GST update /2026-27/0095

Shiv Shankar Oil Udhyog and various ors. v. Additional Director General, Director General of Goods and Service Tax Intelligence Jaipur Zonal Office Jaipur and ors.

GST UPDATE

Cash could not be detained during search proceedings.

Civil Writ Petition No.: 3912/2024 (D.B.)

Court: Rajasthan High Court (Jaipur)

Case Title: Shiv Shankar Oil Udhyog and various ors. v. Additional Director General, Director General of Goods and Service Tax Intelligence Jaipur Zonal Office Jaipur and ors.

Outcome: Writ Petition was allowed.

Judgement Date: 15.04.2026

BRIEF FACTS OF THE CASE:

A search/investigation was conducted in the case of M/s Shiv Shanker Oil Udhyog (hereinafter referred to as Appellant). During investigation proceedings, money found in the premises subject to search was seized. Being aggrieved by the action of the investigating authorities by detention of the cash found, petitioner preferred writ petition seeking quashing of the show cause notice served to the appellant, deposit of tax during search proceedings and detachment of the cash which was detained.

QUESTION BEFORE HON’BLE COURT:

Whether the investigating authorities can exercise power granted under Section 67(2) to seize cash found in the premises during search proceedings?
Whether the expression things could be interpreted expansively to overcome the express exclusion of money from the definition of goods under Section 2(52) of the CGST Act?

BRIEF ARGUMENTS BY PETITIONERS:
Petitioners submitted following contentions: -
Section 67(2) does not include money in goods:

Relying upon various judicial pronouncements it was argued that the word “money” has not been included in Section 67(2) of the CGST Act as goods. Hence, investigating agency is incompetent to seize money as the same is not included. Further, Section 2(52) excludes money and securities from the definition of goods, and the Department cannot exercise a power that has not been conferred by the legislature. Reliance was placed upon numerous case laws like :
Smruti Bagdhari versus Joint Director, DGGI [(2026) 40 Centax 256 (Bom.)],
Commissioner of CGST versus Deepak Khandelwal (2024) 21 Centax 463 (S.C.),
CGST v. Bhagwan Gupta [(2024) 21 Centax 530 (S.C.)],
B. Kusuma Poonacha versus DGGI [(2024) 19 Centax 6 (Kar.)]
Bharatkumar, PravinKumar and Co. versus State of Gujarat [(2023) 12 Centax 63 (Guj.)]
Dhanya Sreekumari v. State tax officer [(2023) 8 Centax 169 (Ker.)] and
T.H. Fazil v. State Tax officer [(2023) 11 Centax 71 (Ker.)]
Issuance of SCN and Adoption of Coercive Means is Illegal

Relying upon judicial pronouncements, it was held that, the show cause notice and further adoption of coercive means to pressurize the petitioners to deposit any amount is contrary to the settled.

Principle has been laid down by decisions given in various judicial pronouncements that investigating officials are not empowered and authorized to seize and confiscate cash amount found during the search proceedings as the same is not covered under the domain of “goods” under CGST Act. Along with that, to put pressure on the petitioners to deposit any amount is contrary to the settled propositions of the law.

Entitlement to Compensation and Interest for Illegal Seizure

Placing reliance upon the ratio decidendi of the above referred cases applicable in the instant case, it was contended that, money has been categorically excluded from the definition of goods under Section 2(52) of the CGST Act. Furthermore, that they are eligible for compensation for illegal seizure along with interest. Any action pursuant to search and seizure is illegal and the petitioners are entitled for issuance of writ under article 226 of the Constitution of India.

Therefore, impugned order should be set aside.

BRIEF ARGUMENTS BY REVENUE DEPARTMENT:

Revenue Department contended that:
“Things” phrase should be given a wider meaning:

It was argued that the word “things” used in the proviso to Section 67(2) of the CGST Act has to be given a wider meaning as the legislature has used the word and inserted the proviso to the said section.

Section 2(17), 2(31), 2(75) and 67(2) should be read conjointly:

Further that the sections 2(17), 2(31), 2(75) and 67(2) should be read conjointly which empowers the respondents to seize money recovered during the search proceedings. Reliance was placed upon various judicial pronouncements in which it was held that Section 67(2) authorizes department/investigation authorities to seize cash during search proceedings.
Reliance placed upon judicial precedents

Reliance was placed upon the judgment in Shrimati Kanishka Matta v. Union of India, reported in [(2020), 120 Taxman.com 174 (MP)] a Coordinate Division Bench clearly held that Section 67(2) of the CGST Act, 2017, authorises the respondents to seize cash recovered during search proceedings.
Residuary phrase should be given a wider sense when the legislature intent is to do so:

Along with that reliance was placed upon the decision in the case of P. Mohanraj v. Shah Brothers Ispat Private Limited [(2021) 6 SCC 258] that rule of construction of any statute must be adopted in a way to nullify the plain meaning of the words used in a statute if they are designed in a wide sense. Along with that, a residuary phrase is used in wider sense specifically where the legislature has intentionally done it. While interpreting any provision, courts must consider the purpose of the law and the context in which the provision appears. Further, Legal maxim “noscitur a sociis” should not be misused to narrow down a broad and catch all expression, if the legislature deliberately used wide language to achieve a purpose.

FINDINGS & JUDGEMENT:

Following are the findings of the Hon’ble Court in the instant case:
Based on the contentions of both the parties, following are the observations and judgment of the Court:

Money and Securities are Excluded from the Definition of “Goods” under Section 2(52) of the CGST Act, 2017

Section 67(2) and definition of “goods” as contained in Section 2(52) was referred and it was observed that provision expressly excludes money and securities from its ambit . Further, definition of “goods” as contained in Section 2(22) of the Customs Act was considered in which no exclusion is mentioned, instead currency and negotiable instruments have specifically been included. Similarly, Section 132 of the Income Tax Act, 1961, specifically provides for the seizure of money, bullion, jewellery and other valuable articles. Court observed that these provisions demonstrate that where the legislature intends to authorise seizure of money, it expressly provides for the same.

Decisions given in the case of Annaya Kocha Shetty v. Laxmibai Narayan Satose [2025 INSC 466]in which it was held that provision should be first interpreted in its plain, ordinary and literal meaning. Only in those cases where there is any unreasonableness, departure from literal rule is allowed.
In continuation of above, decision in the case of P Mohanraj v. Shah Brothers Ispat Private limited (supra) was referred and it was held that there are three rules followed at the time of interpretation which are : 1. Plain meaning rule or literal rule, which means the words to be taken in their plain and liberal meaning 2. The golden rule, that when the words requires modification to avoid absurdity or inconsistency and 3. The mischief rule, used to give effect to the intention of the legislature, looking at the mischief which the provision is intended to address. Therefore, the Court observed that the terms “goods”, “money” and “things” have different meanings under the CGST Act, 2017, and are not synonyms of each other. The legislature has specifically defined “goods” and “money”, while the word “things” has not been defined under the Act.

The Expression “Things” under Section 67(2) does not Include Money

It was held that the language contained in Section 67(2) of the CGST Act is very clear and unambiguous. Money and securities have specifically been excluded by way of interpretation of any other provision. Along with that, the definition of “thing” as contained under Section 2 of the CGST Act, it was observed that the things means any other object other than money and securities. Along with that, the legislature has categorically excluded “money and securities” from the power of proper officer. Hence, proper officer has no power to seize “money and securities”.

Consistent View of Various High Courts on the Illegality of Seizure of Cash

Further it was observed that, Supreme Court in the decision of State Tax officer, IB and others v. Shabu George and Another [(2023) 11 Centax 194 (Ker.)],in which it was held that the appeal was allowed by directing the respondents to verify and release the cash seized from the premises to the concerned person against a receipt to be obtained.
It was observed that there were various judicial pronouncements in which it was held that the phrase used “goods liable to confiscation” or “document or books or things” under Section 67(2) cannot be interpreted in isolation or in manner which would grant unrestricted power to the department. Merely because cash was found at the premises subject to search, does not constitutes cash to be goods liable to confiscation or that is a thing useful for proceedings under the GST enactment. This principle has also been confirmed in the case of Commissioner of CGST v. Deepak Khandelwal (supra) in which it was held that the power of search and seizure under Section 67(2) could not be utilised merely for the purpose of utilising cash or unaccounted wealth.
It was observed that the said view observes considerable significance as the special leave petition preferred by the revenue department against the said decision was dismissed by the Hon’ble Supreme Court and the subsequent review petition was also dismissed. The said principle was also laid in the CGST v. Bhagwan Gupta (supra) in which substantial cash was seized during a GST search.
State Tax officer v. Shabu George (supra)in which Kerala High Court directed release of cash seized during the GST investigation cash did not constitute stock in trade of business. Similarly in the case of Dhanya Sreekumari v. State tax officer (supra) and T.H. Fazil v. State Tax officer (supra) In which it was reiterated that the cash which is not covered under stock in trade and did not showed any relevance directly with the GST proceedings could not be retained merely by invoking Section 67(2) of the CGST Act.
Furthermore, it was observed that,Bharatkumar Pravinkumar & Co. v., State of Gujarat (supra) directed return of substantial cash which was seized during transportation, particularly when the material on record indicated that the amount represented sale proceeds and was not shown to constitute stock in trade or an unexplained GST transaction.
Similarly reliance was placed upon the decision in the case of B. Kusuma Poonacha v. Senior Intelligence officer (supra) in which it was held that, whether cash/currency could fall within the expression “things” occurring in Section 67(2) was considered. The Court held that the cash/currency/ money do not fall within the expression “things” for the purpose of provision in the circumstances before it and consequently directed return of the seized amount along with accrued interest.
Further it was observed that principle has been laid by various judicial pronouncements in which it has been held that cash could not be retained by either the GST department or the Income tax department merely pending finalization of the respective proceedings and directed release of the amount while permitting the statutory proceedings to continue in accordance of law. Thus, the effect of the aforesaid decisions is that the power of search under Section 67(2) of the CGST Act cannot be converted into a general authority
Decision in the case ofSmruti Waghdare v. Joint Director Directorate General of GST (supra) was referred in which it was held that mere finding of cash or a suspicion that cash was unaccounted could not by itself justify seizure under Section 67(2) of CGST Act and seizure was quashed.
Based on above observations it was held that department has no authority to seize money and securities at the time of search, as the same has specifically been excluded by the legislature. Therefore, the money seized during the search operation by the respondents by invoking authority under Section 67(2) of the CGST Act is liable to be refunded.

With regard to the challenge made to the show cause notice, deposit made by alleged coercive methods and other issues, it was held that as the statutory alternate remedy is available under Section 107 and Section 112 of the CGST Act 2017. Hence, decision was only granted with respect to the seizure of “money” during search undertaken under Section 67 of the CGST Act 2017.

Thus, the writ petition filed by the petitioner was allowed.

CA Pradeep Jain_

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GST update /2026-27/0095

GST UPDATE

BRIEF FACTS OF THE CASE:

QUESTION BEFORE HON’BLE COURT:

BRIEF ARGUMENTS BY REVENUE DEPARTMENT:

FINDINGS & JUDGEMENT:

Opinion

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