The Madras High Court has criticised tax officials for procedural lapses during a GST search on a jewellery firm, emphasising the need for fairness and proper legal protocols in tax assessments and seizures.
The Madras High Court has criticised tax officials over a GST search at a jewellery firm, saying claims by public servants cannot be accepted without scrutiny and using the mythological figures Harishchandra and Yudhishthir to underline its point. In a ruling that focused on both procedure and fairness, the court said a payment of Rs 32.62 lakh made during the operation was not voluntary and could not be treated as a conscious discharge of liability.
Justice G R Swaminathan was hearing a petition from Kanniyakumari-based M/s Bhima Enterprises, a jewellery manufacturer and wholesaler, which challenged a search authorisation issued in August 2023 and sought a refund of the money it said was extracted under pressure. According to the court, the firm had been subjected to a GST search under Section 67(2) of the Central Goods and Services Tax Act, after which officials seized gold ornaments and bullion valued at several crore rupees on the ground that there were stock discrepancies.
The firm said it paid Rs 13.37 lakh on August 16, 2023, and another Rs 19.24 lakh the next day, while the department maintained that the payments were voluntary and followed the firm’s own realisation of tax liability. The court rejected that account, saying a taxpayer must first ascertain liability in writing before any payment can properly be described as voluntary. It also said officials must explain the option of provisional release of seized goods through a bond and security, so the assessee can make an informed choice rather than pay under pressure.
The judge also took aim at the search authorisation itself, saying it lacked the mandatory Document Identification Number, or DIN, and that the explanation offered by the department about technical problems was not backed by details. The court said inspection, search and seizure are distinct powers, and one does not automatically include the others. While stopping short of ordering an immediate refund, it directed the tax authorities to begin fresh assessment proceedings, issue proper notice and proceed within the legal timelines, leaving the fate of the Rs 32.62 lakh to that process. Taxscan has separately reported other Madras High Court rulings in recent GST disputes involving jewellery and provisional attachment, underlining the court’s strict approach to revenue actions that do not follow the statute closely.
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