GST Authorities cannot Seize Cash as ‘Goods’ under CGST Act: Calcutta HC Orders De-Sealing of ₹24 Lakh [Read Order]

In a recent ruling, the Calcutta High Court held that GST authorities have no power to seize or seal cash as “goods” under the CGST Act, and directed the department to de-seal Rs. 24 lakh that was sealed during search proceedings against a furniture manufacturer.

Puspa Furniture Pvt. Ltd. and another petitioner filed a writ petition before the Calcutta High Court challenging search and seizure proceedings conducted by GST authorities under Section 67 ofthe CGST Act, 2017.

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During the search at the office, sales office-cum-residential premises, and factory premises of the petitioners, the authorities sealed cash amounting to Rs. 24 lakh, though the cash remained physically with the petitioners.

The petitioners’ counsel argued that the search was conducted without following due process of law. They argued that the authorization for search did not disclose any valid “reason to believe,” which is mandatory under Section 67 of the CGST Act.

The counsel also argued that there were no independent witnesses during the search, as the panchnama and seizure documents were signed only by employees, and in some cases, even witness signatures were absent.

The counsel further argued that cash does not fall within the definition of “goods” under Section 2(52) of the CGST Act. They argued that even under the category of “documents, books, or things,” cash can be seized only if it has evidentiary value and is directly required for GST proceedings. According to the petitioners, the department failed to show any connection between the sealed cash and any alleged tax evasion.

The department’s counsel argued that the cash was suspected to be unaccounted money generated from clandestine supplies without invoices. They argued that the person present at the premises could not satisfactorily explain the source of the cash at the time of search.

The department also stated that the cash was only sealed and not taken away, and that the Income Tax Department was the appropriate authority to deal with unaccounted cash.

After examining the provisions of the CGST Act, Justice Om Narayan Rai observed that money is clearly excluded from the definition of goods. The court explained that the term “things” used in Section 67 must be interpreted narrowly and refers to items that contain information or have evidentiary value relevant to GST proceedings.

The court pointed out that the department had failed to demonstrate how the seized cash was useful or necessary as evidence in any GST case. The court directed the GST authorities to immediately de-seal the cash, allowing the petitioners to use it in accordance with law.

The court clarified that this order would not prevent the Income Tax Department or any other authority from taking action under the law, if permissible. The court allowed the investigation to continue and directed the department to file its affidavit in the matter.

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