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Dated: 10.03.2025

Delhi High Court Ruled that seizure beyond 12 months is unlawful

The Delhi High Court, in its judgment dated March 3, 2025, addressed a writ petition filed by M/S Kashish Optics Ltd. challenging the seizure and continued retention of goods by the CGST Department. The case revolved around Section 67 of the Central Goods and Services Tax (CGST) Act, 2017, which governs search and seizure provisions.

Key Issues:

1. Legality of Seizure:

• The Petitioner’s goods were seized on October 23, 2020, following a search operation.
• A Show Cause Notice (SCN) was issued on October 20, 2021, regarding confiscation under Section 130 of the CGST Act.
• The Petitioner challenged the delay and continued retention of goods.

2. Violation of Section 67(7) of CGST Act:

• As per Section 67(7), if no notice is issued within six months of seizure, the goods must be returned unless an extension is granted (maximum 12 months).
• The Petitioner argued that the extension was granted unilaterally without proper notice and hearing, which is required under natural justice principles.

3. Comparison with Customs Act:

• The Court referenced Section 110 of the Customs Act, 1962, which has a similar provision for seizure and retention.
• It cited Supreme Court precedents (I.J. Rao case) that mandate a notice to be served before extending the retention period.
• The Court held that CGST Act and Customs Act are pari materia (similar in nature), rejecting the Department’s argument that the two operate differently.

4. Deficiencies in the Seizure Process:

• The Department failed to properly document the goods in the seizure records.
• No valid justification was provided for extending the retention beyond 12 months.
• The Petitioner’s right to be heard before extension was violated.

Court’s Decision:

• The seizure was deemed unlawful beyond the prescribed period.
• The goods were ordered to be released, subject to the Petitioner depositing the valuation amount.
• The Department was directed to return all seized documents and electronic devices after making copies.
• Proceedings related to alleged violations must be concluded within six weeks.

Significance of the Judgment:

• Reinforces protection against arbitrary retention of seized goods under the CGST Act.
• Establishes parity between CGST and Customs laws concerning seizure procedures.
• Strengthens principles of natural justice, requiring authorities to provide notice and justification before extending seizure durations.

In case you face any issues related to Indirect Tax-Customs, GST, Foreign Trade Policy (FTP), Arbitration matters and Central Licensing and related advisory matters in India then please feel free to get in touch with SJ EXIM Services.

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Source: Delhi High Court

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