Neeraj Paper Marketing Ltd Vs Special Commissioner (Delhi High Court)
Delhi High Court held that payments made under compelling circumstances during the course of search, without ascertaining tax liability and issuance of notice post search, is liable to be refunded back to the taxpayer along with interest.
Facts-
The petitioner carries on a business in trading of waste paper and craft paper, which are taxable at 5% and 12% respectively, under the provisions of GST laws. On 29.07.2022, a search was conducted at the petitioner’s business premises u/s. 67(2) of the CGST Act, on the basis of GST INS-01, issued by respondent no.1.
During the course of the search operation, documents pertaining to the financial period FY 2017-2018 to 2020-2021 were inspected. Consequently, it was revealed that there was a mismatch of Rs. 60 lakhs in GSTR-2A and GSTR-3B during the year 2018-2019, and ₹20 lakhs in the year 2019-2020.
The petitioner claims that its Director was coerced by the visiting team officers of respondent no.1 into depositing an amount of Rs. 25,20,000/- under GST DRC-03 dated 29.07.2022 and Rs. 3,00,000 under GST DRC-03 dated 30.07.2022. The petitioner requested respondent no.2, to refund the amount deposited vide GST DRC-03 forms, along with the applicable interest.
Conclusion-
Held that whilst the petitioner has accepted that there was a mismatch in its return regarding the ITC, he did not acknowledge that the ITC was incorrectly availed. On the contrary, the Director of the petitioner had acknowledged that in case there was any tax liability, the same would be paid with interest and penalty. Admittedly, the respondents have not ascertained the said liability and no notice has been issued to the petitioner as contemplated under Rule 142 (1A) of the CGST Rules communicating the details of any tax, interest or liability as ascertained.
Held that payments aggregating to ₹28,20,000/- have been made at 11:49 PM and at 12:38 PM during the search operations. We are, therefore, inclined to accept the petitioner’s contention that the payments made by it were not voluntary payments but under compelling circumstances. Thus, the present petition is allowed. The respondents are directed to refund the amount deposited by the petitioner by making a payment of ₹23,70,000/- in cash along with interest.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The petitioner has filed the present petition, inter alia, praying that respondent no.1 be directed to refund the amount of Rs. 28,20,000/– deposited by the petitioner during the course of search and inspection conducted on 29.07.2022, along with a simple interest of 12% p.a. from the date of payment. The petitioner claims that it was coerced to deposit the aforesaid amount and that the same cannot be considered as a deposit done voluntarily under Section 74(5) of the Central Goods & Services Tax Act, 2017 (hereafter the ‘CGST Act’).
FACTUAL CONTEXT
2. The petitioner carries on a business in trading of waste paper and craft paper, which are taxable at 5% and 12% respectively, under the provisions of GST laws. The petitioner is registered with the GST Department under the registration: GSTIN No. 07AAACN0196P1Z3.
3. On 29.07.2022, a search was conducted at the petitioner’s business premises, 218-222, Aggarwal Prestige Mall, Pitampura, Delhi, under Sub-section (2) of Section 67 of the CGST Act, on the basis of GST INS-01, issued by respondent no.1. The reasons for the aforementioned operation, as detailed in the said form, are that the petitioner had suppressed transaction relating to supply of goods and/ or services; suppressed transaction relating to stock of goods in hand; claimed input tax credit (ITC) in excess of his entitlement under the CGST Act; and, indulged in contravention of provisions of GST laws with the intent to evade payment of tax.
4. During the course of the search operation, documents pertaining to the financial period FY 2017-2018 to 2020-2021 were inspected. Consequently, it was revealed that there was a mismatch of ₹60 lakhs in GSTR-2A and GSTR-3B during the year 2018-2019, and ₹20 lakhs in the year 2019-2020.
5. The petitioner claims that its Director (Sh. Deepak Goel S/o Sh. Vinod Kumar Goel) was coerced by the visiting team officers of respondent no.1 into depositing an amount of Rs. 25,20,000/- under GST DRC-03 dated 29.07.2022 and Rs. 3,00,000 under GST DRC-03 dated 30.07.2022. The breakup of payment of the aforementioned amounts is as follows:
