Seizure of goods becomes illegal if extension orders are not recorded with reasons and communicated within six months.

In brief

The question

1. Whether the internal note-sheet dated 18.02.2026 constituted a valid order for extension of limitation under Section 110 of the Customs Act, 1962.

The court held

The Court held that the petitioners were legally entitled to the return of the cash on the expiry of six months.

It also directed

The Court modified its initial exemplary cost of ₹10 Lakhs to ₹1 Lakh, payable to the petitioners for the illegal three-month retention and the deliberate attempt to defeat the ends of justice, upon receiving an unconditional apology and assurance from the A.S.G.I.

The writ petition was disposed of with directions that the petitioners must seek recovery from the Income Tax authorities in accordance with law.

01Facts

The petitioners filed a writ of Mandamus for the release of ₹25,20,000/- seized by the Directorate of Revenue Intelligence (DRI) on 20.08.2025.

¶ 1-2

Under Section 110(2) of the Customs Act, 1962, the cash was required to be returned if no Show Cause Notice (SCN) was issued within six months (by 19.02.2026).

¶ 3

No SCN was issued, nor was any extension order communicated to the petitioners within the stipulated period.

¶ 7

During the pendency of the writ petition, the DRI handed over the cash to the Income Tax Department on 20.05.2026, acting on a requisition issued just one day prior.

¶ 8, 25

The DRI produced an internal note-sheet dated 18.02.2026 to justify the retention, claiming it as an extension order.

¶ 4

02Issues

i.1. Whether the internal note-sheet dated 18.02.2026 constituted a valid order for extension of limitation under Section 110 of the Customs Act, 1962.

¶ 11

ii.2. Whether the retention of seized cash beyond the statutory period of six months without communication of an extension order is legal.

¶ 17-19

iii.3. Whether the conduct of the authorities in handing over the property to another department during sub-judice proceedings amounted to overreaching the judicial process.

¶ 26

03Law Applied

Section 110(2) of the Customs Act, 1962, which mandates the return of seized goods if no notice is given within six months, unless a written extension is granted and informed to the person before expiry.

¶ 10

Principle from Chhugamal Rajpal v. S.P. Chaliha and Sahara India (Firm) v. CIT, establishing that statutory approvals must not be mechanical "rubber stamps" and must reflect an application of mind with recorded reasons.

¶ 12-13

Principle from S. Ganga Saran and Sons (P) Ltd. v. ITO regarding "reason to believe," asserting that such belief must be based on relevant and material reasons, not vague feelings.

¶ 15

Provisions in the judgment · 2 · Linked ones open on LawLens

Customs Act,1962 Section 110 Section 124

04Reasoning

The Court found that the internal note-sheet dated 18.02.2026 was invalid as an extension order because it lacked recorded reasons by the competent authority and bore a signature that appeared to be a mere mechanical "rubber stamp".

¶ 11-12

The Court noted that Section 110(2) requires the extension to be communicated to the petitioner before the expiry of the six-month period; since no communication occurred, the DRI lost jurisdiction to retain the cash after 19.02.2026.

¶ 17, 19

The Court characterized the DRI’s subsequent action of handing the cash to Income Tax authorities while the matter was sub-judice as a deliberate attempt to "overreach and defeat" the judicial proceedings.

¶ 26

The hurried execution of the requisition (issued in Lucknow on 19.05 and executed in Bareilly on 20.05) without seeking leave of the Court was deemed an unfair obstruction of the petitioners' right to the refund.

¶ 25, 27