Surprise inspection, search, and seizure, including of electronic devices and residential CCTV footage permissible, if properly justified by "reason to believe"

The Hon'ble Delhi High Court in the case of Genesis Enterprises & Ors. v. Principal Commissioner, CGST Delhi East & Ors. [W.P.(C) 13821/2025, order dated September 15, 2025] held that surprise search and seizure actions under Section 67 of the CGST Act are valid when "reason to believe" is properly documented, but authorities must follow statutory safeguards, fair procedure, and ensure privacy and protected access to seized electronic data, including communication norms and de-sealing directions.​

Facts:

Genesis Enterprises ("the Petitioner"), along with several firms and family entities linked to the Gumber family, alleged unlawful search and seizure by the CGST Department at residential and business premises, including the seizure of electronic devices and CCTV footage.

Principal Commissioner, CGST Delhi East & Ors. ("the Respondent"), conducted the searches based on alleged fraudulent availment of ITC and believed a maze of non-existent firms was created by the Petitioner's family to pass on and claim fake credits.

The Petitioner contended the searches were unauthorized, Panchama's not properly drawn, access to premises was illegal (using tenant's keys), privacy was violated by seizure of family CCTV footage, and payments/refund withdrawals were coerced. They cited CBIC Instruction No. 1 of 2022-23 dated May 25, 2022 to challenge the manner and legality of search/seizure.

The Respondent contended that proper "reason to believe" was recorded, official procedure followed, the complexity and fraud warranted search, keys were handed by tenant, seized devices not accessed without SOP and the concerned parties' presence, and alleged coercion/duress regarding payments and refund application withdrawals was unsupported.

The Petitioner approached the High Court under Article 226 seeking protection and reversal of actions, including the non-use of seized CCTV footage, de-sealing of premises, and reversal of coerced payments/refund withdrawals.

Issue:

Whether the CGST Department's search and seizure operations under Section 67 of the CGST Act were in violation of statutory safeguards, procedural fairness, and privacy rights, and what safeguards are required for accessing electronic evidence, communications, and seized property during investigation of suspected GST fraud?

Held:

The Hon'ble Delhi High Court in W.P.(C) 13821/2025 held as under:

· Observed that, surprise inspection and search under Section 67, CGST Act, is valid if there is properly documented "reason to believe". The test requires a rational link between materials and reason to believe, not mere suspicion.

· Noted that, procedure and safeguards from the Code of Criminal Procedure (CrPC), now applicable under the Bharatiya Nagarik Suraksha Sanhita (BNSS), must be followed. Access to business premises through tenant keys is only proper if done with knowledge or consent of the person/entity being investigated; failing which, process of breaking locks under Section 67(4) must be followed.

· Directed that, any seized CCTV footage or electronic evidence from the residence cannot be accessed except in the presence of at least one family member and one authorized representative, and only relevant content required by GST authorities may be copied, with all other content returned to the Petitioners.

· Clarified that, if access to business premises must be obtained via tenant keys, it should only be with the knowledge and consent of the person/entity being investigated. Otherwise, officials must undertake the formal process under Section 67(4).

· Held that, all communications from revenue officials to investigated persons/entities should be through prescribed official email channels, stating officer details for traceability. Use of WhatsApp or informal messaging is not permissible, except in exceptional or emergency situations.

· Held that. allegations of coercion or duress in payments or refund withdrawals require deeper fact-finding in appropriate legal proceedings; the writ jurisdiction does not conclusively decide such claims now, but parties are free to pursue them as part of the show cause and adjudication process.

· Directed that, the Petitioners may revive refund applications if successful in subsequent show cause proceedings, and permitted the revenue authorities to continue investigation against all implicated entities in conformity with law, with caution that directions regarding privacy and procedure remain binding.

Our Comments:

The Court's approach reflects consistent interpretation from Calcutta Discount Co. Ltd. v. Income-tax Officer [1961 41 ITR 191 SC] had held that, "The expression 'reason to believe' postulates belief and the existence of reasons for that belief. The belief must be held in good faith : it cannot be merely a pretence. The expression does not mean a purely subjective satisfaction of the Income-tax Officer: the forum of decision as to the existence of reasons and the belief is not in the mind of the Income-tax Officer. If it be asserted that the Income tax Officer had reason to believe that income had been under-assessed by reason of failure to disclose fully and truly the facts material for assessment, the existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justiciable". In the case of Deepak Khandelwal v. Commissioner CGST [2023 SCC OnLine Del 4985], the entire scheme of Section 67 has been discussed, emphasizing evidence and procedural safeguards, including privacy protections over abuses or arbitrary exercise of search powers.

This decision elaborates detailed directions on copying, accessing, and returning digital footage and directing proper investigation communications method; as privacy, procedural fairness, and lawfulness converge, a balance is struck between effective enforcement and individual protections.

Relevant Provisions:

Section 67, CGST Act, 2017:

"67. Power of inspection, search and seizure.-

(1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that-

(a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or

(b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act, he may authorise in writing any other officer of central tax to inspect any places of business of the taxable person or the persons engaged in the business of transporting goods or the owner or the operator of warehouse or godown or any other place.

….

(4) The officer authorised under sub-section (2) shall have the power to seal or break open the door of any premises or to break open any almirah , electronic devices, box, receptacle in which any goods, accounts, registers or documents of the person are suspected to be concealed, where access to such premises, almirah , electronic devices, box or receptacle is denied."

CBIC Instruction No. 1 of 2022-23 dated May 25, 2022

Deposit of tax during the course of search, inspection or investigation - reg.

"3. It is further observed that recovery of taxes not paid or short paid, can be made under the provisions of Section 79 of CGST Act, 2017 only after following due legal process of issuance of notice and subsequent confirmation of demand by issuance of adjudication order. No recovery can be made unless the amount becomes payable in pursuance of an order passed by the adjudicating authority or otherwise becomes payable under the provisions of CGST Act and rules made therein. Therefore, there may not arise any situation where "recovery" of the tax dues has to be made by the tax officer from the taxpayer during the course of search, inspection or investigation, on account of any issue detected during such proceedings. However, the law does not bar the taxpayer from voluntarily making payment of any tax liability ascertained by him or the tax officer in respect of such issues, either during the course of such proceedings or subsequently.

5. Pr. Chief Commissioners/ Chief Commissioners, CGST Zones and Pr. Director General, DGGI are advised that in case, any complaint is received from a taxpayer regarding use of force or coercion by any of their officers for getting the amount deposited during search or inspection or investigation, the same may be enquired at the earliest and in case of any wrongdoing on the part of any tax officer, strict disciplinary action as per law may be taken against the defaulting officers."

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED