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TMI Blog2023 (12) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorization. Thus, there may be some merit in the grievance of the taxpayer that the proper officer has not set out any specific reason but has merely reproduced all reasons on the basis of which an authorization under Section 67(1)(a) of the CGST Act could be issued. However, it is seen that the reasons as set out are connected - The respondents have not referred to any specific reason for initiating the proceedings under Section 67 of the CGST Act, in their counter affidavit, except to state that the reasons to believe were duly recorded on the file prior to conducting the search and the inspection. Thus, it cannot be accepted that the authorization for conducting search or inspection under Section 67 of the CGST Act is illegal for want of reasons to believe that the grounds for conducting the said search as set out in Section 67(1)(a) of the CGST Act, exist. Whether the petitioner is entitled to reversal of the ITC that was debited from his ECL? - HELD THAT:- Undisputedly, a taxpayer has an option to voluntarily pay tax on a self-ascertainment basis prior to issuance of a show cause notice. In terms of Section 73(5) of the CGST Act, a person chargeable to tax may before service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08.10.2022, a search was conducted by respondent no. 3 at the petitioner s business premises being Property No. 66, 3rd floor, Pocket-13, Sector-24, Rohini, Delhi and 3411/249, 2nd floor, Hansa Puri, Tri Nagar, Delhi, under Section 67 of the CGST Act. This was on the basis of authorization dated 07.10.2022 (in form GST INS-01), issued by respondent no. 1 in terms of Rule 139(1) of the CGST Rules. 4. During the course of the search operation, documents pertaining to the period FY 2017-18 to 2021-22 were inspected. The petitioner alleges that during the course of the inspection, the visiting team of officers forced him to reverse the Input Tax Credit (ITC) amounting to ₹18,72,000/- in respect of supplies purchased from one M/s Samridhi Exports. The petitioner was informed that the GST registration of the said supplier was cancelled retrospectively. The petitioner states that he was detained in the office from 4 pm of 07.10.2022 to 2.30 am of 08.10.2022. It is contended on behalf of the petitioner that during this time, the petitioner succumbed to the intimidation of the visiting team and was compelled to transfer the aforementioned amount of the ITC. 5. The statement of the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts, the Madras High Court had directed the concerned authorities to refund an amount of ₹2,00,00,000/-, which was allegedly paid under coercion. 11. The petitioner also referred to the decision of the Gujarat High Court in M /s Bhumi Associate v. Union of India: Manu/GJ/0174/2022, decided on 16.02.2021 , whereby the Court had issued directions to be followed for collecting tax in proximity to the search and seizure operations. The learned counsel also relied on the decision of the Coordinate Bench of this Court in M/s Vallabh Textiles v. Senior Intelligence Officer and Ors.: 2022 SCC OnLine Del 4508, whereby this Court had respectfully concurred with the directions issued by the Gujarat High Court in M/s Bhumi Associate v. Union of India (supra) and had found that the required procedure had not been followed in that case. Accordingly, the Court had directed the refund of the tax deposited by the taxpayer involuntarily along with interest at the rate of 6%. 12. Mr. Rajeev Aggarwal, learned counsel appearing for the respondents countered the aforesaid contentions. He submitted that it was well recognised that the taxpayer was entitled to make voluntary payment of tax to avoid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7(1) of the CGST Act is required to be issued in Form GST INS-01. The said Form is reproduced below: FORM GST INS-1 AUTHORISATION FOR INSPECTION OR SEARCH [See rule 139(1)] To .. .. (Name and Designation of officer) Whereas information has been presented before me and I have reasons to believe that A. M/s.___________________________________________ ___ has suppressed transactions relating to supply of goods and/or services has suppressed transactions relating to the stock of goods in hand, has claimed ITC in excess of his entitlement under the Act has claimed refund in excess of his entitlement under the Act has indulged in contravention of the provisions of this Act or rules made thereunder to evade tax under this Act; OR B. M/s.__________________________________________ is engaged in the business of transporting goods that have escaped payment of tax is an owner or operator of a warehouse or a godown or a place where goods that have escaped payment of tax have been stored has kept accounts or goods in such a manner as is likely to cause evasion of tax payable under this Act. OR C. goods liable to confiscation / documents relevant to the proceedings under the Act are secreted in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CGST Act, in their counter affidavit, except to state that the reasons to believe were duly recorded on the file prior to conducting the search and the inspection. It was also stated that the show cause notice is yet to be issued as the investigation is not complete as yet. 19. The only allegation as stated in the counter affidavit is that the petitioner has availed of ITC in respect of purchases made from certain specified suppliers (five in number) during the relevant period claiming an aggregate ITC of ₹6,48,41,211/-. However, the registration of the said suppliers had been cancelled from the date prior to the date of purchase. Thus, it does appear that in this case, the inspection was authorized on the ground that the petitioner had wrongfully availed of ITC in respect of supplies from other entities. 20. It is apparent that the cancellation of registration of the suppliers with retrospective effect does have a rational nexus with reason to believe that ITC in respect of supplies from such suppliers may not be available. Sufficiency of reasons is not subject to judicial review. It is well settled that so long as there is a rational basis supplying the reasons to believ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner had provided several documents to the concerned officers including the Trading Account for the period 01.04.2022 to 07.10.2022; Cash Book for the period 01.10.2022 to 07.10.2022; Stock group summary as on 07.10.2022; copies of the last purchase and sale bills; profit and loss account for the period 01.04.2021 to 31.03.2022; and parties ledger. 25. It is important to note that the said statement does not indicate that there was any admission that the petitioner had wrongfully availed ITC. 26. Undisputedly, a taxpayer has an option to voluntarily pay tax on a self-ascertainment basis prior to issuance of a show cause notice. In terms of Section 73(5) of the CGST Act, a person chargeable to tax may before service of a notice under Section 73(1) of the CGST Act or prior to the statement under Section 73(3) of the CGST Act, pay an amount of tax along with interest payable thereon under Section 50 of the CGST Act and inform the proper officer of such payment in writing. In such eventuality, in terms of Section 73(6) of the CGST Act, no notice is required under Section 73(1) of the CGST Act to be served by the proper officer in respect of the tax paid or any penalty payable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % of tax payable as the case may be; in cases where the said tax is collected under coercion, the same is required to be returned. 29. It is not necessary to examine in detail any controversy whether such payments were made voluntarily. Clearly, where a taxpayer turns around and states that the payments had not been made involuntarily and the circumstances prima facie indicate so, the taxpayer must be granted the benefit of withdrawing such payments. Obviously, in such cases, the taxpayer would forfeit immunity from levy of any penalty and the concerned authorities are not precluded from proceeding against the taxpayer in respect of any default and to the full extent as permissible under law. 30. It is relevant to note that the payment of tax on a self-ascertainment basis would necessarily require acceptance of the grounds on which such payments had been made. In the present case, it would be necessary for the petitioner to acknowledge the underlying liability on account of which the tax is paid. This is also required to be acknowledged by the respondents. 31. However, in the present case the petitioner has disputed that he is liable to pay any tax. There is no determination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the said directions have not been implemented. In Vallabh Textiles v. Senior Intelligence Officer and Ors. (supra), a Coordinate Bench of this Court had respectfully concurred with the aforesaid directions. 36. The Central Board of Indirect Taxes and Customs (CBIC) has also issued instructions emphasizing that the tax must be collected only after following the due process of law. The relevant extract of the said instructions dated 25.05.2022 are set out below: 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 by 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries and Technologies and Technologies Ltd. Through its Director Rajeev Gupta v. Commissioner DGST Delhi Ors.: MANU/DE/0081/2021 is also misplaced. In that case, the assessee s claim that he was coerced to make the statement was doubted on the ground that the petitioner had not retracted the same. The said decision has no relevance in the facts of this case. 42. The decision of the Gujarat High Court in S.S. Industries v. Union of India (supra) is also of little assistance to the respondents. In that case, there were serious allegations against the petitioner, which were set out in the counter affidavit. The Court had set out the said allegations and in paragraph 71 of the said decision, noted that none of the said averments made in the counter affidavit, were refuted. As stated hereinbefore, in the present case, there is no acknowledgement by the petitioner that he had wrongfully availed of the ITC. 43. In view of the above, we direct the respondents to reverse the ITC of ₹18,72,000/- deposited by the petitioner on 08.10.2022 and forthwith credit the same in his ECL. 44. It is clarified that this would not preclude the respondents from taking any other steps in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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