MARCH 18, 2026

Cash and Carry - Wrong Turn

By Vijay Kumar

THE Bombay High Court recently reminded the Directorate General of GST Intelligence (DGGI) that "cash and carry" is a retail concept, not a seizure strategy. Smurti Waghdhare vs DGGI (WRIT PETITION NO. 839 OF 2025) - 2026-TIOL-437-HC-MUM-GST

On 27th and 28th June 2023, searches were conducted by Officers of the Directorate General of GST Intelligence, Mumbai (famously known as DGGI) on the basis of authorization issued by the Joint Director , DGGI at the following places owned by the Petitioner,

a. Petitioner's office (registered under GST as her "principal place of business");

b. Another premises owned by the Petitioner (no activities are conducted from this place; no entity maintains its place of business at this place): ("Premises No 19");

c. Petitioner's residence (premises owned by Petitioner's father, Mr. Suhas Waghdhare, a senior citizen):

d. Residence of the Petitioner's parents, both of whom are senior citizens (premises owned by the Petitioner):

Pursuant to the above searches, several items owned by the Petitioner were seized from Premises No. 19 and residence of the Petitioner's parents by the DGGI team.

Search and seizure proceedings were conducted by the DGGI team on the same date at the residence of one Mr. Hitesh Chheda, proprietor of M/s. Leo Ferromet situated at Ghatkopar West and also in the premises owned by Mr. Hitesh Chheda, situated in the same building as Premises No. 19, which is also owned by the Petitioner.

It is the Petitioner's contention that though the Petitioner and Mr. Hitesh Chheda are friends, they are not related persons within the meaning of Central Goods and Services Tax Act, 2017. Mr. Hitesh Chheda was arrested on 21st July 2023 under the CGST Act and subsequently released on bail.

The DGGI seized Rs. 1 crore in cash - but forgot one small detail: the CGST Act doesn't allow them to.

In this backdrop, the question before the High Court was:

whether the seizure of cash of INR 1 crore by the impugned seizure orders is justified in law and whether the Respondents had the power to seize the same under the provisions of the CGST Act .

The Court minced no words:

The action of the Respondents of seizing the cash… is perverse, arbitrary and without the authority of law.

And further observed,

1. The provisions of Section 67(2) of the CGST Act have not been fulfilled as the very ingredients as mandated in the said Section have not been complied with by the Respondents.

2. On a plain reading of the Section, it is clear that the seizure has to be of any goods or any documents or books or things which are liable for confiscation, and for which the proper officer not below the rank of Joint Commissioner, should have "reason to believe" that the same are useful or relevant to any proceedings under the CGST Act, and it is only on the satisfaction of this condition that the seizure could be made.

3. In the facts of the present case, the Respondent-Department has given a go-by to the expression "reason to believe", which forms the bedrock to initiate proceedings under the CGST Act to seize goods, documents, books or things.

4. Respondents have further not recorded any reasons to conclude that the cash found at the premises of the Petitioner was liable to be seized.

5. There was no power under which the Respondents could seize the cash from the Petitioner's premises.

6. When this very important condition of "reason to believe" has not been fulfilled by the Respondents, the seizure of cash is completely illegal and not justified in law.

The officers skipped the reasoning, skipped the law, and went straight to the cash box.

There is another issue:

Section 67(7) of the CGST Act stipulates:

Section 67. Power of inspection, search and seizure. -

(7) Where any goods are seized under sub-section (2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized:

PROVIDED that the period of six months may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months.

The High Court noted that provisions of Section 67(7) of the CGST Act have not been followed in this case inasmuch as no notice, in respect of goods which are seized, had been issued within a period of six months of the seizure of the goods, and therefore the goods are liable to be returned to the Petitioner.

The case gets further twists:

The Court asked the Counsel for DGGI - where is the seized cash?

To the utter shock and dismay of the High Court, it was submitted that the cash has been handed over to the Income Tax Department for further proceedings.

It turned out the cash had taken a wrong turn too - straight into the Income Tax Department's lap.

The High Court observed:

We are rather surprised and completely at pains to understand as to from where the Respondents have sourced the power under the CGST Act to handover the cash to the Income Tax Department for further proceedings.

Thus, looked at from any angle, we are of the considered view that the impugned seizure orders and the consequent seizure of the cash by the Respondents is without any authority of law and could have not been made under any of the provisions of the CGST Act.

The High Court ordered:

a. Impugned seizure order dated 28th June 2023 seizing cash amounting to INR 60 Lakhs and impugned order of seizure dated 27th June 2023 seizing cash amounting to INR 40 Lakhs, is quashed and set aside.

b. Respondents to forthwith release the aforesaid amounts and pay the same directly to the Petitioner in the bank account as provided by her, along with the applicable interest within a period of two weeks from the date this order is made available to the Respondents.

So, the DGGI had no power to seize the cash; they had no power to hand over the cash to Income Tax Department - they did both - with impunity!

Now, the High Court has directed them to release the money. How will they do it? The money is with the Income Tax Department, illegally transferred to it. Is there any legal way to get it back?

Will the Income Tax Department say 'sorry' and return one crore rupees with their compliments?

When I discussed the issue of cash seizure with a departmental officer, he asked me, "do you think we have to just smile and forget if we find huge cash while we search for something else? As such, holding such amounts of cash is illegal"

The Delhi High Court clarified this question in Deepak Khandelwal vs Commissioner of CGST - 2023-TIOL-1007-HC-DEL-GST:

The search and seizure operations under Section 67 of the Act are not for the purpose of seizing unaccounted income or assets or ensuring that the same are taxed. The said field is covered by the Income Tax Act, 1961. Thus, even if it is assumed that the petitioner could not account for the cash found in his possession, the same were not liable to be seized under Sub-section (2) of Section 67 of the Act.

The Government was obviously not happy with the High Court decision and took the matter in SPECIAL LEAVE PETITION to the Supreme Court which dismissed the SLP - 2024-TIOL-79-SC-GST with the observation:

No case for interference is made out in exercise of our jurisdiction under Article 136 of the Constitution of India.

The special leave petitions are, accordingly, dismissed.

The Government was not happy with this dismissal by the Supreme Court and filed a review petition. The Supreme Court dismissed the Review petition - 2025-TIOL-61-SC-GST observing:

We have gone through the Review Petition and the connected papers filed therewith.

In our opinion, no case for review of order is made out. The review petition is dismissed.

So, the law of the land as it stands today is that GST officers CANNOT seize cash during their search operations unless ….

Right Turn by Customs

A short film called 'Right Turn' by Visakhapatnam Customs received laurels at the 10th Indian World Film Festival conducted in Hyderabad recently. The Film had actors, writers and directors all from Customs officers with the message that Customs officers should help the trade wherever possible instead of enforcing compliance alone.

In the film, a driver asks, "Sir shall I take the right turn?" "No, you go straight", says the Customs officer. Later in the film, an importer calls the same Customs officer who is driving his car and says, "Sorry sir for disturbing you on a Sunday. I have an urgent Bill of Entry. Are you coming to office tomorrow?" The officer says, "I am taking the right turn; I will do it today itself!"

A cinematic reminder that sometimes the right turn is the humane one. Congratulations to Visakhapatnam Customs.

You can watch the movie at https://www.youtube.com/watch?v=blcl84NWzbg

GST officers took the wrong turn - seizing cash they had no power to touch - while Customs officers took the right turn - seizing hearts with a film that celebrated service over severity. One carried away unlawfully, the other carried forward creatively. Between seizure and cinema, the law and the jest, the message is clear: in governance, as in driving, the turn you take decides whether you end up in court or in applause.