In a ruling that could influence how GST authorities conduct search operations across India, the Bombay High Court has set aside the seizure of ₹1 crore in cash by the Directorate General of GST Intelligence (DGGI), holding that the GST law does not empower officers to seize currency merely because it is found during a search.
A division bench of Justice GS Kulkarni and Justice Aarti Sathe pronounced the judgment on March 10, 2026, in a writ petition filed by Mumbai-based trader Smruti Waghdhare. The matter was reserved for orders on March 5, 2026, after hearing detailed arguments from both sides.
The court held that the seizure was “perverse, arbitrary and without authority of law”, and directed GST officers to release the entire ₹1 crore along with applicable interest within two weeks.
GST raid and the cash seizure
The case arises from search operations conducted by the DGGI’s Mumbai unit on June 27 and June 28, 2023, at multiple premises linked to Waghdhare, who runs M/s. Platinum International, a business involved in trading ferrous and non-ferrous metals and scrap.
During the searches, GST intelligence officers seized ₹60 lakh from a commercial premises at Charni Road in Mumbai and ₹40 lakh from the residence of Waghdhare’s parents in Girgaon, totalling ₹1 crore. The seizures were recorded through orders issued in Form GST INS-02 under Section 67 of the Central Goods and Services Tax Act, 2017.
The searches were linked to an investigation involving businessman Hitesh Chheda, who was suspected to be part of a fake invoicing network. According to the GST department’s affidavit before the court, investigators had identified around 155 bogus firms allegedly used to pass fraudulent input tax credit (ITC) worth ₹312.8 crore through invoices issued without actual supply of goods.
However, Waghdhare approached the High Court challenging the legality of the seizure.
Arguments raised by the petitioner
Appearing for the petitioner, tax lawyer argued that the GST authorities had exceeded their powers under the statute by seizing currency.
He told the court that the CGST Act allows seizure only of “goods, documents, books or things” that are useful or relevant to GST proceedings, and that cash cannot fall within this category because Indian currency is legally classified as “money” under the statute.
He further argued that Section 67 requires officers to record a “reason to believe” before initiating search and seizure actions, and that the impugned orders failed to demonstrate how the seized cash was relevant to any GST investigation.
Another argument raised by the petitioner was that no notice had been issued within six months of the seizure, as required under Section 67(7) of the CGST Act. The law provides that if such notice is not issued within the prescribed period, the seized goods must be returned to the person from whom they were taken.
He also pointed out that statements recorded during the investigation indicated that ₹60 lakh seized from the premises belonged to Waghdhare, weakening the department’s allegation that the money was connected to fake ITC transactions.
Court finds seizure unlawful
After examining the record, the High Court agreed with the petitioner and held that the statutory requirements for seizure under the GST law had not been met.
The bench emphasised that “reason to believe” is the bedrock of any search and seizure under the CGST Act, and authorities must demonstrate a clear link between the seized items and the proceedings under the law.
In the present case, the judges found that the GST department had not established how the seized cash was relevant to the investigation, nor had it recorded the necessary reasons before ordering the seizure.
The court therefore concluded that the action of the authorities was without legal authority under the GST framework.
Court questions transfer of cash to Income Tax department
During the course of the hearing, the High Court also expressed surprise when it was informed that the seized cash had been handed over to the Income Tax Department for further proceedings.
The bench said it was “at pains to understand” how GST officers derived the power to transfer the seized currency to another department when such authority is not contemplated under the CGST Act.
This aspect of the case further strengthened the court’s view that the seizure and subsequent handling of the money were legally untenable.
Wider implications for GST investigations
The ruling is likely to have broader implications for businesses and tax enforcement authorities alike. Search operations by GST intelligence units often involve the seizure of cash during raids, particularly in investigations relating to fake invoicing or input tax credit fraud.
However, the High Court’s decision reinforces the principle that GST search powers are investigative in nature and must operate strictly within the limits of the statute. For businesses, the ruling underscores that the mere presence of cash during a tax raid cannot automatically justify seizure unless authorities demonstrate a clear legal basis.
At the same time, the court clarified that its findings relate only to the legality of the GST seizure and do not affect any ongoing proceedings under income-tax law, meaning tax authorities may still examine the source of the funds under the Income Tax framework.
The judgment therefore adds to a growing body of judicial decisions emphasising that while tax authorities have wide investigative powers, those powers must be exercised with strict adherence to statutory safeguards and procedural requirements.
