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IN THE HIGH COURT OF DELHI AT NEW DELHI
Sanjeev Sachdeva, Ravinder Dudeja, JJ.
Sushil Kumar - Appellant
Versus
Delhi State Gst Govt. NCT of Delhi & Ors. - Respondents
W.P.(C) 15519 of 2023
Decided On : 26-02-2024
Refund - GST - Section 73, Section 74, Rule 142 - The court discussed the provisions of Section 73 and Section 74 of the Central Goods and Services Tax Act 2017, along with Rule 142 of the CGST Rules. The court highlighted the leeway available for taxpayers to pay tax voluntarily before being served with a notice for payment of tax, and the consequences of such voluntary payments. The court also emphasized the importance of following the prescribed procedure to ensure that unnecessary harassment is not caused to the assessee. The court referred to CBIC Instruction No. 01/2022-2023 and a direction issued by the Gujarat High Court, emphasizing the voluntary nature of tax payments and the consequences of non-compliance with the prescribed procedure.
Fact of the Case:
The petitioner sought refund of the integrated GST amounting to Rs.40,06,342/- recovered without authority of law. The petitioner was subjected to search based on GST INS-01 and was made to deposit amounts without any statutory demand being raised by the respondents and merely on the basis of alleged discrepancy noticed during the search operation. The petitioner claimed that the deposit was not voluntary and contrary to the CBIC Instruction No. 01/2022-2023.
Finding of the Court:
The court found that the amounts deposited lacked voluntariness and were liable to be returned with interest. However, the court held that no interest would be liable to be paid on the amount deposited by way of an adjustment of the credit amount standing in the Electronic Credit Ledger, unless an appropriate application had already been made prior to the alleged non-voluntary deposit.
Issues: The main issue was whether the deposit made by the petitioner during the search operation was voluntary or coerced.
Ratio Decidendi: The court emphasized the importance of following the prescribed procedure to ensure that unnecessary harassment is not caused to the assessee. The court held that the deposit made by the petitioner lacked voluntariness and should be refunded with interest. The court also clarified the liability for interest on the amount deposited by way of an adjustment of the credit amount standing in the Electronic Credit Ledger.
Final Decision: The court directed the respondents to refund the amount of Rs.15,06,342/- to the petitioner along with statutory interest and to forthwith re-credit the amount of Rs.25,00,000/- to the Electronic Credit Ledger of the petitioner. The refund was without prejudice to the proceedings initiated by the respondents under Section 73 of the Act and the defense of the petitioner thereto.
JUDGMENT
Sanjeev Sachdeva, J. (Oral) - Petitioner seeks refund of the integrated GST amounting to Rs.40,06,342/- (Rs.15,06,342/- towards stock variation and 25,00,000/- towards alleged wrongful input tax credit) recovered from the petitioner without authority of law.
2. Petitioner was engaged in business of manufacturing and trading of ferrous and non-ferrous metals.
3. Petitioner was subjected to search based on GST INS-01 dated 16.11.2023 issued by Respondents. The reasons mentioned in the FORM INS-01 were:
"i. Has suppressed transactions relating to supply of goods and/or services.
ii. Has suppressed transactions relating to the stock of goods in hands.
iii. Has indulged in the contravention of the provisions of this act or rules made there under to evade tax under this act."
4. The search operation started on 16.11.2023 at 5:30 P.M and continued till 17.11.2023 around 5 AM. During the search operation, documents and other records were inspected and consequently, as per the Petitioner, it was orally and vaguely alleged the Petitioner has evaded GST on its transactions. Further, the statement of the authorized representative of the petitioner was also recorded under duress and coercion.
5. Further, as per the Petitioner he cooperated and furnished all the statutory records maintained in the business premises.
6. As per the Petitioner, he was made to deposit an amount of Rs.15,06,342 (towards alleged stock variation) and an amount of Rs.25,00,000 (towards ITC reversal alleged to be illegible) totaling to Rs.40,06,342 vide FORM GST DRC-03, without any statutory demand being raised by the Respondents and merely on the basis of alleged discrepancy noticed during the search operation.
7. Said amounts were deposited by the Petitioner at 3:10 AM and 3:18AM, during the course of search operation, in the presence of the Respondents at the premises of the petitioner.
8. As per the Petitioner, no intimation of Form GST DRC-04 was ever issued by the Respondents, as prescribed under sub-section 2 of Rule 142 of CGSR Rules, acknowledging the acceptance of such payments.
9. Learned counsel for the petitioner relies upon the decision dated 20.12.2022 in W.P.(C) 9834/2022 titled `M/s Vallabh Textiles vs. Senior Intelligence Officer' wherein it was held that if the petitioner is coerced to make a deposit in an involuntary manner then the Petitioner is entitled to refund the said amount along with interest.
10. Learned counsel for petitioner submits that the deposit being made at 3:00 AM during course of search in the presence of the official, could not be termed a voluntarily deposit. He further submits that the petitioner was not given an opportunity to explain about the transactions and the stock position in question.
11. Per contra learned counsel for respondents submits that there was no coercion, and the amount was voluntarily deposited by the petitioner. He further submits that recovery proceedings under Section 73 of the Central Goods and Services Tax Act 2017 have been initiated by issuance of a Show Cause Notice and proceedings are underway.
12. It would be apposite herein to quote the decision in the case of Vallabh Textiles vs. Senior Intelligence Officer (supra). A Co-ordinate bench of this court held as under:
"51. The 2017 Act and the 2017 Rules made therein, do make provisions for enabling a person chargeable with tax to pay tax, along with interest, before being served with a notice for payment of tax, which either has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilized for any reason.
52. Thus, if the person chargeable with tax takes recourse to such a route, the proper officer is restrained from serving any notice qua tax or penalty under the provisions of the 2017 Act or the 2017 Rules framed thereunder, unless the amount which is self-ascertained by the person chargeable with tax falls short of the amount payable as per law.
53. This leeway is also available, where the person ch
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 ....
The deposit made during the search proceedings was deemed coerced, lacking legal safeguards mandated under the CGST Act, making it non-voluntary.
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....
Payments made under coercion during tax inspections cannot be construed as voluntary; proper procedures must be followed for valid refund claims.
Point Of Law: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilfulmisstatement or suppression of facts.
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