Tax Recovery Procedures Must Adhere to Legal Standards: Delhi HC

Lovelesh Singhal Prop Shivani Overseas Vs Commissioner (Delhi High Court)

Introduction: In a recent judgment, the Delhi High Court addressed a petition filed by Lovelesh Singhal, proprietor of M/s Shivani Overseas, challenging the tax recovery proceedings initiated by the authorities. The petitioner sought directions to refund an amount of ₹18,72,000/-, deposited during a search operation, and set aside the authorization order for inspection under the Central Goods and Services Tax Act, 2017 (CGST Act). This article provides an overview of the case, the factual context, key submissions, and the court’s reasoning.

Factual Background: Lovelesh Singhal, engaged in the trading of PVC Resin through his business Shivani Overseas, underwent a search operation on 07.10.2022, conducted by respondent no.3 under Section 67 of the CGST Act. The petitioner alleged coercion during the inspection, resulting in the reversal of Input Tax Credit (ITC) amounting to ₹18,72,000/- related to supplies from M/s Samridhi Exports. The authorities subsequently issued a show cause notice proposing a substantial demand, leading the petitioner to file the present petition.

Petitioner’s Submissions: The petitioner challenged the search proceedings, arguing that the authorization lacked specificity and that the officers had no valid reason to believe there was any suppression or contravention. Additionally, the petitioner contested the coercive collection of ₹18,72,000/- through the debiting of the Electronic Credit Ledger (ECL) without proper adjudication of liability. The petitioner’s counsel referred to precedents, including decisions by the Tripura High Court and the Madras High Court, emphasizing the importance of clear authorization and proper procedure in such cases.

Respondent’s Counter: The respondents, represented by Mr. Rajeev Aggarwal, defended the proceedings, claiming that the taxpayer had the option to make voluntary payments to avoid penalties and interest. They argued that the petitioner’s statement, recorded during the search, admitted liability, and emphasized the non-retraction of the same. The respondent’s counsel also cited decisions from the Kerala High Court and a coordinate bench of the Delhi High Court, asserting the voluntary nature of the payments.

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