2023 (2) TMI 820 - HC - GST

Seeking declaration that the payment of tax by way of reversal of Input Tax Credit is coerced by the Respondents from the Petitioner and it should be refunded - bogus firms - Validity of investigations initiated and summons issued - HELD THAT - The present civil writ petition for prayer of quashing the investigation and consequent summons, is not properly filed. The learned Counsel for the Petitioner then states that this prayer is not being pressed. Seeking refund of the ITC - HELD THAT - The reversal of the ITC is done by the Petitioner; however, then it is stated that it was on coercion during the criminal investigation. We note that in this petition, the only parties are the Superintendent (Anti Evasion) and the Deputy Commissioner CGST and C-Excise, and they are not joined by name. It is stated that on account of the aggressive posture of authorities, the Petitioner proceeded to reverse the balance ITC and therefore, what is alleged is force and coercion by an individual officer, and in the reply affidavit filed by the Respondents, this fact has been denied, and the case against the Petitioner of creating fraudulent ITC has been refuted. Investigation into the matter is pending. Reply, and rejoinders are raising seriously disputed questions about how the ITC is reversed. It is not possible to render a finding in a writ jurisdiction that it was due to coercion. There could be various reasons why the Directors of the Petitioner have reversed the ITC. As an accused, if the Petitioner is subjected to a threat or coercion by the investigation officer, then the Petitioner would have their legal remedies open. If the Petitioner is entitled to a refund, on any other legal ground, that the Petitioner was not liable to reverse the ITC, then it is open to the Petitioner to apply for reversal/ refund by making a proper application or adopting such proceedings as available. The writ petition is disposed off.

Summary

Issues:
1. Quashing of investigation and summons under CGST Act.
2. Coerced payment of tax through reversal of Input Tax Credit and seeking refund.

Issue 1: Quashing of investigation and summons under CGST Act:
The Petitioner sought relief in a writ petition to quash the investigation conducted under section 67 of the Central Goods and Services Tax Act, 2017, and the summons issued under section 70. Allegations were made that the Petitioner availed Input Tax Credit (ITC) of Rs.7.61 crores for non-existent firms. The Respondents proceeded with arrests under section 69 of the CGST Act, treating the offenses as cognizable and non-bailable. The Directors of the Petitioner were arrested, produced before the Magistrate, and later granted bail. The Petitioner challenged the investigation and subsequent proceedings leading to the offense and bail in the civil writ petition.

The Division Bench referred to previous legal decisions to determine when a civil or criminal writ petition should be filed. It was highlighted that if a proceeding may result in a sentence of imprisonment, fine, or forfeiture of property, it should be treated as a criminal writ petition. The Bench provided directions for categorizing writ petitions as either civil or criminal based on the nature of relief sought. The Petitioner's prayer for quashing the investigation and summons was not properly filed, and the Petitioner's Counsel acknowledged not pressing this prayer.

Issue 2: Coerced payment of tax through reversal of Input Tax Credit and seeking refund:
The second relief sought by the Petitioner was a declaration that the payment of tax through the reversal of Input Tax Credit was coerced and should be refunded. The Petitioner alleged coercion during the criminal investigation process, leading to the reversal of ITC. The Respondents denied these allegations and refuted the claims of creating fraudulent ITC. The Petitioner argued that the aggressive stance of the authorities forced them to reverse the ITC. However, the Respondents contended that the Directors did not complain of ill-treatment when produced before the Magistrate, suggesting that coercion was an afterthought. The investigation into the matter was ongoing, with disputed questions surrounding the reversal of ITC. The Court noted that it could not determine coercion in a writ jurisdiction and advised the Petitioner to seek legal remedies if subjected to threats or coercion. If entitled to a refund on legal grounds, the Petitioner was advised to apply for reversal or refund through proper channels.

The writ petition was disposed of with these observations, emphasizing the need for legal remedies in case of coercion during the investigation and the availability of procedures for seeking refunds based on legal grounds.