In CWP No.26529 of 2022 -PUNJ HC- Punjab and Haryana High Court orders refund of illegally recovered amount with 6% interest to M/s Samyak Metals Pvt. Ltd, citing failure to issue notice under Section 74 of Central Goods and Services Tax Act
Justice Ritu Bahri & Justice Kuldeep Tiwari [24-05-2023]

Read Order: M/s Samyak Metals Pvt. Ltd v. Union of India and others

Chahat Varma

New Delhi, June 9, 2023: The Punjab and Haryana High Court has directed the tax authorities to refund the amount with interest at the rate of 6%, that was illegally recovered from M/s Samyak Metals Pvt. Ltd (petitioner), noting that the authorities had failed to issue FORM GST DRC-04 or any show cause notice under Section 74 of the Central Goods and Services Tax Act (CGST Act)/Haryana Goods and Services Tax Act (HGST Act).

The petitioner, engaged in manufacturing aluminum ingots, had their business premises searched by officers of the Central GST Commissionerate in Faridabad. After analyzing the ledger of M/s D.G. Enterprises, the petitioner was compelled to deposit tax on the Input Tax Credit claimed on purchases from M/s D.G. Enterprises, amounting to Rs. 35,73,147/- each under the CGST Act and HGST Act, including interest of Rs.1,82,255/- and a penalty of Rs.4,42,291/- vide Form GST DRC-03 dated 26.02.2021.

The division bench of Justice Ritu Bahri and Justice Kuldeep Tiwari examined the decision rendered in Modern Insecticides Ltd. and another v. Commissioner, Central Goods and Service Tax and another [LQ/PunjHC/2023/3592], wherein the High court had held that no recovery of tax should be made during a search, inspection, or investigation unless it is voluntary. The High court emphasized that in order to avoid harassment to the person whose premises have been searched, voluntary payment in the prescribed form, i.e., GST DRC-03, can be made after the day of the search. These instructions were issued to prevent unnecessary harassment to the assessee.

The bench also referred to Vallabh Textiles vs. Senior Intelligence Officer and others [LQ/DelHC/2022/5075], wherein the Delhi High Court examined the provisions of Section 74 of the CGST Act and held that deposit of tax made by the assessee during search was not voluntary and the amount cannot be retained, if no summons had been issued under Section 74 (1) of the CGST Act.

The court noted that in the given case, the petitioner, after a search conducted on 25.02.2021, deposited the amount under Section 74(5) of the CGST Act, 2017. As per Rule 142(2) of the Central Goods and Services Tax Rules, the court held that the proper officer was required to issue an acknowledgment in FORM GST DRC-04 when a payment was made in FORM GST DRC-03. However, in this case, despite the payment made on 26.02.2021, the authorities have not issued FORM GST DRC-04 nor issued any notice under Section 74(1) of the CGST Act. It was held that the respondents had failed to comply with the government instruction No.01/2022-23 dated 25.05.2022 issued by the CBIC.

The court noted that “In these instructions, it is clarified that there is no bar on the taxpayers for voluntarily making the payments on the basis of ascertainment of their liability on non-payment/short payment of taxes before or at any stage of such proceedings. It is the duty of the officer to inform the taxpayers regarding the provisions of voluntary tax payment through DRC03. However, in the present case, as per these instructions, the petitioner has deposited the amount of Rs.35,73,147/-, but the officer has not issued DRC-03 till date.”