Raj Jaggi
Statutory Power to Seize Goods Comes with a Time Limit
Section 67 of the Central Goods and Services Tax Act, 2017 confers wide powers of inspection, search and seizure on the proper officer. Under Section 67(2), when the statutory conditions are satisfied, the officer may seize goods believed to be liable to confiscation. The officer may also seize documents, books or other materials that may be useful or relevant to proceedings under the CGST Act. Where physical seizure of the goods is not practicable, the first proviso to Section 67(2) permits the officer to issue a prohibition order restraining the owner or custodian from removing, parting with or otherwise dealing with the goods without prior permission.
These wide powers are, however, subject to an important statutory time limit. Section 67(7) provides that where goods have been seized under Section 67(2) and no notice “in respect thereof” is given within six months from the date of seizure, the goods “shall be returned” to the person from whose possession they were seized. Thus, while Section 67(2) confers the power to seize, Section 67(7) limits the period for which the seized goods may continue to be retained without the notice contemplated by the provision.
The words “shall be returned” make the statutory consequence clear. Seizure cannot result in indefinite retention of goods merely because an investigation remains pending. The authority to seize is therefore accompanied by a statutory limit on the authority to retain. The limited power to extend the original six-month period is separately provided in the proviso to Section 67(7).
Extension Beyond Six Months Is Not Automatic
The proviso to Section 67(7) creates a limited exception to the ordinary six-month period. It permits the proper officer to extend that period “on sufficient cause being shown” for a further period not exceeding six months. Therefore, continuation of an investigation or the need for additional time does not, by itself, automatically extend the period of retention.
The main provision and its proviso thus serve different purposes. Section 67(7) lays down the general rule requiring return of the goods where the contemplated notice is not given within six months. The proviso permits further retention only where the statutory requirement of sufficient cause for extension is satisfied. The extension must therefore be lawfully made under the proviso; it cannot be presumed merely because the investigation remains incomplete.
It would consequently be incorrect to read Section 67(7) as automatically permitting retention for twelve months. Six months is the ordinary statutory period; a further period of up to six months is only a conditional extension. The proviso provides additional time where legally justified—it does not convert the original six-month period into an automatic twelve-month period.
Expiry of the Statutory Period Ends the Authority to Detain the Goods
The issue arose before the Bombay High Court in Abubakar Mines and Minerals v. Additional Commissioner (AE), CGST, Kolhapur and Another, 2026-VIL-1012-BOM, decided on 02.09.2026. The petitioner challenged the continued detention and prohibition of its goods under a prohibition order dated 26.09.2024. The order was issued in Form GST INS-03 under Section 67(2) read with Rule 139(4) of the CGST Rules, 2017.
The petitioner sought a declaration that the continued detention and prohibition were contrary to Section 67(7) and, consequently, sought release of the goods. Significantly, the Department itself stated in its affidavit that the prohibition order could remain effective only for the period prescribed under Section 67(7) and that, upon expiry of the permissible period, the prohibition order automatically came to an end without requiring any separate order of revocation.
The Bombay High Court accepted that there was no basis to continue the detention after the prohibition order ceased to operate and allowed the petition, directing the release of the goods. At the same time, the Court expressly protected the underlying investigation by clarifying that the release of the goods would not affect the legality of the investigation or the evidentiary material collected during its course. The judgment thus draws an important distinction between the statutory authority to continue restraining the goods and the Department’s authority to continue an otherwise lawful investigation.
Extension Beyond Six Months Requires Compliance with Statutory Safeguards
The Delhi High Court examined the conditions governing an extension under the proviso in considerable detail in M/S Kashish Optics Ltd. v. Commissioner, CGST Delhi West & Others, 2025 (3) TMI 479 (Delhi High Court), decided on 03.03.2025. The goods were seized on 23.10.2020. Before the expiry of the original six-month period, an internal note dated 16.04.2021 proposed extending the seizure for a further six months up to 21.10.2021. However, the Department did not give the taxpayer notice of the proposed extension or an opportunity of hearing. The Court therefore examined whether the seizure period could validly be extended merely on the basis of an internal departmental decision.
The Court held that Section 67(7) of the CGST Act is pari materia with Section 110(2) of the Customs Act, 1962, and applied the principles laid down by the Supreme Court in I.J. Rao, Assistant Collector of Customs v. Bibhuti Bhushan Bagh, (1989) 3 SCC 202. Upon expiry of the original six-month period, the person whose goods have been seized becomes entitled to their return unless the period has been validly extended under the proviso. Such extension is not automatic. The words “on sufficient cause being shown” require objective consideration, and the affected person must ordinarily be given notice of the proposed extension and a limited opportunity of hearing before expiry of the original six-month period. The hearing, however, does not confer any right to disclosure of confidential material concerning the ongoing investigation.
The Department’s internal note-sheet was found insufficient to satisfy these requirements. Apart from not having been disclosed to the taxpayer, the record itself revealed deficiencies in the description and valuation of the goods and incomplete documentation. The Court therefore found the unilateral continuation of seizure unsustainable and directed the release of the seized goods on the terms specified in the judgment. Significantly, the Court separately directed that proceedings concerning the alleged violations be concluded within six weeks, thereby maintaining the distinction between the legality of continued retention of the goods and the continuation of the underlying proceedings.
Expiry of the Six-Month Period Requires Return of Goods, Not Invalidation of a Subsequent Notice
An important distinction must be maintained between the right to continued retention of seized goods and the validity of a notice subsequently issued by the Department. In Best Crop Science Private Limited v. Superintendent of CGST, Delhi West & Others, 2023-VIL-632-DEL, decided on 05.09.2023, the Delhi High Court considered a case in which goods were subjected to a prohibition order under Section 67(2). The Court recognised that, for the purposes of Section 67, such a prohibition order is substantially in the nature of seizure because, instead of physically removing the goods, the taxpayer is prohibited from removing, parting with, or otherwise dealing with them.
The Court clarified that Section 67(7) prescribes the consequence where the requisite notice is not issued within the stipulated period: the seized goods become liable to be returned. However, the provision does not state that a notice issued after the expiry of six months becomes invalid merely because it was issued beyond that period. Thus, expiry of the statutory period affects the Department’s authority to continue retaining the goods; it does not, by itself, extinguish the power to issue a subsequent notice or render such notice invalid.
Release of Goods Does Not Necessarily Terminate the Investigation
Section 67(7) governs the period for which goods may remain seized without the notice contemplated by the provision. If that period expires, the statutory consequence in respect of the goods follows. However, evidence already lawfully collected, statements recorded, documents examined, and other investigative material do not automatically lose their legal relevance merely because continued detention of the goods can no longer be sustained.
The Court also clarified that release of the goods would not affect the investigation or the evidentiary material already collected.
A Prohibition Order Cannot Become a Device for Indefinite Control Over Goods
Another important dimension of Abubakar Mines and Minerals concerns the prohibition order. The first proviso to Section 67(2) permits such an order where physical seizure is not practicable. It restrains the owner or custodian from removing, parting with or otherwise dealing with the goods without the officer’s prior permission. Although physical possession may remain with the taxpayer, the commercial effect can be substantial because the taxpayer loses the freedom to deal with those goods.
The Bombay High Court addressed the prohibition order in the context of Section 67(7) and accepted that the restraint could not continue after the period permitted by law had expired. This prevents the statutory protection against continued retention from being defeated merely because the Department adopted a prohibition mechanism instead of physically removing the goods.
The underlying principle therefore extends beyond the physical location of the goods. Whether the goods are physically seized or subjected to a prohibition against dealing with them, continued statutory restraint must remain supported by valid legal authority.
The Notice Must Relate to the Seized Goods
The wording of Section 67(7) is important. It does not provide that seized goods may be retained merely because an investigation is pending or because some communication has been issued to the taxpayer. The provision specifically states that where “no notice in respect thereof is given” within six months of seizure, the goods shall be returned. The words “in respect thereof” therefore link the notice to the seized goods.
Accordingly, the mere existence of an ongoing investigation or another proceeding should not automatically be treated as compliance with Section 67(7). Where the Department relies on a notice to justify continued retention of the goods, it must be examined whether that notice is of the nature contemplated by Section 67(7) and sufficiently relates to the seized goods. This question has to be determined with reference to the nature of the proceedings and the facts of the particular case.
At the same time, Section 67(7) should not be read as a general limitation provision governing every proceeding that may subsequently be initiated under the CGST Act. Its immediate purpose is to regulate continued retention of seized goods where the contemplated notice has not been given within the prescribed period. Thus, pendency of an investigation cannot, by itself, justify continued retention, while expiry of the period under Section 67(7) does not, by itself, invalidate every subsequent proceeding.
Once the Statutory Period Ends, the Goods Must Be Returned
Section 67(7) places a clear limit on the duration for which goods seized under Section 67(2) may remain under departmental restraint. If the notice contemplated by Section 67(7) is not given within six months of the date of seizure, the goods must be returned to the person from whose possession they were seized. The only exception is where the original six-month period has been validly extended under the proviso. Such extension is not automatic; it must be based on sufficient cause and must satisfy the procedural safeguards recognised in Kashish Optics.
The Bombay High Court, in Abubakar Mines and Minerals, 2026-VIL-1012-BOM, decided on 02.09.2026, reinforces this statutory consequence. Once the period for which the goods can lawfully remain under detention or prohibition has expired, the Department cannot continue its restraint merely because the investigation is still pending. The continuation of the investigation, by itself, cannot justify retaining the goods beyond the period permitted by Section 67(7).
At the same time, the release of the goods does not necessarily bring the investigation to an end. An otherwise lawful investigation may continue, and the evidentiary material already collected may retain its legal relevance. The statutory balance is therefore clear: the Department may continue its lawful investigation, but it cannot retain the goods after its statutory authority to do so has come to an end .
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