TMI Blog2023 (12) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... here may be some merit in the grievance of the taxpayer that the proper officer has not set out any specific reason but has merely reproduced all reasons on the basis of which an authorization under Section 67(1)(a) of the CGST Act could be issued. However, it is seen that the reasons as set out are connected - The respondents have not referred to any specific reason for initiating the proceedings under Section 67 of the CGST Act, in their counter affidavit, except to state that the reasons to believe were duly recorded on the file prior to conducting the search and the inspection. Thus, it cannot be accepted that the authorization for conducting search or inspection under Section 67 of the CGST Act is illegal for want of reasons to believe that the grounds for conducting the said search as set out in Section 67(1)(a) of the CGST Act, exist. Whether the petitioner is entitled to reversal of the ITC that was debited from his ECL? - HELD THAT:- Undisputedly, a taxpayer has an option to voluntarily pay tax on a self-ascertainment basis prior to issuance of a show cause notice. In terms of Section 73(5) of the CGST Act, a person chargeable to tax may before service of a notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Z0. 3. On 07.10.2022 continuing till early hours of 08.10.2022, a search was conducted by respondent no. 3 at the petitioner s business premises being Property No. 66, 3rd floor, Pocket-13, Sector-24, Rohini, Delhi and 3411/249, 2nd floor, Hansa Puri, Tri Nagar, Delhi, under Section 67 of the CGST Act. This was on the basis of authorization dated 07.10.2022 (in form GST INS-01), issued by respondent no. 1 in terms of Rule 139(1) of the CGST Rules. 4. During the course of the search operation, documents pertaining to the period FY 2017-18 to 2021-22 were inspected. The petitioner alleges that during the course of the inspection, the visiting team of officers forced him to reverse the Input Tax Credit (ITC) amounting to ₹18,72,000/- in respect of supplies purchased from one M/s Samridhi Exports. The petitioner was informed that the GST registration of the said supplier was cancelled retrospectively. The petitioner states that he was detained in the office from 4 pm of 07.10.2022 to 2.30 am of 08.10.2022. It is contended on behalf of the petitioner that during this time, the petitioner succumbed to the intimidation of the visiting team and was compelled to transfer the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Intelligence Officer and Ors.: W.P. No. 5192/2020, decided on 07.04.2021, whereby in similar facts, the Madras High Court had directed the concerned authorities to refund an amount of ₹2,00,00,000/-, which was allegedly paid under coercion. 11. The petitioner also referred to the decision of the Gujarat High Court in M /s Bhumi Associate v. Union of India: Manu/GJ/0174/2022, decided on 16.02.2021 , whereby the Court had issued directions to be followed for collecting tax in proximity to the search and seizure operations. The learned counsel also relied on the decision of the Coordinate Bench of this Court in M/s Vallabh Textiles v. Senior Intelligence Officer and Ors.: 2022 SCC OnLine Del 4508, whereby this Court had respectfully concurred with the directions issued by the Gujarat High Court in M/s Bhumi Associate v. Union of India (supra) and had found that the required procedure had not been followed in that case. Accordingly, the Court had directed the refund of the tax deposited by the taxpayer involuntarily along with interest at the rate of 6%. 12. Mr. Rajeev Aggarwal, learned counsel appearing for the respondents countered the aforesaid contentions. He su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of any of the provisions of the CGST Act or the CGST Rules made thereunder, to evade tax. 16. In terms of Rule 139(1) of the CGST Rules authorization under Section 67(1) of the CGST Act is required to be issued in Form GST INS-01. The said Form is reproduced below: FORM GST INS-1 AUTHORISATION FOR INSPECTION OR SEARCH [See rule 139(1)] To .. .. (Name and Designation of officer) Whereas information has been presented before me and I have reasons to believe that A. M/s.___________________________________________ ___ has suppressed transactions relating to supply of goods and/or services has suppressed transactions relating to the stock of goods in hand, has claimed ITC in excess of his entitlement under the Act has claimed refund in excess of his entitlement under the Act has indulged in contravention of the provisions of this Act or rules made thereunder to evade tax under this Act; OR B. M/s.__________________________________________ is engaged in the business of transporting goods that have escaped payment of tax is an owner or ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing such authorization. Thus, there may be some merit in the grievance of the taxpayer that the proper officer has not set out any specific reason but has merely reproduced all reasons on the basis of which an authorization under Section 67(1)(a) of the CGST Act could be issued. However, it is seen that the reasons as set out are connected. 18. The respondents have not referred to any specific reason for initiating the proceedings under Section 67 of the CGST Act, in their counter affidavit, except to state that the reasons to believe were duly recorded on the file prior to conducting the search and the inspection. It was also stated that the show cause notice is yet to be issued as the investigation is not complete as yet. 19. The only allegation as stated in the counter affidavit is that the petitioner has availed of ITC in respect of purchases made from certain specified suppliers (five in number) during the relevant period claiming an aggregate ITC of ₹6,48,41,211/-. However, the registration of the said suppliers had been cancelled from the date prior to the date of purchase. Thus, it does appear that in this case, the inspection was authorized on the ground that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e material time. 24. In the given facts, we are inclined to accept the petitioner s claim that the deposit was made under duress and in compelling circumstances. The petitioner had been subjected to the search/inspection operations way beyond the normal business hours. Admittedly, the petitioner was called upon to provide copies of various books of accounts. The statement recorded on the said date which is also relied upon by the respondents clearly indicates that the petitioner had provided several documents to the concerned officers including the Trading Account for the period 01.04.2022 to 07.10.2022; Cash Book for the period 01.10.2022 to 07.10.2022; Stock group summary as on 07.10.2022; copies of the last purchase and sale bills; profit and loss account for the period 01.04.2021 to 31.03.2022; and parties ledger. 25. It is important to note that the said statement does not indicate that there was any admission that the petitioner had wrongfully availed ITC. 26. Undisputedly, a taxpayer has an option to voluntarily pay tax on a self-ascertainment basis prior to issuance of a show cause notice. In terms of Section 73(5) of the CGST Act, a person chargeable to tax ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to pay penalty equivalent to 15% along with tax deposited on the basis of his own ascertainment. The provisions of Sub-sections 73(5) and 74(5) of the CGST Act are not provisions under which the Department can compel a taxpayer to deposit tax. 28. Given the scheme of permitting the taxpayers to voluntarily deposit tax prior to issuance of notices (either under Section 73 or Section 74 of the CGST Act) to avail of the benefit of absolving themselves from the liability to pay penalty either in entirety or in excess of 15% of tax payable as the case may be; in cases where the said tax is collected under coercion, the same is required to be returned. 29. It is not necessary to examine in detail any controversy whether such payments were made voluntarily. Clearly, where a taxpayer turns around and states that the payments had not been made involuntarily and the circumstances prima facie indicate so, the taxpayer must be granted the benefit of withdrawing such payments. Obviously, in such cases, the taxpayer would forfeit immunity from levy of any penalty and the concerned authorities are not precluded from proceeding against the taxpayer in respect of any default and to the ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make payment in any mode during the pendency of the search proceedings. (4) If complaint/ grievance is filed by assessee and officer is found to have acted in defiance of the afore-stated directions, then strict disciplinary action should be initiated against the concerned officer. 34. In terms of the aforesaid directions, the concerned officers were required to advise the taxpayer, who come forward to deposit tax during the course of search proceedings, that he should do so on the next day after the proceedings have been concluded. 35. However, it appears that the said directions have not been implemented. In Vallabh Textiles v. Senior Intelligence Officer and Ors. (supra), a Coordinate Bench of this Court had respectfully concurred with the aforesaid directions. 36. The Central Board of Indirect Taxes and Customs (CBIC) has also issued instructions emphasizing that the tax must be collected only after following the due process of law. The relevant extract of the said instructions dated 25.05.2022 are set out below: 3. It is further observed that recovery of taxes not paid or short paid, can be made under the provisions of Section 79 of CGST Act, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply dealers have been cancelled suomoto from the date of registration: 1. M/s. Samridhi exports (07AFGPY9258P2Z7) ITC Rs.18,72,000/- 40. The above statement cannot be read as acknowledgment of any liability to pay ITC. It merely records that the visiting team had informed the petitioner that the registration of the supplier, M/s Samridhi Exports had been cancelled. The same cannot be read as the petitioner acknowledging that he was liable to reverse the ITC in respect of purchases made from the said dealer. 41. In view of the above, the reliance placed by the respondents on the decision of this Court in M/s RCI Industries and Technologies and Technologies Ltd. Through its Director Rajeev Gupta v. Commissioner DGST Delhi Ors.: MANU/DE/0081/2021 is also misplaced. In that case, the assessee s claim that he was coerced to make the statement was doubted on the ground that the petitioner had not retracted the same. The said decision has no relevance in the facts of this case. 42. The decision of the Gujarat High Court in S.S. Industries v. Union of India (supra) is also of little assistance to the respondents. In that case, there were serious allegations against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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