The Madras High Court has clarified that the seizure of digital devices under GST law cannot be used as a tool to obstruct a taxpayer’s ability to comply with statutory summons. In a pragmatic resolution, the Court directed the return of a seized computer upon the petitioner’s appearance, reinforcing that procedural fairness must prevail over coercive measures in tax investigations.
Background & Facts
The Dispute
The petitioner, M/s. Rajkumar Muthusamy (Proprietor of M. Rajkumar), was subjected to an inspection by the Director General of GST Intelligence, resulting in the seizure of a computer belonging to its manager, Ramakanth Naik. The seizure was effected under Form GST INS 02 dated 24.02.2026, accompanied by a Mahazar and a recorded statement from the manager. Following the seizure, two summonses were issued on 24.02.2026 and 17.03.2026, requiring the petitioner to furnish detailed financial records and appear for deposition.
Key Facts
- The computer seized contained business records including supplier lists, purchase and sales ledgers, and bank statements from 2020-21 onwards
- The petitioner maintains transactions with 831 suppliers, necessitating access to digital records for accurate compliance
- The seizure occurred on 24.02.2026
- Summons dated 24.02.2026 required: (i) list of all suppliers with purchase details; (ii) deposition of statement
- Summons dated 17.03.2026 required: (i) sales and purchase ledgers from 2020-21; (ii) bank statements from 2020-21; (iii) deposition of statement
- The petitioner was unable to respond to the summonses due to the unavailability of the seized computer
Procedural History
- 24.02.2026: Seizure of computer under Form GST INS 02; Mahazar and statement recorded
- 24.02.2026: First summons issued
- 17.03.2026: Second summons issued
- 07.04.2026: Writ Petition (WP No. 13394 of 2026) filed under Article 226 seeking quashing of seizure and return of computer
- 07.04.2026: Writ Petition disposed of at admission with consent of both parties
Relief Sought
The petitioner sought quashing of the seizure order dated 24.02.2026 and a direction to return the computer to enable compliance with the summonses dated 24.02.2026 and 17.03.2026.
The Legal Issue
The central question was whether the seizure of a computer under GST inspection powers can lawfully prevent a taxpayer from fulfilling statutory obligations under summons, thereby violating the principles of natural justice and proportionality.
Arguments Presented
For the Petitioner
The petitioner’s counsel argued that the seizure of the sole repository of business records rendered compliance with the summonses impossible. The petitioner had no alternative means to access transactional data involving 831 suppliers. The absence of the device was not a refusal to cooperate but a physical impediment. Reliance was placed on the principle that investigative powers must not become instruments of oppression.
For the Respondent
The Respondent’s counsel acknowledged the petitioner’s inability to comply but maintained that the seizure was lawful under Section 67 of the CGST Act, 2017. However, they offered a compromise: if the petitioner appeared before the office on 15.04.2026, the computer would be returned after copying its contents and recording a preliminary statement, with further depositions to be scheduled subsequently.
The Court's Analysis
The Court observed that while the authorities are empowered to seize electronic devices under Section 67 of the CGST Act, 2017, such power must be exercised with restraint and proportionality. The seizure of the computer, without providing any mechanism for the petitioner to access its contents for compliance, effectively nullified the petitioner’s right to respond to lawful summonses.
"The right to be heard is meaningless if the means to respond are taken away. The seizure of the computer, while procedurally valid, has rendered the summons nugatory."
The Court emphasized that the purpose of inspection and seizure is to gather evidence, not to paralyze the taxpayer’s ability to discharge statutory obligations. The Respondent’s offer to return the device upon appearance and after copying its contents was deemed a reasonable and balanced resolution.
The Court found no merit in prolonging the seizure beyond the point of securing digital evidence, particularly when the petitioner demonstrated willingness to cooperate.
The Verdict
The writ petition was disposed of with the consent of both parties. The computer seized under Form GST INS 02 dated 24.02.2026 shall be returned to the petitioner upon its appearance before the office of the 2nd Respondent on 15.04.2026. The contents of the computer shall be copied prior to return, and a preliminary statement shall be recorded on that date. Further statements may be recorded on subsequent dates as required. No costs are awarded.
What This Means For Similar Cases
Seizure Must Not Impede Statutory Compliance
- Practitioners may now argue that seizure of digital devices under GST inspections must be accompanied by a mechanism to preserve the taxpayer’s ability to respond to summonses
- Authorities cannot use seizure as a punitive or coercive tactic to force compliance
- The burden shifts to the investigating officer to demonstrate why retention beyond evidence duplication is necessary
Proportionality in Digital Evidence Collection
- Seizure of entire devices should be the exception, not the rule
- Where possible, forensic imaging or selective extraction should be preferred over physical removal
- Taxpayers must be given reasonable opportunity to access records for compliance, even during active investigations
Timely Return of Devices Is a Procedural Imperative
- The Court’s directive to return the device on a specific date (15.04.2026) sets a precedent for time-bound handling of seized digital evidence
- Delays beyond the time required for copying and recording preliminary statements may be challenged as violative of Article 14 and Article 21
- Practitioners should insist on written undertakings from authorities regarding timelines for return of seized devices
