Tax deposited by taxpayer during search proceedings cannot be treated as voluntary: High Court

HC directed to refund the entire amount along with interest. The same view was taken by Delhi High Court and Gujarat High Court in referred rulings.

Petitioner:

On 05.03.2020, GST officers searched the factory of petitioner and resumed the entire record lying there.

GST Officers again conducted search on 15.01.2021 and took away Director and Chartered Accountant of the petitioner to their office.

GST Department detained Director of Company (78 years old) and Chartered Accountant of the petitioner till 1.00 A.M. They were released on the condition of deposit of Rs. 2.15 crores, which were deposited through reversal of ITC from electronic credit ledger and surrender of pending refund applied by the petitioner.

The respondents did not supply copy of Panchnama, copy of resumed record and electronic gadgets, which are necessary to file returns and comply with the requirement of banks. In this backdrop, the present petition has been filed.

Held by High Court:

References:

The above provisions of Section 74 have been examined by the Delhi High Court. In that case, the Delhi High Court was examining the issue, where an amount of Rs.1.8 Crores was deposited by the petitioner, during search proceedings.

The question for consideration was, whether the said deposit was voluntary act or not. During the search proceedings, an officer of the company was detained for several hours and was allowed to leave only when he appended his signatures on the documents. The Delhi High Court examined the provisions of Section 74(1) of the CGST Act, 2017 along with Rule 142 of the CGST Rules.

The Court also examined the Government instructions dated 25.05.2022 issued by the CBIC with respect to the GST investigation. These instructions were issued keeping in view the observations made by the Gujarat High Court. As per said instructions, no recovery of tax should be made during search, inspection or investigation unless, it is voluntary.

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Search and Inspection

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Refund

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