I’m with you. Ammo is not illegal. On what grounds did they seize the ammo?
My guess is forfeiture law, if you want to call it that. They simply state that they believe that the thing (house, car, cash, ammo) was obtained with drug money, and seize it. Then the owner has to prove that they obtained it legally, or the state keeps it.
A lot of departments fund quite a bit of their activities with that scam.