2023 (4) TMI 207 - HC - GST

Refund alongwith Interest - amount deposited during search proceedings - blocking of Input Tax Credit - whether the amount deposited on behalf of the petitioner-concern, during search proceedings carried out, was a voluntary act or not? - HELD THAT - Reference at this stage can further be made to judgment of Karanataka High Court in a case of THE UNION OF INDIA REP. BY THE SECRETARY DEPARTMENT OF REVENUE MINISTRY OF FINANCE, DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE NEW DELHI, SENIOR INTELLIGENCE OFFICER DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD ZONAL UNIT, DEPUTY DIRECTOR DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD, ADDITIONAL DIRECTOR DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD PRINCIPAL ADDITIONAL DIRECTORATE GENERAL DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD VERSUS M/S. BUNDL TECHNOLOGIES PRIVATE LIMITED, THE STATE OF KARNATAKA, COMMISSIONER OF STATE TAX GOODS AND SERVICE TAX BENGALURU 2022 (3) TMI 625 - KARNATAKA HIGH COURT , wherein the question was that whether the amount was voluntarily paid during investigation by a company under Section 74 (5) of Act. The appeal was dismissed and it was held that Article 264 of the Constitution of India mandates that collection of tax has to be by authority of law. If tax is collection without any authority of law, the same would amount to depriving person of his property without any authority of law and would infringe his right under Article 300A of Constitution. The only provision which permits deposit of amount during pendency of investigation is Section 74 (5) of Act, which is not attracted. The amount collected from company is in violation of Article 265 and 300A of Constitution. The contention of the department that amount under deposit be made subject to outcome of pending investigation, cannot be accepted. In the present case, as per the department, the petitioner has deposited the impugned amount voluntarily and the proper procedure has been followed. But Article 265 of the Constitution of India lays down that collection of tax has to be by the authority of law. If tax is collected without any authority of law, the same would amount to depriving a person of his property without any authority of law and would infringe his right under Article 300 A of the Constitution of India as well. In the present case, no receipt was given by the Proper Officer after accepting the impugned amount - Thus, the amount deposited by the petitioner under protest were liable to be refunded, as the petitioner has been deprived of his right. The writ petition is partly allowed and respondent No. 1 is directed to refund a sum of Rs.1,99,90,000/- along with 6 % interest.

Summary

Issues involved:
The issues involved in the judgment are the refund of a sum of Rs. 1,99,90,000/- along with interest and the unblocking of input tax credit amounting to Rs. 24,18,516/-.

Refund of Rs. 1,99,90,000/-:
The petitioner, engaged in manufacturing lead products, filed a writ petition seeking a refund of Rs. 1,99,90,000/- along with interest, which was forcibly deposited by respondent No. 1 after a search conducted on the petitioner's premises. Respondent No. 1 contended that the amount was voluntarily deposited by the petitioner, as indicated in the FORM GST DRC-03. The investigation revealed illegal availment of input tax credit and discrepancies in invoices. The department issued a show cause notice raising a demand, which was confirmed by respondent No. 2. The petitioner sought a refund based on precedents emphasizing that tax collection must be by the authority of law to avoid infringing on the right to property.

Unblocking of Input Tax Credit:
Respondent No. 2 had initially blocked input tax credit amounting to Rs. 24,18,516/- in the petitioner's electronic ledger, leading to objections from the petitioner. However, the court noted that the matter involving respondent No. 2 had become infructuous as the account was unblocked after a year, and steps were taken against the demand raised. The focus shifted to respondent No. 1, with the court adjourning the matter to allow further steps to be determined. The petitioner's claim for the unblocking of input tax credit was intertwined with the overall dispute and subsequent legal proceedings.

Judicial Precedents and Legal Provisions:
The judgment referenced various legal provisions, including Section 74(5) of the CGST Act, 2017, and Section 142(2) of the CGST Rules, 2017, to emphasize the importance of tax collection being in accordance with the law. Precedents from different High Courts were cited to support the petitioner's claim for a refund, highlighting the constitutional mandate that tax collection must be authorized by law to avoid violating property rights. The court's decision to partially allow the writ petition and direct respondent No. 1 to refund the disputed amount, along with interest, was based on these legal principles and precedents.

Conclusion:
The judgment addressed the issues of refunding a significant sum and unblocking input tax credit, emphasizing the legal requirement for tax collection to be authorized by law. The court's decision to partially allow the petition and order the refund, along with interest, was influenced by legal precedents and constitutional provisions safeguarding property rights in tax matters. The detailed analysis of the facts, legal provisions, and precedents formed the basis for the court's decision in this complex tax dispute.