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2025 (2) TMI 175 - HC - GSTChallenge to investigation carried out u/s 67 of the Central Goods and Services Tax Act 2017 - validity of the summons to the witness - challenge to declaration that the recoveries as being illegal - deposit made voluntarily or not - case of the appellants is that on an analysis of the e-way bills it is revealed that the vehicles have not moved as evidenced by the RFID/fastag data - HELD THAT - The facts demonstrate the interference that the recording of statement was under the threat that he shall be arrested. It is also a fact that one deposit was made in the afternoon of 31.07.2021 and the same was after he was issued summons for appearance in Bengaluru on 02.08.2021 (appeared on 03.08.2021). So in that sense there was likelihood that he may be arrested at Bengaluru if he does not deposit the money is writ large. Similarly second payment was made on 03.08.2021 while the proprietor of the respondent was in Bengaluru. So it suggests the statements were recorded and deposits were made under threat and coercion. The statements and the payments made cannot be separated nor it can be concluded that there is no allegation of threat and coercion for the purpose of payment/deposit of the amounts. Section 74 (1) of the CGST Act contemplates that the assessee has an opportunity under Section 74 (5) to make his own ascertainment of tax and deposit the same. The appellants case is that the respondent has deposited the amount upon self-ascertainment of tax which stand is contested by the respondent by stating that the deposit was under threat and coercion otherwise no amount is payable. So the issue is whether any tax is payable at all? So pending decision on the issue can the amount remain deposited with the appellants? The answer has to be NO more so when it is concluded by the learned Single Judge that the same was not voluntary with which it is agreed upon. Insofar as the affidavit dated 10.08.2021 is concerned the plea is that such an affidavit was not given to the Authorities and it is for the first time filed along with the writ petition with an intention to resile out of the statements made to the appellants cannot be relied upon is unsustainable. This is so because the only stand of the appellants in the appeal/affidavit is the same is belated. If that be so it is noted the affidavit is dated 10.08.2024 i.e. one week after the statement dated 03.08.2024 was made. One week is not a large period to be considered as fatal/belated. The Court need to look into the facts in totality to come to a conclusion whether there was threat and coercion resulting in the statements recorded and also the deposits made. On a cumulative reading of the facts of this case it is opined that the learned Single Judge is right in coming to a conclusion in paragraphs No.24 and 28 of the impugned order which we have reproduced above that the payments were recovery and were contrary to law. Conclusion - i) The payments made by the respondent were not voluntary and did not constitute self-ascertainment under Section 74(5) of the CGST Act. The recovery was deemed coercive and contrary to law warranting a refund of the amounts with interest. ii) The appellants appeal dismissed upholding the decision of the learned Single Judge to grant a refund to the respondent. Appeal dismissed.
Issues Presented and Considered
The primary issues considered in this judgment were:
Issue-wise Detailed Analysis 1. Coercion and Legality of Recovery The legal framework under the CGST Act prohibits coercive recovery of taxes during an investigation unless due process is followed. The Court examined the timeline of events, including the prolonged detention of the respondent and the circumstances under which the payments were made, to determine whether coercion was involved. The respondent claimed that the payments were made under duress, as evidenced by the affidavit dated 10.08.2021, which was filed shortly after the payments. The Court found the affidavit to be timely and indicative of coercion, given the circumstances described by the respondent, including threats of arrest and prolonged detention by the investigating officers. The appellants argued that the payments were voluntary and part of self-ascertainment under Section 74(5). However, the Court noted that the facts did not support voluntariness, as the payments were made under duress and without the procedural safeguards typically associated with voluntary payments. 2. Voluntariness and Self-ascertainment The Court analyzed the concept of self-ascertainment under Section 74(5) of the CGST Act, which requires voluntary determination and payment of tax liability by the taxpayer. The Court found that the element of voluntariness was absent in this case, as the payments were made under coercive circumstances, and the respondent did not acknowledge any underlying tax liability. The appellants' argument that the payments were voluntary was not supported by evidence of self-ascertainment or acknowledgment of liability by the respondent. The Court highlighted that no intimation was given to the proper officer, nor was any acknowledgment in the form of DRC-04 issued, which are procedural requirements for self-ascertainment. 3. Entitlement to Refund Given the findings of coercion and the absence of voluntariness, the Court concluded that the recovery was contrary to law and violated Article 265 of the Constitution of India, which prohibits the levy and collection of taxes without the authority of law. Consequently, the respondent was entitled to a refund of the amounts paid with interest. 4. Validity of Summons and Procedural Conduct The Court examined the procedural conduct of the investigation, including the issuance of summons and the manner in which statements were recorded. The respondent's allegations of coercion and procedural irregularities were found credible, given the timeline and circumstances. The Court noted that the investigation exceeded reasonable limits and involved undue pressure on the respondent. Significant Holdings The Court held that the payments made by the respondent were not voluntary and did not constitute self-ascertainment under Section 74(5) of the CGST Act. The recovery was deemed coercive and contrary to law, warranting a refund of the amounts with interest. The judgment emphasized the requirement for voluntary compliance in tax payments and the prohibition of coercive recoveries during investigations. The Court reaffirmed the principle that any tax recovery must follow due process and be supported by legal authority. The Court dismissed the appellants' appeal, upholding the decision of the learned Single Judge to grant a refund to the respondent. The judgment reinforced the legal protections against coercive tax recoveries and underscored the importance of procedural fairness in tax investigations.
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