Seizure and Provisional Release

When goods are seized during a search, the business loses the use of its stock while the department decides whether to propose confiscation. The Act deals with this in three ways. It allows the goods to be left in the owner’s custody under an order not to deal with them. It provides for release on a bond and security while the inquiry continues. And it sets a time limit: if no notice is issued within six months, extendable once by six more, the goods go back.

This guide covers seizure under section 67(2), release under section 67(6) to (9), and rules 139, 140 and 141. How a search is authorised and conducted is in the previous guide. The guide describes the powers and the safeguards as the provisions and instructions state them.

Not the same as detention in transit

Goods stopped on the road are dealt with under a different provision. Detention and seizure of goods and conveyances in transit fall under section 129, with its own forms, release conditions and penalty. CBIC’s Circular No. 41/15/2018-GST was issued on that procedure, not on seizure under section 67. This guide does not cover section 129.

What may be seized

Section 67(2) allows seizure of two categories:

• “goods liable to confiscation”, that is, goods that may be confiscated under section 130
• “documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Act”

The two are treated differently. Goods may end in confiscation. Documents, books and things are evidence: under the second proviso to section 67(2), they may be kept “only for so long as may be necessary for their examination and for any inquiry or proceedings”. Under section 67(3), those not relied on in a notice must be returned within thirty days of the notice.

The Delhi High Court has read “things” narrowly. In Deepak Khandelwal v Commissioner of CGST, Delhi West (17 August 2023), officers searched the residence of a trader in non-ferrous metals on 28 January 2020. The department alleged that he had taken credit on invoices from bogus or non-existent firms. The officers seized Rs 7 lakh in cash, two silver bars weighing 44 kg in all, phones, cheque books and documents. The court held that “things” must be read with “documents” and “books”: it “denotes items that contain information or records” useful in proceedings. It is not “any and every thing”, because “power of search and seizure is a drastic power”. The notice later issued did not rely on the cash or silver, so section 67(3) required their return in any event. The court ordered their release. The case is on gst.bharattax.net. The department’s special leave petition against it (SLP © No. 18536 of 2024) was dismissed on 14 August 2024, and its review petition was dismissed on 19 August 2025, as the Supreme Court’s record of proceedings of that date shows. A dismissal of a special leave petition does not by itself declare the law, so the High Court’s reasoning remains the authority on the point. Other challenges on the seizure of cash have been reported as pending before the Supreme Court; this guide has not read their orders and does not rely on them.

The seizure order and the prohibitory order

Seizure, in FORM GST INS-02. Under rule 139(2), the proper officer or authorised officer “shall make an order of seizure in FORM GST INS-02”. The form records:

• the date, time and premises of the inspection or search
• the witnesses
• the officer’s reasons to believe
• two tables, one for goods (description, quantity, make or model) and one for books, documents and things

The inventory. Rule 139(5) requires the officer to “prepare an inventory” of what is seized, with “description, quantity or unit, make, mark or model”, and to “get it signed by the person from whom such goods or documents or books or things are seized”.

Custody with the owner. Seized goods need not be removed. Under rule 139(3), the officer may entrust them to the owner or custodian “for safe upkeep”. That person “shall not remove, part with, or otherwise deal with the goods or things except with the previous permission of such officer”. INS-02 names the person to whom the goods are handed over.

Prohibition, in FORM GST INS-03. Where “it is not practicable to seize” the goods, the first proviso to section 67(2) and rule 139(4) allow the officer to serve an order of prohibition in INS-03 on the owner or custodian. The order directs that he shall not remove, part with or otherwise deal with the goods without the officer’s permission.

Provisional release on a bond and security

Section 67(6) provides that seized goods “shall be released, on a provisional basis, upon execution of a bond and furnishing of a security, in such manner and of such quantum, respectively, as may be prescribed or on payment of applicable tax, interest and penalty payable, as the case may be”. The section says “shall”. It gives two routes.

Bond and security, under rule 140. Rule 140(1) prescribes:

• a bond “for the value of the goods” in FORM GST INS-04
• a security “in the form of a bank guarantee equivalent to the amount of applicable tax, interest and penalty payable”

“Applicable tax” includes central and State (or Union territory) tax and compensation cess. INS-04 binds the person who signs it (the obligor) to the President or the Governor. Under it, the obligor:

• undertakes “to produce the said goods released provisionally to me as and when required by the proper officer”
• undertakes to pay all taxes, interest, penalty, fine and charges demanded in writing “within ten days of the date of demand”

The bond is signed before two witnesses and accepted by the officer. INS-04 refers to the security as “cash/bank guarantee”.

Payment. Alternatively, the goods are released on payment of the applicable tax, interest and penalty.

Failure to produce. Under rule 140(2), if the person “fails to produce the goods at the appointed date and place indicated by the proper officer, the security shall be encashed and adjusted against the tax, interest and penalty and fine”.

Release not taken up. Notification No. 27/2018-Central Tax lists goods that may be disposed of soon after seizure under section 67(8). Item 17 covers goods to be provisionally released under section 67(6) where “provisional release has not been taken by the concerned person within a period of one month from the date of execution of the bond”.

The rules do not prescribe a form for asking for provisional release, or a time within which the officer must act on a request.

Perishable and hazardous goods

Release, in FORM GST INS-05. Rule 141(1) covers goods or things “of perishable or hazardous nature”. If the taxable person pays the lower of two amounts, they “shall be released forthwith, by an order in FORM GST INS-05, on proof of payment”. The two amounts are the market price of the goods, and the tax, interest and penalty “that is or may become payable”.

Disposal. If the amount is not paid, rule 141(2) allows the proper officer to dispose of the goods. The amount realised is adjusted against tax, interest, penalty or other amounts payable.

Goods notified for early disposal. Section 67(8) lets the Government notify goods that “shall, as soon as may be after its seizure … be disposed of”, having regard to perishability, hazard, depreciation, storage constraints or other considerations. Section 67(9) requires an inventory of them. Notification No. 27/2018-Central Tax (13 June 2018) lists them. They include:

• salt and hygroscopic substances
• newspapers and periodicals
• menthol, camphor and saffron
• cells and batteries
• petroleum products
• pharmaceutical products of Chapter 30
• fireworks, red sanders and sandalwood
• “all taxable goods falling within Chapters 1 to 24” of the Customs Tariff
• unclaimed or abandoned goods liable to rapid depreciation from changes in technology or new models
• goods whose provisional release is not taken within a month of the bond

Six months to issue a notice

Section 67(7) reads:

Where any goods are seized under sub-section (2) and no notice in respect thereof is given within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: Provided that the period of six months may, on sufficient cause being shown, be extended by the proper officer for a further period not exceeding six months.

The outer limit is therefore twelve months from seizure, and only if the extension is properly made.

The Delhi High Court has held that the person is entitled to be heard before the extension. In Kashish Optics Ltd v Commissioner, CGST Delhi West (3 March 2025), spectacle frames were seized after a search on 22 and 23 October 2020. An internal note of April 2021 extended the seizure by six months. A notice proposing confiscation under section 130 was then issued on 20 October 2021. The company was not told of the extension before the first six months ran out.

The court held section 67(7) to be in pari materia with section 110(2) of the Customs Act. It applied the Supreme Court’s decision in I.J. Rao v Bibhuti Bhushan Bagh (1989): the person “would be entitled to a notice of the proposal for extension prior to the expiry of six months” and “to be heard on the said proposal”. This is subject to keeping the investigation confidential. “Sufficient cause cannot mean a reason known only to the concerned officials”. The cause recorded in the note was the officers’ own failure to value the goods and to keep the file in order, and that “cannot be ‘sufficient cause’”. The court also held that the availability of provisional release under rule 140 did not dispense with the need to show sufficient cause.

It directed release of the goods on the company depositing their value as recorded in the department’s valuation, completion of proceedings within six weeks, and copies of all seized documents and electronic data. The case is on gst.bharattax.net.

Documents and devices

The rules for documents are in the previous guide. Under section 67(5), the person may take copies of seized documents in the presence of an authorised officer, unless the proper officer considers this would prejudice the investigation. Under section 67(3), documents not relied on in a notice are returned within thirty days of that notice. Section 67(11) separately allows seizure, with a receipt, of accounts, registers or documents “produced before” the officer where he believes tax is being evaded.

Seizure and release, in order

1. Goods, documents or things found in a search are listed in an inventory signed by the person, and seized by an order in INS-02.
2. Seized goods may be left with the owner for safe upkeep. Where seizure is not practicable, an INS-03 prohibits dealing with them without the officer’s permission.
3. Provisional release is available under section 67(6): either a bond in INS-04 for the value of the goods plus a bank guarantee for the tax, interest and penalty, or payment of those amounts.
4. Goods released provisionally must be produced when the officer requires. If they are not, the security is encashed.
5. Perishable or hazardous goods are released in INS-05 on payment of the lower of market price and the tax, interest and penalty. Goods notified under section 67(8) may be disposed of soon after seizure.
6. If no notice is issued within six months of seizure, the goods are returned. An extension of up to six more months requires sufficient cause and, on the Delhi High Court’s reading, notice to the person before the first six months end.
7. Documents not relied on in the notice are returned within thirty days of it.

The next guide covers the power to summon a person to give evidence or produce documents under section 70, and the instructions that govern its use.