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Orders Refund, Holds GST Payments During Investigation Not
The has directed the to refund ₹53.97 lakh to a taxpayer, ruling that payments made during an investigation were not and could not be treated as such under the law. Justice C.M. Poonacha quashed appellate orders that had rejected the refund claim and ordered the amount be returned with 6% interest from the date of payment.
Payments Under the Microscope
The petitioner, , a registered taxpayer providing manpower services to government departments, faced an inspection on , based on an intelligence report alleging discrepancies between its GSTR-3B and GSTR-7 returns. Following the inspection, the taxpayer made two sets of payments through : ₹35.97 lakh on , and an additional ₹18 lakh on . The petitioner claimed these payments were made under by the tax officers.
The taxpayer subsequently sought a refund, arguing that the payments were not . The refund applications were rejected in , and the appeal was dismissed on , prompting the writ petition before the High Court.
Legal Framework and Precedents
The court examined the statutory scheme under Section 73(5) and , which permit a taxpayer to voluntarily pay tax before a is issued. requires the authorities to issue an acknowledgment in upon such payment. The court also considered departmental instructions dated , which clarify that no recovery can be made during search or inspection without following .
Relying on the Division Bench decision in and a coordinate bench ruling in , the court identified multiple factors indicating that the payments were not .
Why the Court Found Payments Involuntary
The court noted that no acknowledgment had been issued by the authorities, a mandatory step under Rule 142(2). More critically, there was no material showing any prior ascertainment of tax liability—either by the taxpayer or the proper officer—that could explain the amounts paid. The DRC-03 forms showed no payment toward interest or penalty, even though the payments were purportedly made under Section 74(5), which mandates payment of tax along with interest and penalty.
The court also highlighted that the second payment of ₹18 lakh was made just one day after the authorities issued a notice demanding personal appearance, a notice that did not cite any legal provision. The absence of a prior demand or assessment before the payments further undermined the claim of voluntariness.
“Mere proceedings initiated under will not in any manner indicate that the payments made by the petitioner are ,” the court observed, rejecting the Revenue’s argument that subsequent adjudication proceedings justified the retention of the amount.
The Final Order
The High Court allowed the writ petition, quashed the appellate orders dated , and directed the respondents to refund ₹53,97,352 along with interest at 6% per annum from the respective dates of payment until actual refund. The court clarified that all rival contentions regarding the and adjudication proceedings remain open for determination in those proceedings.
The judgment reinforces the principle that tax payments collected during investigations without proper legal process cannot be treated as , and taxpayers are entitled to refund with interest when are ignored.
