Rajasthan High Court Orders Release Of ₹47.45 Lakh Cash Seized Over Alleged Unaccounted Sales

The Rajasthan High Court on 14 September directed the GST department to release Rs. 47.45 lakh seized during a search of residential premises, along with applicable interest.

A Division Bench comprising Justices Arun Monga and Ashutosh Kumar held that Section 67(2) of the Central Goods and Services Tax (CGST) Act does not authorise the seizure of cash merely on suspicion that it represents proceeds from unaccounted sales. It observed:

“...the jurisdictional condition of 'reasons to believe' under Section 67(2) is not an empty formality. The expression requires a bona fide belief based on objective material having a rational nexus with the action proposed. It is not synonymous with a mere suspicion...”

The case arose from a search conducted by GST authorities at the business and residential premises of the petitioners. During the search, the department seized Rs. 47.45 lakh in cash and 2,33,300 cigarettes valued at approximately Rs. 18.67 lakh.

Petitioners contended that the cash belonged to different individuals and family members. However, the Assistant Commissioner treated the cash and cigarettes as liable to confiscation, alleging that the money represented proceeds from unaccounted cigarette sales.

Defending the seizure, the department relied on the recovery of cigarettes, statements recorded during the investigation and WhatsApp communications. It alleged that the cash was linked to unaccounted business transactions.

The Court examined Section 67(2) of the CGST Act, which permits tax authorities to seize goods, documents, books or things during a search if they have reasons to believe that these may be useful or relevant to proceedings under the Act.

It noted that Section 2(52) of the Act expressly excludes money and securities from the definition of “goods”, and held that the expression “things” could not be interpreted to extend the seizure power to cash. It observed:

“Section 67(2) of the CGST Act does not use any expression comparable to 'money', 'currency', 'cash', 'sale proceeds', or 'valuable article'. To hold that 'things' includes currency notwithstanding this deliberate legislative arrangement would, in effect, add words to the statute. Such an interpretation is impermissible, particularly when the power asserted is a coercive power authorising deprivation of possession of money.”

Further, the Bench held that the expression “things” must be read ejusdem generis with the other items listed in Section 67(2). It covers articles that may serve as material or evidence in an inquiry and does not authorise the seizure of every movable article found during a search.

It noted that the Income-tax Act and the Customs Act specifically provide for the seizure of money or currency in prescribed circumstances. It held that the absence of a corresponding provision in the CGST Act was significant. It stated:

“Other enactments, including the Income-tax Act and Customs Act, specifically provide for seizure of money or currency. The omission of a corresponding power in the CGST Act cannot be judicially supplied.”

Moreover, the judges found that the department had not established a direct link between the seized cash and any specific untaxed supply of goods. Even if one of the petitioners had admitted that Rs. 37.45 lakh belonged to him, the admission established ownership but did not, by itself, prove that the money represented proceeds from unaccounted sales.

They declined to follow the Madhya Pradesh High Court's decision in Smt. Kanishka Matta v. Union of India. Instead, the Bench relied on the approach adopted by the Delhi High Court in Deepak Khandelwal v. Commissioner of CGST, Delhi West and the Bombay High Court in Smurti Waghdhare v. Joint Director, DGGI.

Accordingly, the High Court directed the GST department to release the seized Rs. 47.45 lakh, along with applicable interest in accordance with law, within six weeks from the date of uploading of the order.

For the Petitioners: Advocates Rahul Lakhwani, Mihir Jhanwar and Prateek Kedawat (through video conferencing).

For the Respondents: Advocates C.S. Sinha, Dev Yadav, Chelsi Agarwal (AAAG) and Kuldeep Singh Rathore (AAAG), appearing for Mahi Yadav (AAG).