2021 (11) TMI 108 - HC - GST

Court Orders Prompt Refund Despite Coercive Tax Collection

The High Court directed the respondents to process the refund application of Rs. 27,51,44,157 within four weeks, despite the pendency of a statutory ... Refund of amount illegally collected from the petitioner - Self-ascertainment under Section 74(5) of CGST Act - Amount paid under coercion - Right of Bona fide Tax Payer to be treated with dignity - availability of alternative remedy - HELD THAT:- The mere fact that application has been made for refund does not in any way take away the right of the petitioner to seek for appropriate direction in the present proceedings, as the application for refund has merely been deferred and in effect, no decision is taken, even otherwise, the question of alternate remedy is of no significance, when the eventual direction in the present writ is only for consideration of the refund application - the learned counsel for the petitioner has fairly submitted that the eventual remedy that the petitioner is seeking insofar as refund application is, a direction to consider the application de hors the investigation being carried out and in light of such stand, it cannot be stated that the statutory remedy of refund would displace the petitioner from the present proceedings and the petition is to be dismissed on such ground. Self-ascertainment under Section 74(5) of CGST Act - HELD THAT:- The procedure of self-ascertainment under sub-section (5) of Section 74 contains a scheme that is concluded after following the procedure under sub-sections (6), (7) and (8) of Section 74 of the CGST Act. In the present case, it must be noted that though there is payment of tax and even if it is accepted that payment of tax is also followed by requisite Challan DRC-03, the mere payment of tax cannot be construed to be a payment towards self-ascertainment as contemplated under Section 74 (5) of CGST Act - the payment of tax by itself even if construed to be voluntary will not by itself in any way lead to a conclusion that the same is paid in furtherance of self-ascertainment under Section 74(5) of CGST Act. The scheme of self-ascertainment as contained in sub-sections (5), (6), (7), (8) of Section 74 of CGST Act would not admit of making of payment and continuance of investigation. Upon payment of tax after collection of the same with penalty, if the same is accepted even before the issuance of notice under Section 74(1) during investigation, there ends the matter and there is nothing further to be proceeded with. The respondents have not taken the stand that self-ascertained tax falls short and if that were to be so, it could have proceeded to issue notice as contemplated under Section 74(7) and could have even rejected the self-ascertainment in its entirety while asserting that it would issue notice under Section 74(1) of CGST Act, if facts so warrant. The stand of the respondents is ambiguous as self-ascertainment is put forward only as defence to the assertion of the petitioner that the payment of amount has been made involuntarily - the contention of payment being made by way of self-ascertainment is liable to be rejected. Amount paid under coercion - HELD THAT:- The manner in which investigation was carried out in late hours of the night and the early hours of the morning with physical closing of the gates during the investigation would reasonably create an apprehension in the mind of any person including the persons of the standing of Directors of the Assessee Company and its officers. The fear of police powers are such that would shake a man irrespective of their position in society. It must be noted that even under Section 132(1)(b) and (c)(i) to (iii) of the GST Act, 2017, the wrongful availment of I.T.C. is an offence and is punishable with imprisonment - the payment cannot be stated to have been made voluntarily. Such amount having been paid, retention of the said amount as referred to above by the Department right from November, 2019 till date where investigation is not concluded would call upon the department to honour legitimate claims being made for refund of the amount which cannot be grudged. Lapse of time and lack of conclusion of investigation has only exacerbated the situation conferring upon the petitioners a right to seek for refund of the amount. Right of Bona fide Tax Payer to be treated with dignity - HELD THAT:- No doubt, the power of investigation cannot be interfered with nor can the court direct investigation be made in a particular manner, however, during all such investigation, it cannot be held that the Fundamental Rights including the right of a bona fide tax payer to be treated with appropriate dignity as enshrined under Article 21 of the Constitution of India would be kept in abeyance. We would not like to elaborate further but to leave it to the wisdom of the respondents as to the manner in which bona fide tax payers are to be treated. Video Recording of Investigation - HELD THAT:- While the respondents would contend that the application is only for installing of CC TV only, the consequential direction that is made in the order dated 20.04.2021 is for video recording. Installation of CC TV as ordered by the Apex Court would taken within itself recording of all that would fall within the range of CC TV - recording of interrogation which direction is limited to maintaining of records relating to interrogation would make it possible as and when circumstances are so made out for summoning of the same as may be required at an appropriate stage. The refund applications at Annexure-'Q' are to be considered and suitable orders be passed within a period of four weeks from the date of release of the order while making it clear that consideration of refund applications must be made in light of the observations. Petition disposed off. Issues Involved:1. Refund and alternative remedy.2. Self-ascertainment under Section 74(5) of CGST Act.3. Amount paid under coercion.4. Right of bona fide taxpayer to be treated with dignity.5. Video recording of investigation.6. Other prayers.Detailed Analysis:A) Refund and Alternative Remedy:The petitioner filed for a refund of Rs. 27,51,44,157, which was allegedly collected under coercion. The court considered whether the writ petition was maintainable given that the petitioner had already filed a statutory refund application. The court noted that the Department's communication merely deferred the refund, citing ongoing investigations. The court held that even if a refund application is pending, the High Court has the power to issue directions for refund if the tax was collected without authority of law, as established in the case of Godavari Sugar Mills Ltd. v. State of Maharashtra.B) Self-ascertainment under Section 74(5) of CGST Act:The respondents argued that the payment was voluntary and should be considered as self-ascertainment under Section 74(5) of the CGST Act. The court examined the letters from the petitioner, which indicated that the payments were made under protest and not as an admission of liability. The court concluded that mere payment of tax does not constitute self-ascertainment under Section 74(5) as it requires a specific procedure, including the issuance of a show-cause notice and acceptance by the proper officer. The court rejected the respondents' contention of self-ascertainment.C) Amount Paid Under Coercion:The court analyzed the sequence of events, noting that the payments were made during the investigation when the petitioner's directors were present and under the threat of arrest. The court found that the circumstances, including late-night investigations and the locking of premises, indicated coercion. The court held that the payments were not voluntary and that the retention of the amount by the Department was unjustified.D) Right of Bona fide Taxpayer to be Treated with Dignity:The court emphasized the need to treat bona fide taxpayers with dignity, citing the substantial taxes paid by the petitioner. The court referred to the Apex Court's observations in Dabur India Limited v. State of Uttar Pradesh, which condemned coercive tactics by the government. The court reiterated that the right to dignity under Article 21 of the Constitution extends to bona fide taxpayers and should not be compromised during investigations.E) Video Recording of Investigation:The court referred to the Supreme Court's judgment in Paramvir Singh Saini v. Baljit Singh, which mandated the installation of CCTV cameras in offices where interrogations are conducted. The court directed that further interrogations be video recorded to ensure transparency and accountability.F) Other Prayers:The court left it to the respondents to consider providing copies of statements recorded during the investigation as per law. The court refrained from adjudicating the constitutional validity of Section 16(2)(c) of the CGST Act, as the primary relief sought by the petitioner was granted.Conclusion:The court directed the respondents to process the refund applications within four weeks, considering the observations made. The petition was disposed of, providing substantial relief to the petitioner without placing any fetters on the ongoing investigation.