The Bombay High Court quashed the seizure of Rs 1 crore by the Directorate General of GST Intelligence, ruling GST officers lack authority to confiscate cash found during searches. The court granted relief to Mumbai trader Smruti Waghdhare.
MUMBAI: In a significant ruling that may reshape how GST authorities conduct search operations throughout India, the Bombay High Court has annulled the seizure of Rs 1 crore in cash by the Directorate General of GST Intelligence (DGGI). The court ruled that GST law does not grant officers the authority to seize currency merely because it is discovered during a search.
On March 10, 2026, a division bench consisting of Justice GS Kulkarni and Justice Aarti Sathe delivered the judgment in favor of Mumbai trader Smruti Waghdhare, who had challenged the seizure. The matter was reserved for judgment on March 5, 2026, following extensive arguments from both parties.
The court deemed the seizure “perverse, arbitrary and without authority of law” and instructed GST officers to release the entire Rs 1 crore, along with applicable interest, within two weeks.
Background of the Seizure
The case arose from search operations carried out by the DGGI’s Mumbai unit on June 27 and 28, 2023, at multiple locations associated with Waghdhare, owner of M/s Platinum International, a business specializing in trading ferrous and non-ferrous metals and scrap.
During these searches, GST intelligence officers confiscated ₹60 lakh from a commercial property on Charni Road in Mumbai and Rs 40 lakh from the residence of Waghdhare’s parents in Girgaon, totaling Rs 1 crore. The seizures were recorded via orders in Form GST INS-02 per Section 67 of the Central Goods and Services Tax Act, 2017.
These searches were part of an investigation concerning businessman Hitesh Chheda, suspected to be involved in a fraudulent invoicing scheme. According to the GST department’s affidavit, around 155 fake firms had allegedly been identified, which were used to claim fraudulent input tax credit (ITC) totaling Rs 312.8 crore through invoices generated without actual supply of goods.
Waghdhare subsequently approached the High Court to contest the legality of the seizure.
Petitioner’s Arguments
Tax attorney Abhishek A Rastogi, representing Waghdhare, argued that the GST authorities overstepped their jurisdiction by seizing cash. He pointed out that the CGST Act only permits the seizure of “goods, documents, books or things” relevant to GST proceedings, asserting that cash falls under the category of “money” and is therefore not subject to seizure.
Rastogi further contended that Section 67 mandates officers to record a “reason to believe” prior to initiating search and seizure actions, and that the orders in question failed to establish any relevance of the seized cash to a GST investigation.
Additionally, he noted that no notice had been issued within six months of the seizure, as required by Section 67(7) of the CGST Act, which states that if such a notice is not issued in the prescribed timeframe, the seized goods must be returned.
Rastogi also highlighted statements from the investigation indicating that the ₹60 lakh seized from the commercial premises belonged to Waghdhare, thereby undermining the department’s claims linking the funds to fraudulent ITC transactions.
Observations of the Court:
After reviewing the case, the High Court concurred with the petitioner, asserting that the necessary statutory requirements for seizure under GST law had not been fulfilled. The bench emphasized that the “reason to believe” standard is crucial for any search and seizure action under the CGST Act and that authorities must provide a clear connection between the seized items and legal proceedings.
In this case, the judges noted that the GST department failed to demonstrate how the seized cash was pertinent to the investigation and did not properly document the reasons leading to the seizure.
As a result, the court concluded that the actions taken by the authorities were legally unwarranted within the GST framework.
During the hearings, the High Court expressed astonishment upon learning that the seized cash had been transferred to the Income Tax Department for further action. The bench stated it was “at pains to understand” how GST officers believed they had the authority to transfer the seized currency to another department when such power is not specified in the CGST Act.
This issue further solidified the court’s opinion that the seizure and subsequent management of the funds were legally untenable.
Implications for GST Investigations
This ruling is poised to have broader consequences for both businesses and tax enforcement agencies. Seizures of cash during GST raids frequently occur, especially in cases involving fraudulent invoicing or input tax credit misuse.
The High Court’s decision reinforces the principle that GST search powers are investigative and must strictly adhere to statutory limits. For businesses, this ruling underscores that the mere presence of cash during a tax raid cannot justify seizure without an established legal basis.
Additionally, the court clarified that its findings pertain solely to the legality of the GST seizure and do not affect any ongoing proceedings under income tax law, meaning that tax authorities may still investigate the source of the funds in accordance with income tax regulations.
Ultimately, this judgment contributes to a growing body of judicial decisions that emphasize the importance of adhering to statutory safeguards and procedural requirements in the exercise of tax authorities’ investigative powers.
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