2024 (3) TMI 270 - HC - GST

Refund of amount deposited during investigation proceedings - Recovery of wrongful input tax credit - alleged discrepancy noticed during the search operation - HELD THAT - In the instant case, the deposit made by the Petitioner was at 3 10 and 3 18 AM during the search operation being carried out which continued till 5 00 AM The fact that Petitioner was made to deposit the amount at 3 10 and 3 18 AM before the search ended and the officers left at 5 00 AM, 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. There are merit in the said submission of learned counsel for the Respondent and hold that no interest would be liable to be paid on the amount deposited by way of an adjustment of the credit amount standing in the Electronic Credit Ledger, unless an appropriate application had already been made, prior to the alleged non-voluntary deposit, claiming refund or as an adjustment towards tax due - Respondents are directed to, within four weeks, refund the amount of Rs. 15,06,342/- to the Petitioner alongwith statutory interest @ 6% p.a. from date of deposit till repayment and the amount of Rs. 25,00,000/- by forthwith re-crediting the same to the Electronic Credit Ledger of the Petitioner. Petition disposed off.

Summary

Issues Involved:
1. Legality of the GST deposit during the search operation.
2. Voluntariness of the deposit.
3. Entitlement to refund and interest.

Issue-wise Comprehensive Details of the Judgment:

1. Legality of the GST deposit during the search operation:
The petitioner sought a refund of Rs. 40,06,342/- (Rs. 15,06,342/- towards stock variation and Rs. 25,00,000/- towards wrongful input tax credit) recovered without authority of law. The search operation was conducted based on GST INS-01 dated 16.11.2023, alleging suppression of transactions and contravention of GST provisions to evade tax. The petitioner claimed that the deposit was made under duress during the search operation, without any statutory demand being raised.

2. Voluntariness of the deposit:
The petitioner argued that the deposit made at 3:10 AM and 3:18 AM during the search operation was not voluntary. The court referred to the decision in 'M/s Vallabh Textiles vs. Senior Intelligence Officer,' which emphasized that deposits made under coercion are not voluntary. The court noted that the deposit was made before the search ended, indicating a lack of voluntariness. The CBIC Instruction No. 01/2022-2023 dated 25.05.2022, which prohibits recovery of tax dues during search operations, was also cited.

3. Entitlement to refund and interest:
The court held that the amounts deposited lacked voluntariness and were liable to be returned with interest. The court directed the respondents to refund Rs. 15,06,342/- with statutory interest @ 6% p.a. from the date of deposit till repayment and to re-credit Rs. 25,00,000/- to the petitioner's Electronic Credit Ledger. It was clarified that no interest would be paid on the amount deposited by way of adjustment from the Electronic Credit Ledger unless an appropriate application had been made prior to the alleged non-voluntary deposit.

Conclusion:
The court disposed of the petition, directing the respondents to refund the amounts as specified, without prejudice to the ongoing proceedings under Section 73 of the Act.