Tax deposited During Search Not Voluntary: Delhi High Court Directs GST Dept. To Return Rs.1.80 Crores With Interest

The Delhi High Court has directed the GST department to return the amount of Rs. 1.80 crores along with 6% interest as the recovery of tax made during the search was not voluntary.

The division bench of Justice Rajiv Shakdher and Justice Tara Vitasta Ganju has observed that no recovery of tax should be made during search, inspection, or investigation unless it is voluntary.

The petitioner/assessee is in the business of trading in ready-made garments (RMG) and is also engaged in selling these very goods on behalf of third parties in the domestic market on a commission basis.

The respondents/department claimed that the RMGs sold in cash on behalf of the entities by the petitioner were worth Rs. 149.90 crores, against which it received a commission of Rs. 7.50 crores. It was alleged that the commission was also received in cash. A search of the petitioner's premises was conducted. The petitioner deposited Rs.1,80,10,000 during search proceedings.

The issue raised was whether the cumulative sum of Rs.1,80,10,000 deposited on behalf of the petitioner or assessee during search proceedings was a voluntary act or not.

The petitioner contended that the deposit of Rs. 1,80,00,00 was not voluntary. The statements and documents on which the signatures were obtained were products of coercion. Since the copies of documents have not been furnished till today, the official respondents have contravened the provisions of Section 67(5) of the CGST Act, 2017.

The petitioner contended that when the search was carried out, CCTV cameras were switched off. The investigation was not supported by camera footage.

The department contended that the petitioner was avoiding payment of tax by making cash sales.

The court noted that the position taken by the respondents was that it was a voluntary payment based on self-ascertainment of tax, interest, and penalty and not established. The regime incorporated under the provisions of Sections 73 and 74 has not been adhered to.

"The amounts deposited (the cumulative sum being Rs. 1,80,00,00) did not have an element of voluntariness attached to them," the court said.

The court said that if the payments or deposits were voluntary, then an acknowledgment of having received the payment should emanate from the proper officer, as mandated in the prescribed form, i.e., GST DRC-04, as prescribed under Rule 142(2). The respondents have not been able to discharge the burden.

Case Title: M/s. Vallabh Textiles Versus Senior Intelligence Officer

Citation: 2022 LiveLaw (Del) 1208

Date: 20.12.2022

Counsel For Petitioner: Advocates Vivek Sarin withDiby a Prashant Singh

Counsel For Respondent: Advocates Satish Kumar, Anushree Narain

Click Here To Read The Order