Seizure of Cash Under Section 67 Is Illegal and Entitles Assessee to Interest and Post-SCN Asset Return

By | October 3, 2026
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Seizure of Cash Under Section 67 Is Illegal and Entitles Assessee to Interest and Post-SCN Asset Return

Issue

Whether the seizure of cash under Section 67 of the CGST/AGST Act is legally permissible, whether the assessee is entitled to interest on cash illegally withheld during search proceedings, and whether electronic devices and banking assets must be returned after the issuance of a Show Cause Notice (SCN).

Facts

  • Search proceedings under Section 67 of the Central/Assam Goods and Services Tax Act, 2017 were executed on the petitioner’s premises.
  • Respondent authorities seized two mobile phones, three pen drives, one ICICI bank card, and cash amounting to ₹11 lakhs during the search.
  • The seized cash of ₹11 lakhs was refunded to the petitioner during the pendency of the writ petition.
  • A demand-cum-Show Cause Notice (SCN) was subsequently issued to the petitioner by the Department.
  • The petitioner approached the High Court seeking interest on the illegally withheld cash for the period from 5 June 2025 to 19 August 2026, alongside the immediate release of the seized mobile phones, pen drives, and bank card.

Decision

  • Held in favor of the assessee; cash does not fall within the category of articles permissible for seizure under Section 67 during search operations, rendering the seizure of ₹11 lakhs illegal.
  • Held in favor of the assessee; although a direction for refund was redundant as the cash was returned prior to adjudication, the petitioner is legally entitled to interest on the sum illegally withheld during the stated period.
  • Held in favor of the assessee; respondent authorities were directed to compute and pay accrued interest on the withheld cash sum to the petitioner accordingly.
  • Held in favor of the assessee; since the SCN had already been issued, the continued retention of the mobile phones, pen drives, and bank card was unwarranted, and the Investigating Officer was directed to arrange their immediate return.

Key Takeaways

  • Illegality of Cash Seizure: Cash does not constitute goods, stock-in-trade, or documents liable for seizure under Section 67, making any such seizure during GST searches legally unsustainable.
  • Right to Interest on Unlawful Withholding: Where cash is illegally seized and retained by tax authorities, the taxpayer is entitled to statutory/compensatory interest for the entire duration of the illegal detention.
  • Release of Assets Post-SCN: Once investigation culminates in the issuance of a Show Cause Notice, continued retention of digital devices, storage media, and banking credentials is unnecessary and legally impermissible.
HIGH COURT OF GAUHATI
Ankit Choudhary
v.
Union of India
RAJESH MAZUMDAR, J.
WP (C) No. 2513 of 2026
SEPTEMBER  11, 2026
Dr. Ashok Saraf, P Baruah, N N Dutta, S J Saikia, P K Bora, B Sarma, A. Kaushik and P Das, Advs. for the Petitioner. Ms J Sarmah, DY. S.G.I for the Respondent.
ORDER
1. Dr. Ashok Saraf, learned Senior Counsel, assisted by Mr. P. Das, learned counsel for the petitioner. Mr. S K Keyal, learned Senior Counsel, appears for the Department of CGST. Mr. S Chetia, learned counsel, appears for SGST.
2. The Senior counsel has submitted that this writ petition has been instituted being aggrieved the illegal act of the respondent authorities in continuing to keep (i) 1 Samsung-s25 ultra mobile phone (Sl No. RZCY11E7K4V), (ii) 1 Realme C 53 mobile phone, (Sl NO. 0K53C21132200388), (iii) 3 nos. of pen drive; Sandisk Cruzer Blade 32 GB, USB Sandisk 3.2 Gen1 128 GB, HP USB Flash Drive USB 32 GB and (iv) Bank Card of ICICI Bank bearing no. 5344246645005938 seized, pursuant to a search and seizure procedure conducted by the respondent authorities.
3. The Senior Counsel for the petitioner has submitted that while the very seizure of the aforesaid articles was illegal, the respondent authorities had also seized an amount of Rs. 11 lakhs in cash from the petitioner; however, the cash amount of 11 lakhs had been returned to the petitioner during the pendency of these proceedings on 19.08.2026.
4. The Senior Counsel for the petitioner has submitted that the issue as to whether cash money would be within the realm of the terms used in Section 67 of the Central Goods and Services Tax Act or would fall within the definition of goods as given in Section 252 of the CGST Act has been answered by various High Courts, holding that the cash would not fall within any of the terms used in Section 67 of the CGST Act and, therefore, he has submitted that the seizure of the cash amount was illegal.
He has further submitted that, perhaps realising the position in law, the cash amount has already been refunded to the petitioner on 19.08.2026.
5. The Learned Senior Counsel has further submitted that the show cause notice has been issued to the petitioner vide notice bearing DIN 202606DEE30000333D8B dated 30.06.2026 and, therefore, it is an apparent case that the investigation has been completed and has culminated in the demand cum show cause notice.
6. By referring to the provisions of Section 67 of the Act, he has submitted that as per the proviso, the documents, books or things so seized shall be retained by the officer only for so long as may be necessary for their examination and for enquiry or proceedings under this Act. He has submitted that with the issuance of the show cause notice, the necessity for retaining the goods/the articles and items enumerated in the foregoing paragraphs, which include two mobile phones, three pen drives and a card issued by the ICICI Bank, had ended and they cannot be retained any further and were required to have been returned at least immediately after the demand cum show cause notice had been issued/served upon the petitioner.
7. He has further submitted that even though the cash amount of Rs 11 lakhs has been refunded to the petitioner, going by the different judgments of the High Courts, the petitioner would be entitled to be paid interest which accrues from the date of the seizure till the date of the actual refund.
8. Mr. S C Keyal, the learned Senior Standing Counsel representing the respondent No. 3 and 4, has submitted that since the present matter involves the interpretation of Section 67, and the facts are not denied, the submission of an affidavit-in-opposition may not be necessary and the matter may be decided in accordance with applicable law.
He has submitted that while, as per the provisions of Section 67, although the officer is entitled to retain the documents, books or things seized for so long as may be necessary for their examination and for enquiry or proceedings under the Act, the provisions of Sub-Section 7 are also relevant to the extent that the same provide that when the goods are seized under Sub-section 2, and no notice in respect thereof is given within six months of the seizure of the goods for extension, the goods are to be returned to the person from whose possession they were seized. He has accordingly submitted that in accordance with law, after six months of the seizure of the goods, they were required to have been returned to the petitioner.
He has submitted that since the items are also required in connection with the proceedings which are assailed in WP(C) No. 2501 of 2026, the investigating officer had not returned the goods since the investigation therein is not complete.
9. Mr. S.C. Keyal has also clarified that the seized articles in the present case would fall within the category of goods covered by sub-section 7 of Section 67.
10. I have heard both the learned Senior Counsel appearing for the contesting parties and I have also considered the materials placed before me.
11. The learned Senior Counsel appearing for the petitioner has placed reliance on the following judgments;
1. Shabu George v. State Tax Officer (IB) 99 GST 165/76 GSTL 348/116 GSTR 203 (Ker).
2. State Tax Officer (IB) v. Shabu George 99 GST 252/76 GSTL 145 (SC)/SLP (Civil) Diary No. 27670/2023.
3. Deepak Khandelwal v. Commissioner of CGST 99 GST 560/77 GSTL 5/116 GSTR 278 (Delhi)
4. Commissioner of CGST v. Deepak Khandelwal  105 GST 934/89 GSTL 193 (SC)/SLP (Civil) Diary No. 31886/2024.
5. B. Kusuma Poonacha v. Senior Intelligence Officer  87 GSTL 330 (Kar)/2024 SCC Online Kar 76.
12. In B. Kusuma Poonacha (Supra) and Another, the High Court of Karnataka has held as follows:
“9.2 In the aforesaid judgment at paragraph-57, the Delhi High Court has held that the judgment in Kanishka Matta’s case supra, does not correctly interpret Section 67(2) of the CGST Act and that cash/currency/money is excluded and not included in the expression “things” in the said provision. The Delhi High Court also came to the conclusion that cash/currency/money cannot be treated as “things” which were useful or relevant for proceedings under the CGST Act and consequently, the cash/currency/money seized from the petitioner therein was directed to be returned/refunded back to him.”
“9.3 A similar view has been taken by the Gujarat High Court in Bharat Kumar’s case supra, and the Kerala High Court in Shabu George’s case supra, which was confirmed by the Apex Court in SLP Diary No. 27670/2023 dated 31.07.2023. So also, the Delhi High Court in its subsequent judgments in Aravind Goel’s case, Gunjan Bindal’s case and Baleshwari Devi’s case supra, has reiterated the same position of law as also the Kerala High Court in T.H. Fazil’s case supra. Both the High Courts, while interpreting Section 67(2) of the CGST Act have held that cash/currency/money are not “things” within the meaning of the said provision and cannot be seized/confiscated during the course of search and seizure in terms of the said provision.”
“9.4 On careful perusal of the provisions contained in Section 67(2) of the CGST Act and the statutory scheme envisaged therein and other relevant provisions, I am of the considered opinion that the views taken by the High Courts of Delhi, Gujarat and Kerala have laid down the correct law and the judgment of the Madhya Pradesh High Court in Kanishka Matta’s case supra, is not based on the correct interpretation of the said provision. Under these circumstances, I am of the view that the expression “things” contained in Section 67(2) of the CGST Act does not include cash/currency/money found during the course of search and seizure and the respondents not to revenue do confiscate have jurisdiction or authority of law cash/currency/money during the said process and any such confiscation would not only be illegal and arbitrary but also in clear contravention of the provisions contained in Section 67(2) of the CGST Act. It is also significant to note that the object of Section 67 (2) of the CGST Act is not unearth unaccounted wealth (as in income tax) nor can it be said to be a mechanism for recovering tax by seizing assets, especially when there are separate mechanisms in Sections 73, 74, 78 and 79 of the CGST Act for that purpose and on this score also, I am of the view that cash/currency/money are not “things” within the meaning of the said provision and cannot be confiscated during the course of search and seizure in terms of the said provision.”
“Point No. 1 is accordingly answered by holding that the expression “things” contained in Section 67(2) of the CGST Act does not include cash/currency/money found or recovered during the course of search and seizure under the said provision.”
Further at paragraph 10.3, the High Court of Karnataka has held as follows,
10.3 A perusal of the second proviso to Section 67(2) of the CGST Act, as well as Section 67(3) clearly indicate that it was incumbent upon the respondents to conduct an enquiry and complete the proceedings under the Act as expeditiously as possible subsequent to search and seizure and after recording the statement of petitioner No. 1 on 21.09.2022. In this regard, it is significant to note that the respondents have not even issued show cause notice to the aforesaid company M/s. Vihaan Direct Selling (India) Pvt. Ltd., even after more than 12 years till today. The said inaction on the part of the respondents revenue to complete the investigation subsequent to the date of search and seizure dated 20.09.2022, for more than a period of 1 1/2 years from that day is sufficient to come to the Conclusion that the respondents are not entitled to retain the subject Cash Illegally confiscated from the petitioners despite repeated representations submitted by them and consequently, necessary directions are to be issued to the respondents to return/refund the entire subject sum/cash of Rs. 1,71,07,500/- together with accrued interest back to the petitioners within a stipulated timeframe.
Point No. 2 is also accordingly answered in favour of the petitioners by holding that the impugned seizure order at Annexure-A2 dated 21.09.2022 is illegal, arbitrary and without jurisdiction or authority of law and the same deserves to be quashed and by consequently directing the respondents revenue to refund/repay/return the entire subject sum/cash of Rs. 1,71,07,500/- together with accrued interest back to the petitioners within a stipulated timeframe.
The Senior Counsel has also placed reliance on the judgment of the Delhi High Court in Deepak Khandelwal (supra), which has held as follows:
“26. The question whether the proper officer has any power to seize cash or other asset is required to be addressed bearing in mind the aforesaid scheme of section 67 of the Act.
27 The expression “goods” is defined in sub-section (52) of section 2 of the Act as under :

“(52) ‘goods’ means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; Clause (h) of section 2 of the Securities Contract (Regulation) Act, 1956 29 reads as under:

“2(h) ‘securities’ -include

(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

(ia) derivative;

(ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes;

(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforce-ment of Security Interest Act, 2002;

(id) units or any other such instrument issued to the investors under any mutual fund scheme;

(ii) Government securities;

(iia) such other instruments as may be declared by the Central Government to be securities; and

(iii) rights or interest in securities;”

A plain reading of clauses (i) to (iv) of sub-section (1) of section 130 of the Act indicates that the goods, which are supplied or received in contravention of the provisions of the Act with the intent to evade payment of tax; goods which are unaccounted for and chargeable to tax supply of goods chargeable to tax, by a taxpayer, without applying for registration; and cases where the taxpayer contravenes any provision of the Act with the intent to evade payment of tax, are liable for confiscation.

The word “goods” as defined under sub-section (52) of section 2 of the Act is in wide terms, but the said term as used in section 67 of the Act, is qualified with the condition of being liable for confiscation. Thus, only those goods, which are subject-matter of or are suspected to be subject-matter of evasion of tax. During the course of search under sub-section (2) of section 67 of the Act, the officer conducting the search may find various types of movable assets. Illustratively, in an office premises, one may find furniture, computer, communication instruments, air conditioners, etc. Those assets although falling under the definition of “goods” cannot be seized, if the proper officer has no reasons to believe that those goods are liable to be confiscated.

Thus, even if, it is accepted, which we do not, that the proper officer 62 could seize the currency and other valuable assets in exercise of powers under sub-section (2) of section 67 of the Act, the same were required to be returned by virtue of subsection (3) of section 67 of the Act because the silver bars and currency have not been relied upon in the notice issued subsequently.”

13. The Senior Counsel has submitted that the SLP bearing Diary No. 31886 of 2024 in connection with the above case had been dismissed on 14.08.2024.
14. At this stage, the Learned Senior Counsel for the respondents has drawn our notice to the order dated 21.10.2024, passed in Commissioner of CGST Delhi West v. Gunjan Bindal [2025] 107 GST 612/93 GSTL 3 (SC)/SLP (civil) Diary No.44061 of 2024, wherein the Apex Court had issued notice on the application seeking condonation of delay, as well as on the special leave petition. It is the submission of the Learned Senior Counsel for the department that the Supreme Court has taken notice of the conflict between the interpretation adopted by the Delhi High Court and the Madhya Pradesh High Court on the issue of whether cash could have been seized by the GST authorities in the manner it was done, and therefore, he submits that a decision on the legality of the seizure of cash would not be called for at this stage.
15. I have considered the submissions made by the Learned Senior Counsel on the issue, and in the absence of any impediment imposed by the Hon’ble Apex Court in the order referred to by the Learned Senior Counsel for the respondents, I do not find any reason to differ with the views adopted by the Delhi High Court and the High Court of Karnataka in the cases of Deepak Khandelwal (supra) and B. Kusuma Konachar (supra), respectively.
16. Accordingly, I am of the considered view that the cash which was seized by the respondent authorities during the seizure procedure did not fall within the category of articles which could have been seized and therefore, the seizure is held to be illegal. Since the cash amount has been refunded prior to this Court coming to a finding regarding the legality, orders for refund could now be redundant. However, it cannot escape the notice of the Court that the cash had been illegally withheld by the respondent authorities from 5th of June 2025 to 19th of August 2026.
17. The petitioner would thus be entitled to the interest accrued on the aforesaid sum, which shall be calculated by the respondent authorities and paid to the petitioner within a period of 6(six) weeks from the date of receipt of a certified copy of this order.
18. In so far as the articles which were enumerated previously in this order, namely the 2 mobile phones, 3 pen drives and the bank card, since the show cause notice has already been issued, the Investigating Officer shall forthwith arrange for return of the aforesaid articles to the petitioner. For such purposes, the petitioner shall approach the Investigating Officer along with a certified copy of this order and upon their such appearance, the articles shall be released to them, taking proper acknowledgement.
19. The writ petition is accordingly disposed of.