SMURTI WAGHDHARE V. JOINT DIRECTOR, DIRECTORATE GENERAL OF GST INTELLIGENCE & ORS 2026:BHC-OS:6209-DB:

DATE: 10.03.2026

COURT: High Court of Bombay

BENCH: Justice G. S. Kulkarni and Justice Aarti Sathe

FACTS:

The case arose when Smruti Waghdhare, proprietor of M/s. Platinum International, a GST-registered trader in ferrous and non-ferrous metals and scrap bearing GSTIN 27AASPW1736D1ZC, faced simultaneous search operations conducted by Respondent Nos. 2 and 3 on 27 and 28 June 2023 under written authorizations issued by Respondent No. 1. The searches were carried out at four premises owned by the Petitioner: her registered principal place of business at the Kika Street Office, Premises No. 19 (1st Floor, Laxmi Nivas/Minty House, Charni Road, Mumbai – a premises from which no business activities were conducted), her own residence in the same building, and her parents’ residence at B-1B, Jitekarwadi, Girgaon. Cash totalling ₹1 crore was seized – ₹60 lakhs from Premises No. 19 vide seizure order dated 28 June 2023 in Form GST INS-02 issued by Respondent No. 3, and ₹40 lakhs from the parents’ residence vide seizure order dated 27 June 2023 in Form GST INS-02 issued by Respondent No. 2. Parallel searches were also conducted on the same dates at the premises of the Petitioner’s friend Mr. Hitesh Chheda (proprietor of M/s. Leo Ferromet), who was later arrested under Section 132(1) of the CGST Act.

Aggrieved by the seizures, which the Petitioner asserted belonged entirely to her (kept for her mother’s ongoing medical treatment at Saifee Hospital) and had no nexus with any proceedings against her or with the alleged fake ITC racket involving Mr. Hitesh Chheda, and contending that the officers lacked statutory power under Section 67(2) of the CGST Act to seize cash, that no “reasons to believe” had been recorded, that the seized items were not secreted, that no receipt under Section 67(11) was furnished, and that no notice under Section 67(7) was issued within six months, the Petitioner approached the Bombay High Court by filing Writ Petition No. 839 of 2025 under Article 226 of the Constitution. She sought quashing of the two impugned seizure orders, immediate release of the cash with interest, directions to deposit the amount in court or in a fixed deposit pending disposal, and copies of the search authorizations in Form GST INS-01.

ISSUES:

The issues presented in this case before the Bombay High Court concerned the legality and vires of the seizure of cash amounting to ₹1 crore under Section 67(2) of the Central Goods and Services Tax Act, 2017. The core questions were whether cash qualifies as “goods liable to confiscation” or as “documents, books or things” that may be seized; whether the proper officers had recorded the mandatory “reasons to believe” that the cash was useful or relevant to any proceedings and had been secreted; whether the seizures could be justified merely on the basis of statements of a third party (Mr. Hitesh Chheda) without establishing any nexus to the Petitioner or compliance with procedural requirements; and whether the failure to issue a notice under Section 67(7) within six months and the subsequent handing over of the cash to the Income Tax Department without statutory authority rendered the entire action perverse and without jurisdiction.

JUDGEMENT WITH REASONING:

In its judgement dated 10 March 2026, a Division Bench of the Bombay High Court allowed the writ petition, quashed the impugned seizure orders dated 27 June 2023 and 28 June 2023 issued in Form GST INS-02, and directed Respondent Nos. 2 and 3 to forthwith release the entire seized cash of ₹1 crore directly into the bank account furnished by the Petitioner along with applicable interest within two weeks from the date the order is made available to them. The petition was disposed of with no order as to costs, with the clarification that the findings would not affect any parallel or pending income tax proceedings against the Petitioner.

The Court held that Section 67(2) of the CGST Act does not confer any power to seize cash, as cash is explicitly excluded from the definition of “goods” (falling instead within the definition of “money” under Section 2(75)) and does not otherwise qualify as “documents, books or things” liable to confiscation or relevant to proceedings. The Bench emphasised that the jurisdictional prerequisite of “reasons to believe”, which must have a rational connection and live link with the material on record  was entirely absent from the impugned seizure orders. Relying on the Supreme Court’s authoritative pronouncement in ITO v. Lakhmani Meval Das (1976), the Court explained that “reason to believe” cannot be a mere pretence or subjective satisfaction; it must be founded on material having a direct nexus to the escapement or relevance to proceedings, and the officers had failed to record any such reasons or link the cash to any incriminating evidence against the Petitioner. The seizures were therefore held to be without authority of law and perverse from the outset.

The reasoning was further fortified by the admitted violation of Section 67(7), under which seized items must be returned if no notice is issued within six months (or the extended period). No such notice had been served, entitling the Petitioner to immediate release. The statements of Mr. Hitesh Chheda (dated 21 July 2023) and the Petitioner (dated 10 April 2024) unequivocally confirmed that the entire ₹1 crore belonged to the Petitioner and was not connected to any fake ITC transactions, a fact never controverted by the department. The Court expressed shock that the cash had been handed over to the Income Tax Department without any provision in the CGST Act permitting such transfer, rendering the action wholly arbitrary. The Petitioner’s urgent need for the funds for her mother’s cardiac treatment was also noted as adding to the prejudice caused by the illegal retention. These cumulative failures led the Bench to conclude that the seizures were unsustainable and liable to be quashed with a direction for immediate restitution along with interest.

ANALYSIS:

The judgment delivers a strong rebuke to the GST authorities’ overreach in seizing cash during search operations under Section 67(2) of the CGST Act, 2017. By quashing the seizure orders and directing immediate release of the entire ₹1 crore with interest, the Division Bench firmly held that cash does not fall within the statutory ambit of “goods liable to confiscation” or “documents, books or things” that may be seized, as it is expressly covered under the definition of “money” in Section 2(75) and excluded from the seizure power. The Court underscored the mandatory jurisdictional precondition of a recorded “reason to believe” with a rational nexus to proceedings, which was conspicuously absent here, rendering the action arbitrary and ultra vires from inception. The ruling reinforces that GST officers cannot seize unaccounted cash merely on suspicion or third-party statements without establishing relevance or linkage to tax evasion by the searched person, and it highlights procedural lapses, such as non-issuance of notice under Section 67(7) within six months and the unauthorised transfer of seized cash to the Income Tax Department as compounding the illegality.

This decision has significant implications for GST enforcement practice and taxpayer rights. It curtails the tendency to treat cash discoveries as presumptively proceeds of evasion during searches, insisting on strict compliance with statutory language and safeguards rather than expansive or purposive interpretations that stretch “things” to include currency. By drawing on the Supreme Court’s classic exposition of “reason to believe” in ITO v. Lakhmani Mewal Das (1976), the Bombay High Court has re-emphasised that subjective satisfaction or vague suspicion cannot substitute for objective material establishing a live link to proceedings. While the judgment protects genuine personal savings (here linked to medical needs) from unwarranted seizure, it leaves open the possibility of cash seizure in exceptional cases where clear nexus to tax offences is demonstrably recorded and proven. Overall, the ruling serves as an important check against fishing expeditions and procedural arbitrariness in GST raids, promoting accountability in search-and-seizure actions while preserving the department’s ability to act where statutory conditions are genuinely met.