JANUARY 07, 2026
GST and the Case of the Vanishing Silver
IF bullion could file a writ, this would be it.
GRM Jewellers, a registered GST taxpayer dealing in bullion, had 105 kgs of pure silver lumps and Rs.2,05,000 in cash seized by the police at Kurnool on 27.01.2021. Confiscation followed, with an option to pay Rs.35 lakhs in lieu. Their appeal was dismissed on 24.11.2022; the GST Tribunal wasn't yet born, so the taxpayer paid Rs.39,20,000 (tax, penalty, fine) on 21.03.2023. The GST Assistant Commissioner issued a release order to the Police - return the silver and cash.
The police replied with a plot twist: the silver and cash had been stolen-from the police station! Some quantities were recovered and placed before the Judicial Magistrate, Kurnool. On direction, the taxpayer received 81.567 kgs of silver and Rs.10 lakhs. But the original seizure was 105 kgs and Rs.2,05,000. Worse, the taxpayer contended that 54.567 kgs of the returned silver was only 60% pure.
When compensation didn't come, the taxpayer approached the High Court seeking return of 44.123 kgs of pure silver or its market value.
The State argued that the seizure was an exercise of sovereign power, so no claim for compensation could be maintained.
The sovereign fence claimed immunity, but is immunity impunity?
The High Court reached for its constitutional toolkit: public law compensation and the doctrine of constitutional tort. It cited a line of Supreme Court decisions where compensation was awarded for State action or negligence.
The High Court referred to a table from the Supreme Court judgement in Kaushal Kishor v. State of U.P showing details of the cases where the Court awarded compensation in public law, invoking the principle of constitutional tort, either expressly or impliedly. And this is a brilliant erudite judgement written by Justice V. RAMASUBRAMANIAN and Justice B.V. NAGARATHNA.
Sl. No. | Case Law | Decision |
|---|---|---|
1. | Sebastian M. Hongray v Union of India (1984) 3 SCC 82 | - Two men who were taken for questioning by 21st Sikh Regiment never returned home. - When a writ of habeas corpus was filed by a JNU student, this Court directed that the missing men be produced before the Court. This order could not be complied with. - Court awarded compensation of Rs 1 lakh to the wives of the missing men on account of mental agony suffered by them. |
2. | Bhim Singh v State of J&K (1985) 4 SCC 677 | - An MLA was illegally arrested and detained to prevent him from attending a session of the Jammu & Kashmir State Legislative Assembly. - FIR was registered under Section 153-AIPC and order of remand was obtained from the Magistrate without producing the MLA before Court. - In a writ for habeas corpus filed by his wife, this Court observed that there had been a violation of his fundamental rights under Articles 21 and 22(2) of the Constitution and accordingly directed the State of Jammu and Kashmir to pay Bhim Singh a sum of Rs 50,000 as compensation. |
3. | Peoples' Union for Democratic Rights V State of Bihar &Ors. (1987) 1 SCC 265 | - A public interest litigation was filed against the illegal shooting by police officers against members of a peaceful assembly. - Several were injured and 21 died (including children) due to this incident. - While the State had paid a compensation of Rs 10,000 each to heirs of the deceased, this Court found it insufficient and directed payment of Rs 20,000 to dependents of each deceased and Rs 5000 to each injured person. |
4. | Saheli, a Women's Resources Centre vs. Commissioner of Police, Delhi Police & Ors. (1990) 1 SCC 422 | - Two women were forcefully evicted from their homes. The landlord was aided by the SHO and SI in the assault that led to demise of the nine- year-old son of one of the women. - This Court awarded compensation of Rs 75,000 to the mother of the deceased child. |
5. | Supreme Court Legal Aid Committee v. State of Bihar (1991) 3 SCC 482 | - A person injured in a train robbery, was taken to the nearest hospital by the police by tying him to the footboard of a vehicle. This led to his death. - This Court observed that had timely care been given to the victim he might have been saved. - The State of Bihar was directed to pay Rs 20,000 to the legal heirs of the deceased. |
6. | Nilabati Behera v State of Orissa (1993) 2 SCC 746 | - Petitioner was a mother whose son had died in police custody. - This Court directed the State to pay compensation of Rs 1.5 lakhs. |
7. | Arvinder Singh Bagga V State of U.P. (1994) 6 SCC 565 | - A married woman was detained and physically assaulted in a police station with a view to coerce her to implicate her husband and his family in a case of abduction and forcible marriage. - After taking her statement, her husband and his family were also harassed by the police. - This Court observed that the police had exhibited high-handedness and uncivilised behaviour and awarded the woman a compensation of Rs 10,000 and members of her family Rs 5000 each. |
8. | N. Nagendra Rao & Co. V State of A.P. (1994) 6 SCC 205 | - Appellant was in the business of food grains and fertiliser. On an inspection by the authorities concerned, his stocks were seized. - As was the practice, the food grains in custody were sold and the proceeds deposited in the Treasury, but the fertilisers were not dealt with in the same manner causing great loss to the petitioner. - In a suit for negligence and misfeasance of public authorities, this Court further developed the concept of constitutional tort and limited the scope of sovereign immunity laid down in Kasturi Lal [Kasturi Lal Ralia Ram Jain v. State of U.P., AIR 1965 SC 1039]. The State was held vicariously liable for the actions of the authorities. |
9. | Inder Singh V State of Punjab (1995) 3 SCC 702 | - A Deputy Superintendent of Police along with his subordinates abducted and killed seven persons due to personal vengeance. - This Court ordered an inquiry by CBI. After CBI filed a report, this Court directed the State to pay Rs 1.5 lakhs to the legal heirs (to be recovered from guilty policemen later) and State to pay costs quantified at Rs 25,000. |
10. | Paschim Banga Khet Mazdoor Samity V State of W.B. 1996) 4 SCC 37] | - The callous attitude on the part of the medical authorities at various Government-run hospitals in Calcutta in providing treatment to a train accident victim was highlighted in this case. - This Court directed the State to pay Rs 25,000 for the denial of its constitutional obligations of care. |
11. | D.K. Basu v State of W.B. (1997) 1 SCC 416 | - In a public interest litigation involving incidents of custodial violence in West Bengal, this Court issued guidelines for law enforcement agencies to follow when arresting and detaining any person. - This Court also discussed the award of compensation as a remedy for violation of fundamental rights as a punitive measure against State action. |
12. | People's Union for Civil Liberties v Union of India (1997) 3 SCC 433 | - Two persons alleged to be terrorists were killed by the police in a false encounter. - This Court directed the State of Manipur to pay Rs 1 lakh to the family of the deceased and Rs 10,000 to PUCL for pursuing the case for many years. |
13. | Municipal Corporation of Delhi, Delhi Vs Uphaar Tragedy Victims Association & Ors. (2011) 14 SCC 481 | - A fire in a cinema hall resulted in injury to over 100 persons and death of 59 cinemagoers. - The fire was caused by a transformer installed by Delhi Vidyut Board (DVB). - HC had found the Municipal Corporation, Delhi Police, and the DVB responsible for the accident. - This Court held only DVB and theatre owner liable to pay compensation in the ratio of 15: 85. - While doing so, this Court dealt extensively with the concept of constitutional tort. |
Coming back to the present case, the High Court observed:
1. The loss of silver can only be attributable to the negligence of the respondents as the silver was stolen from the police station itself.
2. The loss of such a large amount of silver and cash would absolutely impinge on the right of the petitioner, under Article 19(1)(g) to carry on his trade or business.
3. The petitioner is entitled to compensation for the loss suffered by him on account of the sheer negligence on the part of the officials of the State in protecting the property which has been seized.
4. It would not be possible for this Court to go into the question of the purity of the silver, handed over to the petitioner.
5. This Court would however leave it open to the petitioner, to demonstrate his claim that 54.567 kgs of the silver returned to him was impure silver consisting of only 60% silver with balance being made up of copper/nickel.
6. The cash of Rs. 2,05,000/- has been seized and cash of Rs 10 lakhs has been returned to the petitioner. It is stated that the aforesaid Rs 10 lakhs was the cash recovered from the persons who had stolen the silver and cash, as these persons had sold away some part of the silver and some of the proceeds of such sale, were recovered from these accused persons.
And held
1. The petitioner is entitled to a return of 23.44 kgs of pure silver.
2. The value of silver, as on date, shall be taken for purposes of supply of such silver to the petitioner.
3. The additional cash of Rs. 7,95,000/- shall be adjusted against the return of 23.44 kgs, by taking the value of Silver, as on today.
4. The silver that remains to be given to the petitioner, after such adjustment, shall be given by the respondents, either in the form of pure silver or by payment of cash, in lieu of silver. For such purpose the value of pure silver as on today shall be taken.
5. The aforesaid value will be applied if the silver is returned within three weeks from today.
6. If there is any delay in the return of the silver, beyond three weeks from today, the value of pure silver, on the date of return, shall be taken.
But the mystery lingers:
Is this the end of the story?
Who will finally give him the cost of silver-the Police who lost it, the GST authorities who levied it, the State that claimed sovereignty, or the Centre that never birthed its Tribunal?
Until next week
This judgement came on 31st December 2025 -Happy New Year.
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