If tax Collected During Investigation under Coercion, such collection is violation of Article 265 and 300-A of the Constitution and does not fall under ambit of 74(5) and hence liable to be refunded-

[Rachit Agarwal]

If tax Collected During Investigation under Coercion, such collection is violation of Article 265 and 300-A of the Constitution and does not fall under ambit of 74(5) and hence liable to be refunded-

Divisional Bench of Karnataka High Court in THE UNION OF INDIA REP. BY THE SECRETARY DEPARTMENT OF REVENUE MINISTRY OF FINANCE, DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE NEW DELHI, SENIOR INTELLIGENCE OFFICER DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD ZONAL UNIT, DEPUTY DIRECTOR DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD, ADDITIONAL DIRECTOR DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD PRINCIPAL ADDITIONAL DIRECTORATE GENERAL DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE HYDERABAD VERSUS M/S. BUNDL TECHNOLOGIES PRIVATE LIMITED, THE STATE OF KARNATAKA, COMMISSIONER OF STATE TAX GOODS AND SERVICE TAX BENGALURU [2022 (3) TMI 625 - KARNATAKA HIGH COURT]

Allegation

Green Finch was a non-existent entity and accordingly, the input tax credit availed by the Company and the GST component paid by it to Green Finch against the invoices raised by Green Finch were fraudulent.

Deposit of Tax during Investigation

On 30.11.2019 at about 4.00 a.m., a sum of ₹ 15 Crores and further deposit of ₹ 12,51,44,157/- at about 1.00 a.m was deposited by the Company

Order Pronounced

Article 265 of the Constitution mandates that collection of tax has to be by the authority of law. If tax is collected without any authority of law, the same would amount to depriving a person of his property without any authority of law and would infringe his right under Article 300A of the Constitution of India as well.

In the instant case, the only provision which permits deposit of an amount during pendency of an investigation is section 74(5) of CGST Act, which is not attracted in the fact situation of the case.

That amount has been collected from Company in violation of Article 265 and 300-A of the Constitution. Therefore, the contention of the Department that amount under deposit be made subject to the outcome of the pending investigation can not be accepted. The Department, therefore, is liable to refund the amount to the Company.

A Statutory power has to be exercised reasonably and in good faith, and for the purpose for which it is conferred. The power vested in any Authority by law has to be exercised in consonance with the spirit as well as letter of the Act. The broader the sweeper ambit of the power, the more caution and circumspection is required while invoking such power. A statutory power has to be exercised within a system of controls and has to be exercised by relevance and reason. It needs reiteration that a statutory power should not be exercised in a manner, so as to in still fear in the mind of a person.