Suspicion Alone Does Not Authorise Seizure
A GST search may reveal unaccounted goods, unexplained transactions or substantial cash. These findings may justify investigation, but officers cannot seize everything merely because they suspect tax evasion. The Department must identify the legal power permitting seizure of the particular property. For example, finding unaccounted goods does not automatically authorise seizure of cash found at the premises. What is seized, why it is seized and whether the law permits that action must be examined separately.
This issue arose in Bhagwan Tirthani & Others v. Principal Commissioner, General Goods and Service Tax Commissionerate, Jaipur & Others, 2026-VIL-1167-RAJ; 2026:RJ-JP:36738-DB, decided on 14.09.2026. Hon'ble Mr Justice Arun Monga and Hon'ble Mr Justice Ashutosh Kumar of the Rajasthan High Court decided D.B. Civil Writ Petition No.2128/2025. During searches on 22.11.2022, officers seized Rs.47,45,000 from residential premises and 2,33,300 cigarettes, valued at Rs.18,67,690, from the shop and godown. The Department alleged that the money came from unaccounted cigarette sales. The question was whether Section 67(2) permitted seizure and retention of cash for that reason.
The petitioners claimed that Rs.1,45,000 was family savings and that Rs.10 lakh, Rs.21 lakh and Rs.15 lakh belonged respectively to the other three petitioners. These explanations were rejected. The Order-in-Original dated 11.06.2024 held the cash and cigarettes liable to confiscation and imposed penalties. Although a statutory appeal was pending, the writ petition challenged only the cash seizure. The judgment decided the limits of the seizure power, not the entire tax dispute. It neither finally decided the allegations about the cigarette business nor accepted the petitioners' explanations about the source of the money
An Appeal Does Not Rule Out Writ Review of an Unauthorised Action
The Department opposed the writ petition because an appeal under Section 107 of the CGST Act, 2017 was pending and a further appeal was available under Section 112 of the CGST Act, 2017. Normally, a taxpayer should challenge an adjudication order through the statutory appeal. Here, however, the question was whether Section 67(2) authorised the officers to seize and retain the cash at all, not simply whether they had correctly examined the evidence.
An incorrect decision and an action taken without legal authority are different. The first can ordinarily be challenged in appeal. The second may justify examination by the High Court despite an available appeal. The existence of an appellate remedy does not automatically prevent writ review of an action beyond statutory power. In this case, the issue required interpreting the scope of Section 67(2)of the CGST Act, 2017.
The examination was limited to the cash seizure. Questions about the cigarettes, registration, statements, tax and penalties remained open for the statutory appeal or other lawful proceedings. The entire tax dispute was not decided in the writ petition. Nor does merely calling an objection "jurisdictional" make writ intervention necessary; the objection must have a proper legal basis.
Unexplained Cash Does Not Become Goods Liable to Confiscation
Section 67(2) of the CGST Act, 2017 permits seizure of two categories: goods liable to confiscation and documents, books, or things useful or relevant to proceedings under the Act. These categories are not interchangeable. Finding a valuable item during a search does not, by itself, authorise its seizure. The Department must identify the category under which it acts and satisfy the conditions applicable to that category.
For the first category, Section 2(52) expressly excludes money from "goods". The seized Indian currency therefore could not be treated as goods liable to confiscation under Section 67(2). Calling it proceeds of unaccounted sales did not change that position. For example, cigarettes and the money allegedly received from selling them are legally different: even if the cigarettes are liable to confiscation, the sale proceeds do not automatically acquire the same status. Reliance on Section 130 could not overcome this distinction.An allegation about the source of cash cannot turn money into goods that the statutory definition expressly excludes . Whether particular currency has a separate evidentiary purpose requires examination under the other part of Section 67(2).
Other statutes make the distinction clearer. Section 132(1)(iii) of the Income-tax Act, 1961, as examined in the judgment, expressly authorises seizure of money. Section 2(22) of the Customs Act, 1962 expressly includes currency within goods. These provisions show that Parliament can clearly provide for cash seizure where intended. Section 67 contains no comparable general power to seize cash or sale proceeds. Authority available under another law cannot be borrowed to justify action under the CGST Act. Any action under that other law must independently satisfy its own requirements
The Word "Things" Does Not Cover Every Asset Found During a Search
The Department relied on the word "things" in Section 67(2) to justify seizing cash. Although "things" has a wide ordinary meaning, it must be read with the surrounding words—"documents" and "books". These ordinarily contain information or provide evidence. Under the principle of ejusdem generis, a general expression following specific words takes its meaning from their common character. "Things" therefore covers other articles serving a similar evidentiary purpose, not every valuable item found during a search. A broad dictionary meaning cannot turn the provision into an unrestricted power to seize assets.
The second proviso reinforces this interpretation. Documents, books or things may be retained only for as long as necessary for their examination and for inquiry or proceedings under the Act. The purpose is to obtain and examine evidence, not simply to hold money against a possible future tax demand. For example, a record showing undisclosed cash sales may help establish the transactions. Cash found at the premises does not automatically serve the same function merely because the Department suspects it came from those sales. The reason for retaining the particular item must be connected to the statutory purpose.
Paragraph 25.10 of the judgment nevertheless recognises that currency having evidentiary value may be seized. The judgment therefore cannot be described as prohibiting the seizure of currency in every circumstance. The distinction is between particular notes needed as evidence and money retained merely as unexplained wealth or suspected sale proceeds. Possession of cash alone does not establish the necessary evidentiary purpose. Here, the notes were not shown to be required as evidence in any proceeding. Instead, the cash was treated as property liable to confiscation and retained towards possible future recovery. Section 67(2) did not authorise retention for that purpose.
Suspicion and Later Findings Cannot Make an Unauthorised Seizure Lawful
The words "reasons to believe" require more than a general suspicion of tax evasion. The belief must rest on identifiable material connected with the conditions prescribed by Section 67(2). Finding allegedly unaccounted cigarettes could justify examining their purchase and sale, but it did not prove that all cash found during the search came from those transactions. The statements and WhatsApp communications concerned the alleged cigarette trading. No account, transaction record or statement was identified that directly connected the seized money with a particular untaxed supply. Finding goods and cash during the same search did not, by itself, establish a link between them.
The alleged admission that Rs.37,45,000 belonged to petitioner No.1 did not establish the source of that money. Accepting ownership is different from admitting that the amount arose from clandestine sales. Likewise, rejecting the petitioners' explanations did not automatically prove the Department's allegation. An unsatisfactory explanation may call for further inquiry, but it cannot replace evidence supporting the conclusion reached. The weakness of a person's explanation does not itself create a legal power to seize the money.
The seizure also had to be supported by the law when it occurred. A later adjudication describing the cash as unaccounted sale proceeds could not retrospectively supply authority missing at the time of search. Later evidence may support lawful determination of tax or penalties, but that is a separate matter. A subsequent finding of tax liability cannot make an originally unauthorised seizure lawful. Investigation, liability determination, and seizure are distinct powers, and each must satisfy its own statutory requirements.
Cash Seizure Requires Legal Authority and Supporting Facts
The Department relied on Smt. Kanishka Matta v. Union of India & Others, 2020 SCC OnLine MP 4564; 2020-VIL-411-MP. In that case, the Madhya Pradesh High Court gave "things" in Section 67(2) a broad meaning that included cash. The record contained a statement identifying the money as proceeds of untaxed pan masala sales, together with supporting investigation material. The Rajasthan High Court disagreed with that interpretation and also distinguished the facts. Here, the alleged admission concerned ownership of the money, not its origin in untaxed sales. No comparable material connected the cash to those sales. The distinction concerned both the extent of the statutory power and the evidence supporting its exercise.
In Deepak Khandelwal v. Commissioner of CGST, Delhi West & Another, 2023 SCC OnLine Del 4985; 2023-VIL-544-DEL , the Delhi High Court adopted a narrower approach. Section 67 was not treated as a general power to seize unexplained wealth or hold assets for tax recovery. The Court had to draw the meaning of "things" from its statutory context, particularly its association with documents and books useful as evidence. A wide dictionary meaning could not enlarge a coercive power beyond its legislative purpose. This reasoning supported the distinction between collecting evidence for an inquiry and taking possession of money merely because its source was disputed.
Smurti Waghdhare v. Joint Director, Directorate General of GST Intelligence, 2026 SCC OnLine Bom 1885; 2026-VIL-249-BOM likewise supported the need for clear statutory authority and satisfaction of the conditions for seizure, including "reasons to believe". The Rajasthan High Court agreed with this approach while giving its own reasons based on the statutory scheme. It also provided an independent factual ground: even if the wider interpretation in Kanishka Matta applied, the present seizure lacked the necessary supporting material. The judgment therefore cannot be reduced to a choice between competing precedents. It examined both the law and the particular record. The disagreement remained between High Court approaches; the Supreme Court did not resolve it.
Return of the Cash Did Not Cancel the Remaining Tax Proceedings
The seizure and continued retention of Rs.47,45,000 could not be sustained under Section 67(2). The respondents were directed to return the money to the persons from whose possession it was seized within six weeks of uploading the order. However, release remained subject to any lawful claim, restraint, attachment or order under an independently applicable statutory provision. The Department could not retain the money merely because the GST dispute continued. Any restriction on its release required a separate and valid legal basis.
The petitioners were also entitled to applicable interest from the expiry of a reasonable period after seizure until actual payment. The respondents had to calculate and disburse that interest according to the governing provisions and legal principles. No fixed rate or exact starting date was specified. The direction therefore did not automatically award interest from the seizure date or at a particular percentage. The Court allowed the writ petition only to this limited extent, without costs, and awarded no separate compensation.
The other issues remained open for decision in the statutory appeal or other lawful proceedings. These included ownership of the cigarettes, alleged unaccounted trading, registration requirements, the evidentiary value of statements, and tax and penalty liabilities. Return of the cash did not establish that the business transactions were lawful or that the petitioners' explanations about its source were correct. It removed an unauthorised seizure without preventing further investigation, adjudication or recovery under validly exercised statutory powers.
Return of the cash did not certify its source or erase every possible liability. Lawful investigation, adjudication, attachment or recovery under independently applicable provisions remained available, subject to their own conditions.
Seizure Requires Legal Authority, Not Just Suspicion
The key questions are what is being seized and why it is being kept. Seizing goods liable to confiscation, collecting evidence and holding assets for recovery are different actions. Authority for one does not automatically permit another. For example, power to seize records of undisclosed sales does not, by itself, permit retaining cash against a future tax demand.
Section 67(2)of the CGST Act, 2017 cannot be used as a general power to seize unexplained money or suspected business receipts. If particular currency is needed as evidence, that purpose must be established. If money is held to secure recovery, a separate statutory basis must authorise the action. Protecting revenue cannot replace the legal authority required to act.
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