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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, Amit Mahajan, JJ.
Lovelesh Singhal Prop Shivani Overseas - Appellant
Versus
Commissioner, Delhi Goods And Services Tax & Ors. - Respondents
W.P.(C) 16353 of 2022
Decided On : 05-12-2023
CGST Act - Search and Inspection - Section 67 - Rule 139(1) - The court discussed Section 67(1) of the CGST Act and Rule 139(1) of the CGST Rules, which enable the proper officer to authorize inspection or search of a taxable person's business premises. The court examined the legality of the search and the reversal of Input Tax Credit (ITC) amounting to Rs.18,72,000/- in respect of supplies purchased by the petitioner.
Fact of the Case:
The petitioner, engaged in trading, contested the search and seizure conducted at his business premises, alleging coercion to reverse ITC and deposit Rs.18,72,000/- under duress. The petitioner sought refund of the amount deposited involuntarily during the search.
Finding of the Court:
The court found that the search authorization was not illegal, as the reasons to believe that the grounds for conducting the search existed were connected. However, the court accepted the petitioner's claim that the deposit was made under duress and in compelling circumstances, directing the respondents to reverse the ITC deposited by the petitioner and credit the same in his Electronic Credit Ledger (ECL).
Issues: The issues involved the legality of the search authorization, coercion to reverse ITC, and the voluntary nature of the tax deposit made by the petitioner during the search.
Ratio Decidendi: The court held that the search authorization was not illegal, but the deposit made by the petitioner was under duress and not voluntary. The court emphasized the impermissibility of pressurizing taxpayers to pay tax without following the requisite procedure.
Final Decision: The court directed the respondents to reverse the ITC deposited by the petitioner and credit the same in his ECL, while clarifying that it would not preclude the respondents from taking any other steps in accordance with the law.
JUDGMENT
Vibhu Bakhru, J. - The petitioner has filed the present petition, inter alia, praying that directions be issued to the respondents to refund the amount of Rs.18,72,000/-, which was deposited by the petitioner during the course of inspection/search conducted at his premises. The petitioner also prays that the order dated 07.10.2022 (in form INS-01) authorizing the search/inspection under Section 67 the Central Goods and Services Tax, 2017 (hereafter `the CGST Act') read with Rule 139 (1) of the Central Goods and Services Tax Rules, 2017 (hereafter `the CGST Rules'), be set aside. In addition, the petitioner prays that the search of his business premises and seizure effected, be declared illegal.
FACTUAL CONTEXT
2. The petitioner is an individual and is engaged in the business of trading of PVC Resin under the name of M/s Shivani Overseas. The petitioner is registered under the CGST Act and has been assigned the Goods and Services Tax Identification Number (GSTIN): 07AAYPS1178H1Z0.
3. On 07.10.2022 continuing till early hours of 08.10.2022, a search was conducted by respondent no.3 at the petitioner's business premises being Property No. 66, 3rd floor, Pocket-13, Sector-24, Rohini, Delhi and 3411/249, 2nd floor, Hansa Puri, Tri Nagar, Delhi, under Section 67 of the CGST Act. This was on the basis of authorization dated 07.10.2022 (in form GST INS-01), issued by respondent no.1 in terms of Rule 139(1) of the CGST Rules.
4. During the course of the search operation, documents pertaining to the period FY 2017-18 to 2021-22 were inspected. The petitioner alleges that during the course of the inspection, the visiting team of officers forced him to reverse the Input Tax Credit (ITC) amounting to Rs.18,72,000/- in respect of supplies purchased from one M/s Samridhi Exports. The petitioner was informed that the GST registration of the said supplier was cancelled retrospectively. The petitioner states that he was detained in the office from 4 pm o f 07.10.2022 to 2.30 am of 08.10.2022. It is contended on behalf of the petitioner that during this time, the petitioner succumbed to the intimidation of the visiting team and was compelled to transfer the aforementioned amount of the ITC.
5. The statement of the petitioner (Mr. Lovelesh Singhal, Proprietor of M/s Shivani Overseas) was recorded on 07.10.2022. He denied mismatch of GSTR1 & GSTR3B, GSTR 2A & GSTR3B for the period 2017-2018 to 2022-2023 and undertook to furnish the reconciliation, in case there was any mismatch attributable to ITC availed by the petitioner.
6. The respondents issued a show cause notice dated 29.03.2023 (hereafter `the SCN') to the petitioner under Section 74 of the CGST Act bearing reference no. ZD070323012878C, proposing a demand of Rs.17,83,28,150/- (i.e., CGST and SGST of Rs.3,22,91,278/- each) including interest of Rs.4,91,63,038 and penalty for a sum of Rs.6,45,82,556/- for the period of April 2022 to February 2023.
7. The petitioner is contesting the SCN and has filed the present petition being aggrieved by the failure on the part of the respondents to refund the amounts, which he claims was deposited involuntarily and under duress, during the course of search.
SUBMISSIONS
8. The petitioner impugns the proceedings initiated under Section 67 of the CGST Act, inter alia, on the ground that the authorization for search is vague and imprecise. It is contended that the proper officer issuing the authorization (in Form INS 01) had no reason to believe that the petitioner had suppressed any transactions relating to supply of goods/services and/or had suppressed transactions relating to the stock of goods in hand or had claimed ITC in excess of its entitlement under the CGST Act.
9. The petitioner also impugns the proceedings for collection of Rs.18,72,000/- by compelling the transfer of the said amount from the petitioner's Electronic Credit Ledger (ECL). As noticed above, it is the petitioner's case that he was coerced into filing Form DRC-03 and debiting the availa
The main legal point established in the judgment is that while the search authorization was deemed legal, the deposit made by the petitioner was found to be under duress and not voluntary, emphasizin....
The sufficiency of the reasons for forming a belief under Section 67 of the CGST Act is not subject to judicial review as long as there is material or information providing a rational basis for the b....
The main legal point established in the judgment is the importance of voluntary tax payments and the consequences of non-compliance with the prescribed procedure, as well as the liability for interes....
The deposit of tax, interest, and penalty must be voluntary and backed by the authority of law, and the prescribed procedure for recovery of taxes must be followed to ensure the voluntariness of the ....
Payments made under coercion during tax inspections cannot be construed as voluntary; proper procedures must be followed for valid refund claims.
The deposit made during the search proceedings was deemed coerced, lacking legal safeguards mandated under the CGST Act, making it non-voluntary.
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