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TMI Blog2023 (3) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... der the provisions of the GST Act as well as under the provisions of the Customs Act also. The Circular dated 19.01.2022 clearly states that arrears are the over due payment of the amount of tax, interest, fine or penalty that is confirmed against a person who is liable to pay the same to the exchequer and it arises as result of Order-in-Original. The said Circular also clarifies the amount in the case under investigation, unconfirmed demands, Show Cause Notice etc., and the Order-in-Original that has been set aside or remanded for de-novo adjudication by Appellate authority do not fall under the category of arrears. In the instant case, it is an undisputed fact that prior to recovery of a sum of INR 1.5 crores from the petitioner, there is no adjudication or any order made/passed by the respondents, which entitled them to recover the money paid by the petitioner. As rightly contended by the learned Senior counsel for the petitioner, the respondents have themselves admitted in their statement of objections that the petitioner did not voluntarily make the payment and that he made it under protest. Under these circumstances, in the light of the aforesaid material on record, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ISHNA KUMAR For the Petitioner : (By Sri. Rohan Shah, Senior Advocate Appearing For Sri. Prasanth. V.G., Advocate) For the Respondents (By Sri. Madanan Pillai, CGC FOR R-1 Sri. Amit Deshpande., Advocate For R-2 TO R-4) ORDER In this petition, petitioner has sought for the following reliefs:- A. This Hon ble Court may be pleased to declare that the amount of INR 1,50,00,000/-( INR 1.5 crores) has been collected and retained by the Respondent No.3 without the authority of law, and the said amount is to be refunded to the Petitioner by the Respondents along with applicable interest; B. This Hon ble Court may be pleased to declare that no Customs duty is payable in respect of the finished goods, raw materials, spares and consumables, plant and machinery, etc., destroyed during the fire which took place in the Petitioner s factory on 19.03.2014. C. This Hon ble Court may be pleased to issue a writ of mandamus or a writ in nature of mandamus or any other appropriate writ or order directing the Respondent No.3 to forthwith grant refund of the amount of INR 1,50,00,000/- (INR 1.5 crores) along with applicable interest at the rate of 12 per annum; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 and a request made by the petitioner for submission of the information on 18.10.2019 having been granted, the petitioner addressed a communication dated 25.10.2019 intimating the respondents that the payment made by the petitioner was under compulsion and has to be construed as payment under protest . 2.3 Petitioner contends that on 19.04.2021, he submitted a letter with the 3rd respondent seeking refund of the aforesaid INR 1.5 crores which is followed by two reminders dated 20.08.2021 and 11.11.2021. As can be seen from the letter dated 19.04.2021, petitioner specifically invoked Article 265 of the Constitution of India and stated that no tax can be collected by the respondents from the petitioner except by an authority of law and in the absence of the respondents having any authority of law, respondents illegally have retained the aforesaid INR 1.5 crores collected by them and the same deserves to be refunded back to the petitioner. 2.4 Petitioner further contends that subsequently, the various queries / questions put by the respondents for the purpose of refund was answered by them and additional information was also provided by the petitioner, despite which, the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of orders and in the instant case, since no adjudication was done as on the date of recovery, much less any order being passed, the amount collected by the respondents is without jurisdiction or any authority of law, the same deserves to be refunded. (iii) My attention is invited to the Board Circulars dated 25.05.2022 and 19.01.2022 in order to contend that in the absence of adjudication or order for payment, the question of recovery of any money from the petitioner does not arise. (iv) It is contended that the amounts collected / recovered from the petitioner without there being adjudication are in the nature of pre-deposit and the same not in the nature of tax / duty, the same deserves to be refunded back to the petitioner. In support of his contentions, learned Senior counsel for the petitioner has placed reliance upon the following decisions:- (i) LML Ltd., vs Collector of Central Excise, Kanpur - 2002 (142) ELT 273(SC); (ii) Concepts Global Impex V. UOI - 2018 (11) TMI 688 P H HC; (iii) Century Metal Recycling Pvt Ltd V. UOI - [2008 (10) TMI 96 P H H] (iv) M/S Bhumi Associate V. Union of India - R/SCA 3196 of 2021, Gujarat High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv) Since the petitioner has already submitted his reply dated 22.02.2022 to the show cause notice dated 11.02.2022 issued by the respondents, the petitioner is not entitled to any relief at this stage. 7. By way of reply, learned Senior counsel for the petitioner submits that since the present petition was preferred on 29.01.2022 and that the right to claim refund got crystallized when the moment the subject amount of INR 1.5 crores was recovered and any subsequent show-cause notice or adjudication proceedings cannot be made the basis to deny refund sought for by the petitioner. My attention is invited to paragraph-10 of the statement of objections in order to point out that the admission made by the respondents that INR 1.5 crores was actually paid by the petitioner under protest during investigation. It is therefore contended that in the light of the submission of the petitioner that the petitioner has paid the said amount under protest, the petitioner would be entitled to refund. It is contended that the proceedings pursuant to the show cause notice are independent proceedings, which are mutually exclusive, independent and distinct from the right of the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty imposable on him subsequent to issuance of show cause notice under Section 73 or Section 74, as the case may be. 3. It is further observed that recovery of taxes not paid or short paid, can be made under the provisions of Section 79 of CGST Act, 2017 only after following due legal process of issuance of notice and subsequent confirmation of demand by issuance of adjudication order. No recovery can be made unless the amount becomes payable in pursuance of an order passed the adjudicating authority or otherwise becomes payable under the provisions of CGST Act and rules made therein. Therefore, there may not arise any situation where recovery of the tax dues has to be made by the tax officer from the taxpayer during the course of search, inspection or investigation, on account of any issue detected during such proceedings. However, the law does not bar the taxpayer from voluntarily making payment of any tax liability ascertained by him or the tax officer in respect of such issues, either during the course of such proceedings or subsequently. 4. Therefore, it is clarified that there may not be any circumstances necessitating recovery of tax dues during the course of sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ADC/JC/Appeals or the CESTAT and the Courts of law. (ii) The amount in the case under investigation, unconfirmed demands (i.e., show Cause Notice, including those in Call Book), Order-in-Original that has been set aside or remanded for de-novo adjudication by Appellate authority do not fall under the category of arrears . 10. As can be seen from the Circular dated 25.05.2022, no recovery can be made unless the amount become payable in pursuance of the order passed by the Adjudicating Authority or otherwise become payable under the provisions of the GST Act as well as under the provisions of the Customs Act also. The Circular dated 19.01.2022 clearly states that arrears are the over due payment of the amount of tax, interest, fine or penalty that is confirmed against a person who is liable to pay the same to the exchequer and it arises as result of Order-in-Original. The said Circular also clarifies the amount in the case under investigation, unconfirmed demands, Show Cause Notice etc., and the Order-in-Original that has been set aside or remanded for de-novo adjudication by Appellate authority do not fall under the category of arrears. 11. In the instant case, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld emanate from the proper officer, as mandated in the prescribed form i.e., GST DRC-04, as prescribed under sub-section (2) of Rule 142 of the 2017 Rules. 36.1 The official respondents/revenue, in our opinion, have not been able to discharge this burden. 37. The malaise of officials seeking to recover tax dues (in contrast to voluntary payments being made by assesses towards tax dues) during search, inspection or investigation was sought to be addressed by the GST Investigation, CBIC via Instruction No. 01/2022-2023 dated 25.05.2022. For the sake of convenience, the said instruction is extracted hereafter: Date:25th May, 2022 Instruction No. 01/2022-23 [GST Investigation] Subject: Deposit of tax during the course of search, inspection or investigation- reg. 1. During the course of search, inspection or investigation, sometimes the taxpayers opt for deposit of their partial or full GST liability arising out of the issue pointed out by the department during the course of such search, inspection or investigation by furnishing DRC-03. Instances have been noticed where some of the taxpayers after voluntarily depositing GST liability through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings. However, there is also no bar on the taxpayers for voluntarily making the payments on the basis of ascertainment of their liability on non-payment/ short payment of taxes before or at any stage of such proceedings. The tax officer should however, inform the taxpayers regarding the provisions of voluntary tax payments through DRC-03. 5. Pr. Chief Commissioners/ Chief Commissioners, CGST Zones and Pr. Director General, DGGI are advised that in case, any complaint is received from a taxpayer regarding use of force or coercion by any of their officers for getting the amount deposited during search or inspection or investigation, the same may be enquired at the earliest and in case of any wrongdoing on the part of any tax officer, strict disciplinary action as per law may be taken against the defaulting officers. (Vijay Mohan Jain) Commissioner (GST-Inv.), CBIC 38. It appears that this Instruction was issued by the GST-Investigation Wing, CBIC, in the backdrop of an order dated 16.02.2021, passed by the Gujarat High Court in the matter of Bhumi Associate v. Union of India MANU/GJ/0174/2021 , whereby the following wholesome directions we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in place by the Act, Rules and by the Court, to ensure that unnecessary harassment is not caused to the assessee, required adherence by the official respondents/revenue, as otherwise, the collection of such amounts towards tax, interest and penalty would give it a colour of coercion, which is not backed by the authority of law. 40. In this case, the argument of Mr Kumar, that the objection concerning the amounts deposited was raised only after the summon dated 13.04.2022 was issued, in our opinion, would not help the cause of the official respondents/revenue. The reason is, that if a procedure is prescribed under a statute or by law, that is, via dicta contained in a judgment, it has to be followed to the tee. 40.1 Failure to follow the prescribed procedure will, as in this case, have us conclude that the deposit of tax, interest and penalty was not voluntary. 41. The reason that the officers of the official respondents/revenue have been asked, perhaps, to have the amounts deposited the day after the search is concluded, is, to also give space to the concerned person to seek legal advice, and only thereafter deposit tax, interest and penalty, wherever applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y deposited. In view of this admitted position, the petitioners are entitled to be returned the amount paid. In Century Knitters (India) Ltd. (supra) finding that certain amount was recovered by the revenue without any show cause notice or demand, while directing retaining of 20% of the amount, the balance amount of Rs.8 crores was directed to be refunded. It was held that unless a demand is finalized and is existing which is liable to be discharged, the revenue cannot retain any amount unless there is a specific provision in the statute which authorizes such retention. Retention of any amount by the revenue in such a situation would be violative of Article 265 of the Constitution. The relevant observations are as under:- 11. After hearing learned counsel for the parties and perusing the record, we find that as on date no crystallized liability has been shown to be existing against the petitioners. Further, only a show cause notice has been issued whereunder a liability to the extent of Rs.50 lacs could be fastened. Insofar, as the matters which are under investigation, it has not been shown that any show cause notice in respect thereof has been issued by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t such payment was not a pre-condition for the grant of bail and that in principle the DGCEI would oppose grant of bail in criminal proceedings only because an offer is made to pay the arrears of service tax dues in such proceedings. 105. In the first place, the Court is unable to accept that when an offer is made in the circumstances outlined before a criminal court for payment of alleged service tax arrears without even a show cause notice in this regard being issued, it is plain that the offer is made only to avoid the further consequences of continued detention. Such a statement can hardly be said to be voluntary even though it may be made before a Court. Secondly, there appears a contradiction because the DGCEI did not decline to receive the offer of payment of alleged service tax arrears. 106. In a different context, while interpreting the provisions of the Delhi Value Added Tax Act, 2004 ( DVAT Act ), this Court in Capri Bathaid Pvt. Ltd. v. Commissioner of Trade Taxes 2016 (155) DRJ 526 (DB) took exception to the officials of the Department of Trade and Taxes collecting arrears of sales tax from dealers at the time of survey and search. The Court pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under sub-section (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment. Thus Section 74(5) of the Act gives an option to a person to make payment of tax, along with interest and 15% of penalty on its own ascertainment of the tax ascertained by proper officer and inform him in writing about such payment. 18. It is pertinent to note that a division bench of Gujarat High Court in M/S BHUMI ASSOCIATE VS. UNION OF INDIA by an interim order directed the Central Board Of Indirect Taxes And Customs was directed to enforce the following guidelines by issuing suitable circular / instructions: (1) No recovery in any mode by cheque, cash e-payment or adjustment of input tax credit should be made at the time of search / inspection proceedings under Section 67 of the Central / Gujarat Goods and services Tax Act, 2017 under any circumstances. (2) Even if the assessee comes forward to make voluntary payment by filing Form DRC 03, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gram and Hyderabad. Dear Sir, XXXXX As an extension of our goodwill conduct and bonafide, we have deposited INR 15,00,00,000/- (Rupees Fifteen Crores Only) with the Exchequer of Government during the pendency of inspection proceedings. The above deposit is without prejudice to and with full reservation of our rights and contentions to seek necessary refund at the appropriate time and therefore, should not be regarded as an admission of liability. The challan of payment of the aforesaid deposit is enclosed herewith for your ready reference as Annexure E. We assure you of our full co-operation in this matter going forward. 20. The company has also reiterated its stand in GST DRC-03 generated on 2.12.2019, the relevant portion of which is reproduced below: FORM GST DRC - 03 [See Rule 142(2) 142(3)] Intimation of payment made voluntarily or made against the show cause notice (SCN) or statement ARN:AD291219000080K Date: 02.12.2019 1. GSTIN 29aafcb7707d1zq 2. Name Bundl Technologies Private Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icers of the Department have power of Inspection, search and seizure u/s 67(1) of CGST Act whereas Section 70 of the Act confers the power on the authority to summon person to give evidence as well as to adduce evidence. The relevant extract of Section 67(1) and Section 70 of the Act read as under: 67. Power of inspection, search and seizure. (1) Where the proper officer, not below the rank of Joint Commissioner, has reasons to believe that - (a) a taxable person has suppressed any transaction relating to supply of goods or services or both or the stock of goods in hand, or has claimed input tax credit in excess of his entitlement under this Act or has indulged in contravention of any of the provisions of this Act or the rules made thereunder to evade tax under this Act; or (b) any person engaged in the business of transporting goods or an owner or operator of a warehouse or a godown or any other place is keeping goods which have escaped payment of tax or has kept his accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act. He may authorise in writing any other officer of central tax to inspect any places of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at on the day that the company made payment of the amount, any amount was due to the department. Therefore, it can safely be inferred that payment of the amount was made involuntarily. There is also no material on record to hold that any threat of arrest was extended to officers of the company. 25. The question whether any threat was extended to officers of the company is a question of fact which can't be adjudicated in a summary proceeding under Article 226 of the Constitution of India. Liberty is reserved to the parties to agitate the issue of threat and coercion in an appropriate proceeding. Accordingly the second issue is answered by stating that amounts were paid by the company involuntarily. 16. As can be seen from the aforesaid judgment of this Court, the Hon ble Division Bench also negatived the very same contentions urged by the learned counsel for the respondents in the present petition that since the adjudication is pending, refund should not be ordered. This Court has categorically held that the contention of the Department that the amount under deposit must be made subject to the outcome of the pending investigation cannot be accepted. It is therefore cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular dated: 17.09.2004, the payment made by the respondent company would not partake the character of Service tax liable to be paid by them. Therefore, mere payment made by the respondent will neither validate the nature of payment nor the nature of transaction. In other words, mere payment of amount would not make it a service tax payable by them. When once there is lack of authority to demand Service tax from the respondent company, the department lacks authority to levy and collect such amount. Therefore, it would go beyond their purview to collect such amount. When once there is lack of authority to collect such service tax by the appellant, it would not give them the authority to retain the amount paid by the petitioner, which was initially not payable by them. Therefore, mere nomenclature will not be an embargo on the right of the petitioner to demand refund of payment made by them under mistaken notion 19. The aforesaid judgment of the Hon ble Division Bench has been followed by the Allahabad High Court in the case of EBIZ.COM Pvt. Ltd. vs. Commissioner of Central Excise, Customs and Service Tax and Others 2016(9) TMI 1405, in order to come to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of pre-deposit. Under these circumstances, even this contention urged by the respondents cannot be accepted. 22. Insofar as the contention urged by the respondents that the show cause notice having been issued, this Court would not exercise its jurisdiction under Article 226 of the Constitution of India by placing reliance upon the judgment of the Apex Court in the case of State of Punjab Shiv Enterprises (2023) 2 Centax 244 (S.C.), is concerned, apart from the fact that the facts obtaining in the said case were completely different, wherein the writ petition against the show cause notice was quashed by the Apex Court, the present petition having been preferred on 21.01.2022, the show cause notice was issued subsequently and mere issuance of subsequent show cause notice cannot be legalise the fact that the original recovery on 15.10.2019 was without jurisdiction or authority of law and violative of Article 265 and 300A of the Constitution of India. Under these circumstances, even this contention of the respondents cannot be accepted and the judgment of the Apex Court in Shiv Enterprises case will not apply to the facts of the present case. 23. Insofar as t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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