Background:

M/S Parsvnath Traders, purchased goods from their regular supplier M/s Royal Sales Corporation in 2018-19 and 2019-20 with proper documentation.

The petitioner paid GST on these purchases and claimed Input Tax Credit (ITC) worth Rs.60.89 lakhs and Rs.1.25 crore for the respective years.

On 05.02.2021, CGST Dept. officials conducted a search on the petitioner’s premises alleging that the petitioner had obtained fake invoices from M/S Royal, illegally claimed ITC, and was forced to deposit Rs. 20 lakhs during investigation, and later on an additional deposit of Rs.30,70,216/- on 16.02.2021.

The petitioner requested evidence, including the Panchnama and statements against them, which were not given neither SCN nor any order was passed. The petitioner also requested refund of Rs.50.70 lakhs deposited, which was denied through an email order dated 18.05.2021.

Arguments of Respondent:

On receipt of information about tax evasion and misuse of ITC through fake transactions, data of M/s Royal was verified from GST Portal which revealed that firm had passed ITC amounting to Rs.5,15,12,408/- within a short span of 13-15 months from registration.

On making Enquiries, premises of the firm were locked with no business activities. Following this, M/S Royal’s proprietor’s premises were searched. His son, in the absence of the proprietor, deposited Rs.16 lakhs using Form GST DRC-03.

This act served as an acknowledgment of fake purchases and his statement indicated that certain purchases from Delhi might also be fraudulent. The petitioner’s premises were searched due to their purchases being from M/S Royal.

Voluntary payment by Petitioner of Rs. 50.70 lacs are seen as admission to receiving and misusing fake invoices from M/S Royal, denying petitioner’s claim of coercion for deposit.

Investigations into the goods movement revealed discrepancies; no goods were transported from M/S Royal to petitioner.

The petitioner as such, was found indulged in improper ITC claims thereby causing loss to the Government Exchequer.

The Petitioner argued that since the respondents had recovered/got deposited GST to the tune of Rs.50.70 lacs from the petitioner without serving a Show Cause Notice in accordance with Section 74(1) of the Act and even till the date of filing of this petition, had not served any such notice upon it, therefore, the petitioner was certainly entitled to refund of the amount so paid “which was not at all a voluntary deposit.”

The grievance of the petitioner is that the respondents without issuing any SCN as required u/s 74(1) recovered an amount of Rs.50.70 lacs from them thereby, without following the adopted procedure. Whereas, according to the respondents, the deposit had been made voluntarily vide GST DRC-03 on two different dates during the course of investigation which amounted to ‘self-ascertainment’ in terms of Section 74 and it was hence urged that petitioner could not make any prayer for seeking refund of that amount.

The contention of Respondent that the payments of Rs.50.70 lacs by the petitioner were “voluntary deposits” is unacceptable for the reason that had that been the case then the respondents must have had material on record to show that the petitioner had in fact, accepted the ascertainment made by it and respondent would have arrived at the conclusion that ‘voluntary deposits’ by the assessee was adequate or inadequate.

The petitioner on the contrary is shown to have consistently contested its liability to make payment of the tax.

The deposit of the amount on the day of search was naturally under the stress of search/ investigation especially when refund was applied shortly after deposit hence could not be stated to be voluntary deposit by any stretch of imagination, irrespective of the fact that deposits were made in the form of GST DRC-03.

The petitioner deserves the relief hence, it is ordered that the sum of Rs.50.70 lacs collected during Search shall be refunded to it within a period of 6 weeks from today along with interest @ 6% per annum from the date of deposit till the refund amount is released.