2023 (12) TMI 293 - HC - GST

Refund of amount deposited by the petitioner during the course of search and inspection - petitioner claims that it was coerced to deposit the aforesaid amount and that the same cannot be considered as a deposit done voluntarily under Section 74(5) of the Central Goods Services Tax Act, 2017 - HELD THAT - A plain reading of the show cause notices would indicate that the same are premised on the mismatch of the ITC in terms of form GSTR-3B and form GSTR-2A. It is also material to note that although, the show cause notices indicate that the petitioner had deposited the tax and penalty on 29.07.2022, the quantum of proposed demand did not provide for any credit for the same. It is apparent that such show cause notices are in terms of Section 74(7) of the CGST Act inasmuch as they are not limited to the amount which falls short of the amount payable after accounting for the tax deposited - the respondents have neither acknowledged the amounts deposited by the taxpayer on 29.07.2022 nor have they granted the benefit of the said deposit, while issuing the proposed demand under Section 74(7) of the CGST Act. In Vallabh Textiles v. Senior Intelligence Officer Ors. 2022 (12) TMI 1038 - DELHI HIGH COURT a Coordinate Bench of this Court had observed that not following the stipulated procedure would also lead to the conclusion that the payments were not voluntary. Whilst the petitioner has accepted that there was a mismatch in its return regarding the ITC, he did not acknowledge that the ITC was incorrectly availed. On the contrary, the Director of the petitioner had acknowledged that in case there was any tax liability, the same would be paid with interest and penalty. Admittedly, the respondents have not ascertained the said liability and no notice has been issued to the petitioner as contemplated under Rule 142 (1A) of the CGST Rules communicating the details of any tax, interest or liability as ascertained - the petitioner s contention is accepted that the payments made by it were not voluntary payments but under compelling circumstances. The respondents are directed to refund the amount deposited by the petitioner by making a payment of ₹23,70,000/- in cash along with interest at the rate of 6% per annum from 13.12.2022 till the date of payment - the present petition is allowed.

Summary

Issues Involved:
1. Whether the payments made by the petitioner during the search operation were voluntary under Section 74(5) of the CGST Act.
2. Whether the petitioner is entitled to a refund of the amount deposited along with interest.

Summary:

Issue 1: Voluntariness of Payments under Section 74(5) of the CGST Act

The petitioner argued that the amount of Rs. 28,20,000/- deposited during the search operation on 29.07.2022 was coerced and not voluntary under Section 74(5) of the CGST Act. The respondents contended that the payments were voluntary as the petitioner acknowledged the liability during the inspection, and the Director's statement was recorded without retraction. However, the court found that the respondents did not follow the procedure for voluntary deposits as per Rule 142(2) of the CGST Rules. The payments were made under form GST DRC-03, but no acknowledgment in form GST DRC-04 was issued. The court noted that the petitioner's Director acknowledged the mismatch in ITC but did not admit to incorrect availing of ITC. The court concluded that the payments made at 11:49 PM and 12:38 PM during the search operations were not voluntary but under compelling circumstances.

Issue 2: Entitlement to Refund and Interest

The petitioner requested a refund of the deposited amount along with interest. The court referred to its earlier decisions in Vallabh Textiles v. Senior Intelligence Officer & Ors. and Lovelesh Singhal v. Commissioner, Delhi Goods & Service Tax & Ors., which covered similar issues. The court directed the respondents to refund Rs. 23,70,000/- in cash with interest at 6% per annum from 13.12.2022 till the date of payment and to reverse the debit of Rs. 4,50,000/- from the petitioner's Electronic Credit Ledger (ECL).

Conclusion:

The petition was allowed, directing the respondents to refund the amount deposited by the petitioner along with applicable interest and to reverse the debit from the petitioner's ECL.