High Court orders refund of GST paid involuntarily and under coercion

The Delhi High Court, in the matter of SANTOSH KUMAR GUPTA PROP. MAHAN POLYMERS (The Petitioner) Vs. UNION OF INDIA THROUGH SECRETARY (The Respondent), ordered the refund of GST paid involuntarily and under coercion.

The petitioner is an individual and carries on the business of trading in PVC resins under the name of his sole proprietorship concern, M/s Mahan Polymers. The petitioner is registered under the Central Goods and Services Tax Act, 2017 (hereafter ‘the CGST Act’) and has been assigned the Goods and Services Tax Identification Number (GSTIN): 07AAPPG5295A1ZP.

The petitioner has filed the present petition impugning the search stated to have been conducted in his business premises (3460/1, Jai Mata Market, Tri Nagar, Delhi-110035) under Section 67 of the CGST Act pursuant to the authorization issued in FORM GST INS-01 dated 11.11.2022. The petitioner claims that during the course of the search, he was compelled to deposit the sum of ₹10,00,000/- [Rs. 5,00,000 under CGST Act and Rs. 5,00,000 under the Delhi Goods and Services Tax Act, 2017 (hereafter ‘the DGST Act’)]. Accordingly, the petitioner prays that directions be issued to the respondents to refund the sum of Rs. 10,00,000 as being collected illegally. In addition, the petitioner also prays that directions be issued for supply of the copy of FORM GST INS-01.

In the present case, the information that the petitioner had purchased the goods from a supplier, which was found to be nonexistent at his principal place of business, has a direct link in forming the belief that the petitioner wrongfully availed of the ITC.

In view of the above, It was found that no ground to declare any search or inspection conducted on 12.11.2022 as illegal or vitiated on the ground that there was no reason to believe that the petitioner had wrongfully availed the ITC.

Having noted the above, it is also necessary to state that it is respondent no.3’s case that no search was conducted in the premises of the petitioner. It is also affirmed in the counter affidavit filed on behalf of the respondents that neither any summons were issued to the petitioner, nor that the petitioner’s statement was recorded on 12.11.2022.

It is found that no merit in the petitioner’s contention that the inspection conducted by the central officers were illegal. The provisions of Section 6(2)(b) of the CGST Act do not preclude the central officers from conducting an inspection for concluding an ongoing investigation merely because a prior inspection or search was conducted by the DGST authorities.

The deposit of Rs. 10,00,000 was made by the petitioner in the FORM GST DRC-03 at about 9:00 pm while the officers of respondents no.3 were conducting the inspection. The petitioner immediately, by a letter dated 14.11.2022 claimed that the deposit was made involuntarily and under coercion. It is also not disputed that FORM GST DRC-03 had been submitted from the laptop carried by the visiting team. It is also relevant to note that the petitioner filed the present petition on 23.11.2022, that is, within a period of less than ten days, claiming refund of the amount paid.

In view of the above, the court directed the respondents to refund the sum of Rs. 10,00,000 deposited by the petitioner in FORM GST DRC-03 on 12.11.2022. However, clarify that this order would not preclude the respondents from taking any steps for protection of the interest of the Revenue including passing an order under Section 83 of the CGST Act or Rule 86(A) of the Central Goods and Services Tax Rules, 2017 if the conditions for the exercise of such powers are satisfied.

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