2024 (3) TMI 269 - HC - GST

Refund of deposit - reversal of ITC - The amount was allegedly recovered from them during search proceedings - HELD THAT - In in the instant case, the deposit made by the Petitioner before the search ended and the officers left, shows that the deposit was not voluntary and contrary to the CBIC Instruction No. 01/2022-2023 dated 25.05.2022. The contention of learned counsel for the respondent that the deposit was voluntary for the reason that there is no material placed on record by respondent to show as to why petitioner would voluntarily deposit the said amount when there was no claim made against the petitioner as on the date of deposit, cannot be accepted. Therefore, the amounts that were deposited on behalf of petitioner lacked voluntariness. Accordingly, said amount are liable to be returned with interest - Respondents are directed to, within four weeks, refund the amount of Rs. 35,00,000/- to the Petitioner alongwith statutory interest @ 6% p.a. from date of deposit till repayment. Petition disposed off.

Summary

Issues Involved:
1. Legality of the recovery of Rs. 35,00,000/- from the Petitioner.
2. Voluntariness of the deposit made during the search proceedings.
3. Compliance with CBIC Instruction No. 01/2022-2023 dated 25.05.2022.
4. Entitlement of the Petitioner to a refund with interest.

Summary:

1. Legality of the Recovery:
The Petitioner sought a refund of Rs. 35,00,000/- which was recovered sans authority of law during search proceedings on 07.01.2023. The search was based on GST INS-01 issued by the Respondents, citing suppressed transactions, excess input tax credit claims, and contravention of GST provisions to evade tax.

2. Voluntariness of the Deposit:
The Petitioner contended that the amount was deposited under coercion, not voluntarily, as officers printed pre-typed statements from the Petitioner's computer and coerced him to sign and reverse the Input Tax Credit via FORM GST DRC-03. The Petitioner was not given an opportunity to explain the transactions and stock position.

3. Compliance with CBIC Instruction No. 01/2022-2023:
The court referred to the CBIC Instruction No. 01/2022-2023, which clarified that no recovery should be made during search proceedings unless the taxpayer voluntarily pays. The instruction emphasized that voluntary payments must be initiated by the taxpayer and not coerced by tax officers. The court noted non-compliance with these instructions in the Petitioner's case.

4. Entitlement to Refund with Interest:
The court found the deposit was not voluntary, as evidenced by the lack of any claim against the Petitioner at the time of deposit and the non-compliance with CBIC instructions. Consequently, the court directed the Respondents to refund Rs. 35,00,000/- to the Petitioner along with statutory interest at 6% p.a. from the date of deposit till repayment, within four weeks. The refund would be without prejudice to ongoing proceedings under Section 73 of the CGST Act.

Conclusion:
The Petition was disposed of with directions for a refund and interest, highlighting the importance of voluntary compliance and adherence to procedural safeguards during tax recovery operations.