Seizure of Cash under GST: Judicial Limits, Evidentiary Scope, and Inter-Departmental Implications (Whether Cash can be transferred to the IT Dept. Courts have now clarified whether cash can be seized during a GST search as “things” under Section 67(2) of the CGST Act.
Courts have now clarified whether cash can be seized during a GST search as “things” under Section 67(2) of the CGST Act. This section allows the seizure of goods that can be confiscated, as well as documents, books, or “things” relevant to the case. However, courts have made it clear that cash is considered “money” and does not fall under “goods.” Using the principle of ejusdem generis, the term “things” should be understood in line with “documents” and “books,” which limits it to items with evidentiary value. As a result, cash cannot be seized just because it is unaccounted for or suspected to be linked to tax evasion, since GST search rules are meant to collect evidence, not to recover or secure revenue. The only exception is when the cash itself is direct evidence, such as marked currency tied to specific transactions or when it is part of a clear method of tax evasion. In general, cash cannot be seized as “things” under GST unless it is needed as evidence.
Further, cash seized during GST proceedings may be transferred to the Income Tax Department under Section 132A of the Income Tax Act if it is considered to represent undisclosed income. However, such a transfer is legally sustainable only where the initial seizure by the GST authorities is valid. It is well settled that if cash is seized during GST proceedings and is believed to be undisclosed income, it can be handed over to the Income Tax Department under Section 132A of the Income Tax Act. However, this transfer is only valid if the original seizure by GST authorities was lawful. An illegal act cannot be made legal by a later action. The Kerala High Court’s decision in Centre C Edtech Private Limited v. Intelligence Officer confirmed that if GST authorities seize cash without proper legal authority, transferring it to the Income Tax Department does not fix the illegality. This view is based on Articles 265 and 300A of the Constitution of India, which together protect people from losing their property unless the law permits it. Confirmation, thereby settling the legal position. Additionally, on the issue of retention of seized assets, the Delhi High Court’s ruling in Gautam Thadani v. Director Income Tax (Investigation) makes it clear that seized assets cannot be retained indefinitely and must either be assessed within the prescribed statutory timelines or returned to the assessee.
To sum up, the rules about seizing cash during GST searches are now clear. Cash is not considered goods or “things” and cannot be seized unless it is needed as evidence. Any seizure must follow the law and respect constitutional rights. An illegal seizure cannot be made valid by transferring the cash to another department, and authorities must follow the rules about how long they can keep seized assets. These rules help ensure due process and give taxpayers solid reasons to challenge any misuse of power.
Also Read:
1. Cash Seizure Under GST Quashed Due to Exclusion of Cash from ‘Things’ in Section 67
2. Cash Cannot Be Seized Under GST Law Without Specific Justification: Calcutta HC
3. Power of GST officers to seize cash during search operations?
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