2021 (4) TMI 366 - HC - GST

Refund of the amounts paid during investigation - remittances made by the petitioner during investigation - self- ascertainment - Section 74(5) of GST Act - HELD THAT - Section 74(5) is a statutory sanction for advance tax payment, pending final determination in assessment. This is contrary to the scheme of assessment set out under Section 74. Records were summoned to examine whether there was an ascertainment in this case. The records revealed the tabulation of instalments furnished by the assessee at the time of recording of statement and out of which the first two instalments have been paid. These, according to Mr.Sundareswaran constitute self-ascertainment and trigger the provisions of Section 74(5) and (7) - Had this been the position, the records must contain material to show that (i) the assessee accepts the ascertainment made by it and (ii) the revenue has applied its mind and arrived at the position that the self-ascertainment by the assessee is inadequate. However, statement recorded at the time of search admitting GST liability and setting the scheme of instalments have been retracted by the petitioner on 05.11.2019 and the petitioner has consistently and vehemently been contested the liability to tax. With this, the requirement of ascertainment under Section 74(5), fails. The ascertainment contemplated under Section 74(5) is of the nature of self-assessment and amounts to a determination by it which is unconditional, and not one that is retracted as in the present case. Had such ascertainment/self-assessment had been made, there would be no further proceedings contemplated, as Section 74(6) states that with ascertainment of demand in Section 74(5), no proceedings for show cause under Section 74(1) shall be issued. In this case, enquiry and investigation are on-going, personal hearings have been afforded and both the parties are fully geared towards issuing/receiving a show cause notice and taking matters forward. The mandamus as sought for by the petitioner is granted. The amount of ₹ 2.00 crores collected shall be refunded to the petitioner within a period of four (4) weeks - Petition allowed.

Issues Involved:
1. Harassment by tax authorities.
2. Refund claim of ?2 crores with interest.
3. Legality of tax demand without due process.
4. Validity of documents seized during the search.
5. Voluntariness of tax payment during investigation.
6. Compliance with GST laws and procedures.
7. Allegations of coercion and high-handedness by tax authorities.
8. Legal provisions under Section 74(5) of the CGST Act, 2017.
9. Requirement of show cause notice before tax collection.

Issue-wise Detailed Analysis:

1. Harassment by Tax Authorities:
The petitioner sought a mandamus to restrain the first respondent from harassing them without addressing their grievance petition and refund claim. The court noted that the petitioner alleged high-handedness by the authorities during the search and claimed that the tax liability admission was not voluntary but coerced.

2. Refund Claim of ?2 Crores with Interest:
The petitioner requested a refund of ?2 crores paid during the investigation, alleging that the payment was made under coercion. The court granted the mandamus, ordering the refund of ?2 crores within four weeks, emphasizing that no collection should be made before the final determination of liability.

3. Legality of Tax Demand Without Due Process:
The court highlighted that any demand for tax must follow due process, including the issuance of a show cause notice. The court found that the payments made by the petitioner were not voluntary and were retracted, thus failing the requirement of 'ascertainment' under Section 74(5).

4. Validity of Documents Seized During the Search:
The petitioner's documents and registers were seized during the investigation. The court did not delve deeply into the validity of the seizure but focused on the legality of the tax collection process.

5. Voluntariness of Tax Payment During Investigation:
The petitioner argued that the tax payments were made under coercion and were not voluntary. The court agreed, noting that the payments were made under stress and were retracted, thus not constituting a valid self-ascertainment under Section 74(5).

6. Compliance with GST Laws and Procedures:
The court examined the compliance with GST laws, particularly Section 74 of the CGST Act, 2017. It emphasized that the scheme of assessment under Section 74 does not permit advance tax collection without proper ascertainment and issuance of a show cause notice.

7. Allegations of Coercion and High-handedness by Tax Authorities:
The petitioner alleged that the tax authorities acted with coercion and high-handedness, especially during the festive season, causing distress to the petitioner's employees and family. The court took these allegations seriously and found that the payments were made under duress.

8. Legal Provisions Under Section 74(5) of the CGST Act, 2017:
The court analyzed Section 74(5) and concluded that it does not provide statutory sanction for advance tax payment pending final determination. The court emphasized that any payment under Section 74(5) must be voluntary and based on self-ascertainment or proper officer's ascertainment, which was not the case here.

9. Requirement of Show Cause Notice Before Tax Collection:
The court reiterated that no tax collection should occur before issuing a show cause notice and determining the liability. The court cited various judgments supporting this principle and found that the petitioner's payments were prematurely collected without following due process.

Conclusion:
The court allowed the writ petition, ordering the refund of ?2 crores to the petitioner within four weeks and emphasizing the importance of following due process and statutory provisions under the CGST Act, 2017. The court also highlighted the need for tax authorities to act fairly and avoid coercive measures during investigations.

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