Delhi HC Directs for Refund as Authority Forced to Deposit GST by Assessee During Search

The department has been instructed by the Delhi High Court to give a refund amount that the petitioner has deposited through a payment of Rs. 23,70,000 in cash along with interest at a yearly rate of 6%.

The two-member bench comprising Justice Vibhu Bakhru and Justice Amit Mahajan has noted that a sum amounting to Rs. 28,20,000 was made at 11:49 PM and 12:38 PM during the search operations. The payments made by the petitioner were not voluntary but were made under compelling circumstances.

The petitioner is engaged in the business of trading waste paper and craft paper, which are subject to taxes at rates of 5% and 12%, respectively, as per the provisions of GST laws.

A petition seeking the refund of Rs. 28,20,000 deposited during the search and inspection, along with a simple interest rate of 12% per annum from the payment date has been filed by the petitioner/assessees.

The petitioner argued that they were coerced into making the deposit and that it cannot be treated as a discretionary deposit as stated in Section 74(5) of the Central Goods and Services Tax Act, 2017.

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It was stated by the petitioner that their director was compelled by the visiting team officers of the respondent or department to deposit a sum of Rs. 25,20,000 under GST DRC-03 and Rs. 3,00,000 under GST DRC-03.

The main issue raised was whether the paid sum could be treated as voluntary payments as stated in Section 73(5) or Section 74(5) of the CGST Act.

Section 73 of the CGST Act, as well as Section 74 of the CGST Act, provide provisions for a taxpayer to make voluntary payments. According to Sub-Section (5) of Section 73 of the Central Goods and Services Tax Act, a person liable for tax can make self-assessment tax payments, along with interest, before receiving any notice under Section 73(1) of the CGST Act.

If the taxpayer makes such payments, they will be exempt from paying penalties under the provisions of the CGST Act.

However, if the payments made fall short of the amount due, the proper officer may proceed with issuing a notice under Section 73(1) of the CGST Act.

The court concluded that the failure to follow the prescribed procedure would also result in the determination that the payments were not discretionary.