Seizure by GST Authorities Without 'Reason to Believe' is Illegal: Bombay HC Directs Release of Rs. 1 Cr [Read Order]

The Bombay High Court held that the seizure by Goods and Service Tax authorities had not provided ‘reason to believe’ before seizing INR 1 crore, which is an illegal seizure.

The petitioner, Smurti Waghdhare, is engaged in trading of ferrous and non-ferrous metals and scrap. After the searches conducted on the premises of the petitioner, the amount of INR 1 crore was seized from the premises of the petitioner and her parental house.

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The counsel for the petitioner submitted that the seizure of cash is illegal as it is not mandated by any provisions under the CGST Act. It was submitted that Section 67(2) of the Act presupposes that seizure of only those items can be made which in the opinion of the proper officer shall be useful or relevant to any proceedings.

It was argued that the seized item can be retained only for so long as may be necessary for their examination and for any inquiry or proceedings. It was also submitted that the GST authorities have failed to justify how the seized cash would be useful or relevant and they failed to establish how they are necessary for any proceedings.

Finally, it was submitted that “reason to believe” forms an undisputed core of search proceedings and the seizure orders did not record this. The petitioner claimed that the cash was kept for the medical treatment of her mother as she is undergoing medical treatment.

The bench of Justices Aarthi Sathe and G.S. Kulkarni observed that the provisions of Section 67(2) have not been fulfilled as the proper officer should have “reason to believe” that the seized goods or documents are useful or relevant to any proceedings under the CGST Act. Reliance was placed on ITO v. Lakhmani Meval Das. Thus, Bombay HC held that the seizure of cash is completely illegal.

The Bombay HC ordered for the release of the amount and payment of the same to the petitioner’s bank account within two weeks with applicable interest.

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