - 2014 (9) TMI 144 - GUJARAT HIGH COURT, it has been held that powers to seize and confiscate are quite drastic powers, such that authority exercising the same should have reasons to believe that goods were liable therefore. It was held that passing of a composite order, i.e. panchnama-cum-seizure order is impermissible in law.

Section 67 of CGST Act, 2017 provides for powers of inspection, search and seizure in GST regime.

It is often seen that the investigating officers during the course of search operations, make seizure of goods, articles, things documents etc including cash. While goods are defined under section 2(52) of CGST Act, 2017 which specifically mentions that money and securities are excluding from the scope of goods. Money cannot also be considered as property or actionable claim so as to be considered as goods

Retention of Seized Items

As per second proviso to section 67(2), the goods, documents or books or things so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceeding under the GST law.

Copies of Document Seized

In terms of section 67(5), the person from whose custody any documents are seized shall be entitled to make copies thereof or take extracts there from in the presence of an authorized officer at such time and place as allowed except where making such copies or taking such extracts may, in the opinion of the proper officer, prejudicially affect the investigation.

Inventory of Items Seized

As per section 67(9), where any goods, being goods specified under sub-section (8), have been seized by a proper officer, or any officer authorised by him he shall prepare an inventory of such goods in such manner as may be prescribed.

In such a situation, money which is represented in the form of cash cannot be considered as goods and cannot be subjected to seizure during the search operations. However, cash in hand is often seized as a part of search memo.

Section 2(75) defines money as 'money' means the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any other instrument recognised by the Reserve Bank of India when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value.

The courts have taken a view that there can be a seizure of goods documents, books or things or accounts as a consequence of search and that cash cannot be seized when it does not form part of stock in trade. Thus, cash cannot be seized or confiscated.

Accordingly, cash cannot be considered as 'goods' for the purpose of seizure. Money and securities have been specifically excluded from the ambit of 'goods'. Also, where cash or money does not form part of stock-in-trade of business, it cannot be seized during the course of search at the business premises. However, there can be seizure of goods, documents, books or things a accounts as a consequence of search. Section 67 of the CGST Act, 2017 uses the words - 'goods' and is qualified with the condition of being liable for confiscation. The goods that can be seized under section 67(2) are the goods which the proper officer believes are liable for confiscation. Further cash cannot be covered under the scope of 'goods' or 'things'. Cash will not be covered under 'goods' but 'money' as defined in section 2(75).

• In G.R.M. Jewellers Versus The Assistant Commissioner of State Tax, Kurnool, The Station House Officer, Kumool, The State of Andhra Pradesh, The Joint Commissioner St, Kumool, The Chief Commissioner of State Tax, Andhra Pradesh, The Union of India Rep. By The Secretary (Finance), Ministry of Finance, New Delhi. - 2026 (1) TMI 257 - ANDHRA PRADESH HIGH COURT, cash and silver were seized during the search. Petitioner paid tax, penalty and fine and release order was issued but it was found cash and silver were stolen from the police station where they were kept for custody. It was held that loss of silver and cash would impinge on right of petitioner, under Article 19(1)(g) of Constitution of India to carry on his trade or business. Petitioner was entitled to compensation for loss suffered by him on account of negligence of State officials in protecting property which had been seized. Petitioner was entitled to return of 23.44 kgs. of pure silver. Value of silver as on date would be taken for purpose of supply of such silver to petitioner. Silver that remained to be given to petitioner, after adjustment of cash returned, would be given by respondents, either in form of pure silver or by payment of cash in lieu of silver.

• In Siddhant Steels Through Its Proprietor Sajan Agrawal Versus State Of Chhattisgarh Through Secretary, Deputy Commissioner Division No. 1, Assistant Commissioner Circle No. 2, State Goods And Services Tax, Commissioner State Goods And Services Tax, GST Department, Raipur (C.G.) - 2025 (9) TMI 110 - CHHATTISGARH HIGH COURT, amount in cash was deposited under coercion during search. Assessee made a submission that such amount if found in excess, may be directed to be adjusted after final adjudication and same be refunded to the petitioner. Considering the prayer, it was held that excess deposit, if any, might be adjusted at the time of final adjudication or with amount of dues, if any from the petitioner.

• In Sri J Ramesh Chand Versus Union Of India, Commissioner South GST, Inspector Of Central Tax and Intelligence Officer DGGI BZU Benglauru - 2025 (11) TMI 180 - KARNATAKA HIGH COURT, where GST-registered trader made Rs. 10 crore payments during search and seizure before any SCN or quantification and without acknowledgment, it was held that collection was involuntary and did not comply with Section 74(5) or Instruction No. 01/2022-23, rendering recovery illegal, thus requiring refund with interest as obtainment violated Articles 265 and 300-A.

• In M/s. N.P. Industries And M/s. Arav Enterprises Versus Union of India & Ors. - 2025 (6) TMI 426 - DELHI HIGH COURT, where DGGI and Income Tax Department had issued their respective notices, petitioner firms were free to defend their position with said Departments by replying to concerned show cause notices; court observed that no ground for interference with ongoing proceedings was made out. Also, resumption of cash was done almost a year back and as such petitioner was free to defend its position with the department by replying to notices.

• In Shivam Iron Store Through Proprietor Jagdish Rai Bansal Versus Union Of India & Anr. - 2025 (4) TMI 681 - DELHI HIGH COURT, where cash was seized during investigation and on writ petition, court directed to forfeit / remit cash seized from the premises along with interest. However, SCN and order was issued without hearing the assessee. The court held that assessee should file before Appellate Authority and writ petition was dismissed.

• In M/s K.M. Food Infrastructure Pvt Ltd Through Its Director Mukesh Kapoor and Mukesh Kapoor And Others Versus The Director General DGGI Headquarters, New Delhi & Anr. - 2024 (2) TMI 762 - DELHI HIGH COURT, where cash was seized during the search and assessee contended that 'money' is not authorized to be resumed under section 67(2) of the CGST Act, 2017, it was held that the word 'things' appearing in Section 67 of the CGST Act, 2017 does not include 'money', and therefore, that being so, action on the part of the Officers of the respondents seizing/resuming the cash was illegal and arbitrary. Investigation has revealed that there is no evidence that the cash so seized was representing the sale proceeds of unaccounted goods, therefore, it could not have been seized under the provisions of CGST Act as the seizure is limited to the goods liable for confiscation. Therefore, there was no reason for the retention of the cash amount by the respondents. Even otherwise, in the facts of this case what is evident is that cash was seized/resumed vide Panchnama dated 4-10-2021 and in accordance with sub section (7) of Section 67 thereof, when no notice in respect thereof is given within six months of seizure of the goods, the goods shall be returned to the person from whose possession they were seized. On this ground also, petitioners were entitled for the return of resumed cash. The seizure of cash and its continued retention was held to be illegal.

In following pronouncements also, it has been held that cash or currency cannot be seized under the GST law and that same was to be released or refunded:

• Pushpa Furniture (P.) Ltd. v. Union of India (2026) 113 GST 689; (2025) 181 taxmann.com 822 (Calcutta); (2026) 105 GSTL 200 (Calcutta).
• B. Kusuma Poonacha, J.K. Manjunath Versus Senior Intelligence Officer Director General of GST Intelligence (DGGI) Bangalore Zonal Unit (BZU), Additional Director Director General of GST Intelligence (DGGI) Bangalore Zonal, Central Board Of Indirect Taxes. - 2024 (6) TMI 361 - KARNATAKA HIGH COURT
• M/s. Goyal Metal Udyog Versus Commissioner Of Central Goods & Services Tax & Anr. - 2023 (9) TMI 900 - DELHI HIGH COURT
• Lovelesh Singhal Prop Shivani Overseas Versus Commissioner, Delhi Goods And Services Tax & Ors. - 2023 (12) TMI 238 - DELHI HIGH COURT
• Gunjan Bindal And Anr. Versus Commissioner of CGST, Delhi West and Ors. - 2023 (11) TMI 954 - DELHI HIGH COURT
• BHAGWAN GUPTA AND ORS. Versus COMMISSIONER OF CGST, DELHI WEST AND ORS - 2023 (11) TMI 1299 - DELHI HIGH COURT [State by Supreme Court in COMMISSIONER OF CGST & ORS. Versus BHAGWAN GUPTA & ORS - 2024 (10) TMI 1049 - SC Order].
• Rajeev Chhatwal Versus Commissioner Of Goods And Services Tax (East) - 2023 (8) TMI 1263 - DELHI HIGH COURT
• Baleshwari Devi Versus Additional Commissioner (Anti-Evasion), Central Goods And Service Tax, Delhi North, New Delhi & Ors. -2023 (7) TMI 1230 - DELHI HIGH COURT
• DHANYA SREEKUMARI, MAHESH. M.M. Versus THE STATE TAX OFFICER (IB), THE COMMISSIONER OF STATE GST SGST DEPARTMENT, THE JOINT COMMISSIONER (IB) SGST DEPARTMENT, ASSISTANT COMMISSIONER (IB) STATE GST DEPARTMENT - 2023 (7) TMI 623 - KERALA HIGH COURT
• Centre C Edtech Private Limited, Dhanya V.S, Gayathri. J.A, Versus The Intelligence Officer, Of intelligence Unit, State Goods And Service Tax Department, Kerala, Thiruvananthapuram, Addl. R3 Impleaded The Deputy Director Of Income Tax Investigation. - 2025 (2) TMI 408 - KERALA HIGH COURT.