Seizure of cash under Section 67(2) of the CGST Act is illegal without established "reason to believe."

The Petitioner, a proprietor of M/s. Platinum International, challenged two seizure orders issued on June 27 and 28, 2023, by GST authorities.

During searches conducted at "Premises No. 19" and the residence of the Petitioner’s parents, Respondents seized cash totaling INR 1 Crore.

The Respondents alleged the premises were used by one Mr. Hitesh Chheda for a fake billing racket to claim fraudulent Input Tax Credit (ITC).

Although the authorities initially suspected the cash belonged to Mr. Chheda, both Mr. Chheda and the Petitioner later deposed that the cash belonged to the Petitioner and was intended for her mother's medical treatment.

It was revealed during the hearing that the GST authorities had handed over the seized cash to the Income Tax Department.

Whether the seizure of cash is authorized under Section 67(2) of the CGST Act, 2017, and whether cash falls within the ambit of "goods, documents, books or things".

Whether the Respondents exercised the mandatory "reason to believe" required to initiate search and seizure under the Act.

Whether the failure to issue a notice within six months under Section 67(7) necessitates the return of the seized items.

The court primarily applied Section 67(2) of the CGST Act, which empowers a proper officer to seize "goods liable to confiscation" or "documents, books or things" useful for proceedings, provided there is a "reason to believe" such items are secreted.

It further relied on Section 67(7), which mandates the return of seized goods if no notice is given within six months.

Regarding the interpretation of "reason to believe," the court applied the principle from *ITO v. Lakhmani Meval Das*, establishing that such belief must be held in good faith, cannot be a mere pretence, and must have a rational connection to the material at hand.

The Court found the seizure of cash legally unsustainable because the Respondents failed to establish the jurisdictional prerequisite of "reason to believe".

The Court noted that the Respondents did not record any reasons to conclude the cash was liable for seizure or relevant to GST proceedings.

Furthermore, the Court observed that cash does not fall under the categories authorized for seizure in the specific context of Section 67(2), as it is explicitly "money" and not "goods".

The court highlighted a procedural lapse where the Respondents failed to issue a notice within the six-month statutory period under Section 67(7), rendering the continued retention of the property illegal.

Most significantly, the Court condemned the Respondents' action of handing the cash over to the Income Tax Department, finding no empowerment within the CGST Act for such a transfer.

It held that the seizure was without the authority of law.

The Court directed the Respondents to forthwith release the INR 1 Crore and deposit it into the Petitioner’s bank account with applicable interest within two weeks.

The ruling clarified that these findings would not affect any independent, pending Income Tax proceedings.