2022 (12) TMI 1038 - HC - GST

Deposit during search proceedings - whether the cumulative sum of Rs.1,80,10,000/- deposited on behalf of the petitioner- concern, during search proceedings carried out between 16.02.2022 and 17.02.2022, was a voluntary act or not? - HELD THAT - The violation of the safeguards put in place by the Act, Rules and by the Court, to ensure that unnecessary harassment is not caused to the assessee, required adherence by the official respondents/revenue, as otherwise, the collection of such amounts towards tax, interest and penalty would give it a colour of coercion, which is not backed by the authority of law. Failure to follow the prescribed procedure will, as in this case, have us conclude that the deposit of tax, interest and penalty was not voluntary - The reason that the officers of the official respondents/revenue have been asked, perhaps, to have the amounts deposited the day after the search is concluded, is, to also give space to the concerned person to seek legal advice, and only thereafter deposit tax, interest and penalty, wherever applicable, upon a proper self-ascertainment. The aforementioned amounts which were deposited on behalf of the petitioner-concern, lacked an element of voluntariness - the official respondents/revenue are directed to return Rs.1,80,10,000/- to the petitioner-concern, along with interest at the rate of 6% (simple) per annum. The interest will run from 17.02.2022 till the date of payment. The writ petition is disposed of.

Summary

Issues Involved:
1. Voluntariness of the deposit of Rs. 1,80,10,000/- during search proceedings.
2. Compliance with statutory provisions and procedural safeguards under the CGST Act, 2017 and the CGST Rules, 2017.
3. Allegations of coercion and violation of procedural safeguards.
4. Adherence to judicial directions and administrative instructions.

Detailed Analysis:

Voluntariness of the Deposit:
The core issue was whether the cumulative sum of Rs. 1,80,10,000/- deposited during the search proceedings was a voluntary act. The petitioner claimed that the deposits made in four tranches between 01:28 A.M. and 07:03 A.M. on 17.02.2022 were coerced. The official respondents/revenue contended that the amount was deposited voluntarily against challans in Form GST DRC-03 dated 17.02.2022.

Compliance with Statutory Provisions:
The court analyzed the provisions under Sections 73 and 74 of the CGST Act, 2017, and Rules 142(1A) and 142(2) of the CGST Rules, 2017, which provide for voluntary payment of tax, interest, and penalty before the issuance of a show-cause notice. The court noted that no acknowledgement in Form GST DRC-04 was issued by the proper officer, which is mandatory under Rule 142(2). This indicated non-compliance with the statutory procedure.

Allegations of Coercion:
The petitioner argued that the deposit was made under coercion, as evidenced by the circumstances of the search, including the timing of the deposits during the early hours while the search was ongoing. The court found that the deposits made before the conclusion of the search (which ended at 09:30 A.M. on 17.02.2022) lacked voluntariness. Additionally, the court noted the absence of independent witnesses and the non-provision of copies of documents to the petitioner, which contravened Section 67(5) of the CGST Act, 2017.

Adherence to Judicial Directions and Administrative Instructions:
The court referenced Instruction No. 01/2022-2023 dated 25.05.2022 issued by the GST-Investigation Wing, CBIC, which emphasized that no recovery should be made during search, inspection, or investigation unless it is voluntary. The court also cited the Gujarat High Court's directions in Bhumi Associate v. Union of India, which mandated that voluntary payments should be made the day after the search concludes. The court found that these directions were not followed, further supporting the conclusion that the deposit was not voluntary.

Conclusion:
The court concluded that the deposit of Rs. 1,80,10,000/- lacked an element of voluntariness and was not aligned with the statutory provisions and procedural safeguards. Consequently, the court directed the official respondents/revenue to return the amount to the petitioner-concern along with interest at the rate of 6% per annum from 17.02.2022 till the date of payment. The court also directed the CBIC to align Instruction No. 01/2022-2023 with the Gujarat High Court's directions in Bhumi Associate to prevent unnecessary harassment of taxpayers during search proceedings.