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2022 (3) TMI 625 - HC - GSTCollection of tax during the investigation - amount was voluntarily paid during the investigation by the company under section 74(5) of CGST Act or not - amount was recovered from the company during investigation under the coercion and threat of arrest or not - matter conducted in a high handled and arbitrary manner during the course of investigation or not - petition filed by company suffers from delay or laches or not? Whether the amount paid during the investigation by the company was voluntarily paid, under section 74(5) of CGST Act? - HELD THAT - Section 74 of the Act deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts - The payment is made as an extension of goodwill and bonafide. It is without prejudice to and with full reservation of our rights and contentions to seek necessary refund at the appropriate time and therefore should not be regarded as an admission of liability. Thus it is evident that payments have not been made admitting the liability. On the other hand, the company reserved its right to seek refund and made it expressly clear that payment of the amount should not be treated as admission of its liability. Besides the aforesaid, there is no material on record to establish that guidelines issued by division bench of High Court of Gujarat were followed - the issue is answered in the negative and it is held that the amount was not paid voluntarily under Section 74(5) of the CGST Act. Whether the amount was recovered from the company during investigation under the coercion and threat of arrest? - HELD THAT - The officers of the Department have power of Inspection, search and seizure u/s 67(1) of CGST Act whereas Section 70 of the Act confers the power on the authority to summon person to give evidence as well as to adduce evidence. In the instant case, an investigation was initiated by DGGI officers and they entered the premises of the Company on 28.11.2019 at 10.30 a.m. in exercise of powers u/s 67(1) of CGST Act. On 30.11.2019 at about 4.00 a.m., a sum of ₹ 15 Crores was deposited by the Company under the GST cash ledger. Thereafter summons were issued to officers of company under section 70 of the Act. The officers of the company made a further deposit of ₹ 12,51,44,157/- at about 1.00 a.m. The aforesaid amounts were not deposited under section 74(5) of the Act - it can safely be inferred that payment of the amount was made involuntarily. There is also no material on record to hold that any threat of arrest was extended to officers of the company. The question whether any threat was extended to officers of the company is a question of fact which can't be adjudicated in a summary proceeding under Article 226 of the Constitution of India. Liberty is reserved to the parties to agitate the issue of threat and coercion in an appropriate proceeding - the issue is answered by stating that amounts were paid by the company involuntarily. Whether the DGGI officers conducted in a High handled and arbitrary manner during the course of investigation? - HELD THAT - It is pertinent to note that company in the writ petition has neither attributed any specific role to officers of DGGI by name nor has impleaded them in the writ petition. Therefore, the same being a question of fact cannot be adjudicated in a summary proceeding under Article 226 of the constitution of India - A statutory power has to be exercised within a system of controls and has to be exercised by relevance and reason. It needs reiteration that a statutory power should not be exercised in a manner, so as to instill fear in the mind of a person. The issue is kept open to be agitated in an appropriate proceeding. Whether writ petition filed by company suffers from delay or laches? - HELD THAT - The rule which says that this Court in exercise of its power under Article 226 of the Constitution may not enquire into belated and stale claims is not a rule of law but a rule of practice based on sound and proper exercise of discretion. The question of delay has to be decided in the facts of each case. The principle on which relief to a party on the grounds of delay and laches is denied is that rights may have accrued to others by reason of delay in filing the Writ Petition should not be allowed to be disturbed unless there is a reasonable explanation for the delay. The lapse of time is not attributable to any laches or negligence. In the instant case, the only provision which permits deposit of an amount during pendency of an investigation is section 74(5) of CGST Act, which is not attracted in the fact situation of the case - it is evident that amount has been collected from Company in violation of Article 265 and 300-A of the Constitution. Therefore, the contention of the Department that amount under deposit be made subject to the outcome of the pending investigation can not be accepted. The Department, therefore, is liable to refund the amount to the Company. Appeal dismissed.
Issues Involved:
1. Whether the amount was voluntarily paid during the investigation by the company under section 74(5) of CGST Act? 2. Whether the amount was recovered from the company during investigation under coercion and threat of arrest? 3. Whether the DGGI officers conducted in a high-handed and arbitrary manner during the course of investigation? 4. Whether the writ petition filed by the company suffers from delay or laches? Detailed Analysis: I. Whether the amount was voluntarily paid during the investigation by the company under section 74(5) of CGST Act? Section 74(5) of the CGST Act allows a person to make a voluntary payment of tax along with interest and a 15% penalty on their own ascertainment or as determined by the proper officer. The court found no material indicating that the amounts of Rs. 15 Crores and Rs. 12,51,44,157/- paid by the company at 4 AM and 1 PM on 30.11.2019 and 27.12.2019 respectively were made voluntarily. The company had communicated to the Department that these payments were made without prejudice and reserved the right to seek a refund, indicating no admission of liability. The court referenced guidelines issued by the Gujarat High Court, which were not followed in this case, further supporting that the payments were not voluntary under Section 74(5). Therefore, the first issue was answered in the negative. II. Whether the amount was recovered from the company during investigation under coercion and threat of arrest? The court noted that the DGGI officers have powers under Sections 67(1) and 70 of the CGST Act for inspection, search, seizure, and summoning individuals. The company deposited Rs. 15 Crores at 4 AM on 30.11.2019 and Rs. 12,51,44,157/- at 1 AM on 27.12.2019 without admitting liability. The court found no evidence that the amounts were due or any threat of arrest was made, inferring that the payments were involuntarily made. The court cited precedents where amounts collected during investigations without adjudication were deemed refundable. Thus, the second issue was answered by stating that the amounts were paid involuntarily. III. Whether the DGGI officers conducted in a high-handed and arbitrary manner during the course of investigation? The company alleged high-handed and arbitrary conduct by the DGGI officers, including threats of arrest. However, this was disputed by the Department, which claimed the investigation was conducted cordially. The court noted that specific roles were not attributed to individual officers, and they were not impleaded in the writ petition. As this is a question of fact, it cannot be adjudicated in a summary proceeding under Article 226 of the Constitution. The court emphasized that statutory powers must be exercised reasonably and in good faith. The third issue was left open to be agitated in an appropriate proceeding. IV. Whether the writ petition filed by the company suffers from delay or laches? The court held that the rule against entertaining belated claims is a rule of practice, not law, and must be decided based on the facts of each case. Section 54 of the CGST Act provides a two-year limit for claiming refunds. The company filed its refund application within this period and subsequently filed the writ petition when the refund attempts failed. The court found no delay or laches in filing the writ petition. Therefore, the fourth issue was answered by stating there was no delay or laches. Conclusion: The court concluded that the amount collected from the company was not voluntary under Section 74(5) of the CGST Act and was made involuntarily. The allegations of high-handed conduct by DGGI officers could not be adjudicated in this proceeding. The writ petition was filed within the statutory period, and there was no delay or laches. The court concurred with the learned Single Judge's conclusion, modified the findings to the extent discussed, and dismissed the appeal.
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