Amount deposited during search cannot be retained as proceedings u/s 74(1) of CGST Act not initiated

Modern Insecticides Ltd. Vs Commissioner (Punjab and Haryana High Court)

Punjab & Haryana High Court held that amount deposited during the search cannot be retained by the department as this deposit cannot be taken to be voluntary as no proceedings u/s 74(1) of the CGST Act has been initiated.

Facts- Officials of the respondents searched the factory premises of the petitioner and resumed the entire record lying there. On 07.03.2020, they got deposited a sum of Rs.39,15,583/-. The respondents conducted the second search on 15.01.2021 and took away the Director and Chartered Accountant of the petitioner to their office at Rishi Nagar, Ludhiana. They detained Mr Avtar Singh, Director and Mr Sahil Sharma, Chartered Accountant of the petitioner till 1.00 A.M. They were released on the condition of a deposit of Rs.2.15 crores, which was deposited through a reversal of Input Tax Credit (ITC) from electronic credit ledger and surrender of refund already applied.
The respondents did not supply copies of Panchnama, copies of the 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.

The short question before the court in this petition is, whether the amount paid by the petitioner on 16.01.2021, could be retained by the department without issuing the show cause u/s. 74(1) of the CGST Act and that too after the expiration of two years.

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