Deposit of Rs.1.8 Crore During Search Was Not Voluntary Due to Procedural Lapses, Ordered Returned with Interest

The HC held that the deposit of Rs.1,80,10,000/- during search proceedings was not voluntary due to the official respondents' failure to follow statutory safeguards designed to prevent coercion. The Court emphasized that adherence to procedure, including allowing time for legal advice before deposit, is essential. Consequently, the amount deposited lacked voluntariness and was ordered to be returned to the petitioner with 6% simple interest per annum from 17.02.2022 until payment. The writ petition was disposed of accordingly.

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Issues Involved:
1. Voluntariness of the deposit of Rs. 1,80,10,000/- during search proceedings.
2. Compliance with statutory provisions and procedural safeguards under the CGST Act, 2017 and the CGST Rules, 2017.
3. Allegations of coercion and violation of procedural safeguards.
4. Adherence to judicial directions and administrative instructions.

Detailed Analysis:

Voluntariness of the Deposit:
The core issue was whether the cumulative sum of Rs. 1,80,10,000/- deposited during the search proceedings was a voluntary act. The petitioner claimed that the deposits made in four tranches between 01:28 A.M. and 07:03 A.M. on 17.02.2022 were coerced. The official respondents/revenue contended that the amount was deposited voluntarily against challans in Form GST DRC-03 dated 17.02.2022.

Compliance with Statutory Provisions:
The court analyzed the provisions under Sections 73 and 74 of the CGST Act, 2017, and Rules 142(1A) and 142(2) of the CGST Rules, 2017, which provide for voluntary payment of tax, interest, and penalty before the issuance of a show-cause notice. The court noted that no acknowledgement in Form GST DRC-04 was issued by the proper officer, which is mandatory under Rule 142(2). This indicated non-compliance with the statutory procedure.

Allegations of Coercion:
The petitioner argued that the deposit was made under coercion, as evidenced by the circumstances of the search, including the timing of the deposits during the early hours while the search was ongoing. The court found that the deposits made before the conclusion of the search (which ended at 09:30 A.M. on 17.02.2022) lacked voluntariness. Additionally, the court noted the absence of independent witnesses and the non-provision of copies of documents to the petitioner, which contravened Section 67(5) of the CGST Act, 2017.

Adherence to Judicial Directions and Administrative Instructions:
The court referenced Instruction No. 01/2022-2023 dated 25.05.2022 issued by the GST-Investigation Wing, CBIC, which emphasized that no recovery should be made during search, inspection, or investigation unless it is voluntary. The court also cited the Gujarat High Court's directions in Bhumi Associate v. Union of India, which mandated that voluntary payments should be made the day after the search concludes. The court found that these directions were not followed, further supporting the conclusion that the deposit was not voluntary.

Conclusion:
The court concluded that the deposit of Rs. 1,80,10,000/- lacked an element of voluntariness and was not aligned with the statutory provisions and procedural safeguards. Consequently, the court directed the official respondents/revenue to return the amount to the petitioner-concern along with interest at the rate of 6% per annum from 17.02.2022 till the date of payment. The court also directed the CBIC to align Instruction No. 01/2022-2023 with the Gujarat High Court's directions in Bhumi Associate to prevent unnecessary harassment of taxpayers during search proceedings.

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