2023 (3) TMI 157 - HC - GST

Revenue's reversal of Input Tax Credit without assessment ruled unlawful under GST rules, refund with interest ordered

M/s. Shree Ganesh Molasses Trading Co. Through Shri Niranjanbhai Govindlal Thakkar Versus Superintendent, Office Of The Commissioner

The HC held that the reversal of Input Tax Credit (ITC) by the revenue without any assessment or demand was unlawful and coercive. The Court found that ... Seeking refund of reversal of the Input Tax Credit (ITC) reversed under threat, coercion and without the Will of the petitioner - It is case of the petitioner that no assessment has been framed so far nor any demand has been raised in absence of any assessment, the quantum of demand cannot be determined hence, the action of coercive recovery by reversing the ITC in electronic credit ledger is bad in law. HELD THAT:- It appears that the officer concerned was to remain present before the Court. There is no reference of his remaining present. However it has been conveyed to that Court that the officer had remained present. Be that it may today the officer is also present. The fact remains that there is categorical directions issued by this Court in [2021 (2) TMI 701 - GUJARAT HIGH COURT] and allied matters. That, order itself was the reason for publishing the instructions which received the attention of Delhi High Court which also frowned upon the action of the authority by questioning its non-fulfillment of one of the directions, (direction No.2) contained in Bhumi Associates. as the instructions had permitted making of voluntarily payments of filing DRC 03 on the basis of ascertainment of their liability on non payment/short payment of taxes before or at any stage of proceedings. The only safeguard is of the tax officers to inform the tax payers regarding the provisions of voluntary tax payments through DRC-03. These instructions surely are not keeping in pace with the directions issued in toto. They being binding in nature even though issued at an interim stage everywhere in sur-rejoinder, the officer concerned has referred to them as the observations. This is an apparent case where scant regard is shown to the interim directions of this Court which have so far not been challenged. Having issued the instructions with regard to the same by No.01/2022-23 on 25th May, 2022, this disregard on the part of the officer concerned is required to be viewed with little seriousness, what has been offered thereafter, is of filling up of the form for reversal of ITC, instead of an end that to by saying that there is some amount of difficulty with the portal and due to those limitations the filling up the Form will be necessary - Assuming that the directions contained in the Bhumi Associates at the interim stage, no authority should forget that its own Board had followed it subsequently by issuing the instructions on the basis thereof and same had also received the scrutiny at the end of Delhi High Court. This Court requires to hold that the respondent-revenue is required to reverse the ITC to the tune of Rs. 37,68,300/- along with 6% interest - Petition disposed off. Issues Involved: 1. Coercive recovery of Input Tax Credit (ITC) by the respondent authorities.2. Legality of the search and seizure operation conducted by the CGST officials.3. Compliance with the guidelines issued by the Central Board of Indirect Taxes and Customs (CBIC) and the Gujarat High Court's directions.4. Voluntariness of the petitioner's reversal of ITC.5. Request for refund of the reversed ITC amount.Detailed Analysis:1. Coercive Recovery of ITC:The petitioner sought the court's intervention under Article 226 of the Constitution of India, claiming that the respondent authorities coercively and illegally reversed ITC amounting to Rs. 37,68,300/- during a search operation. The petitioner argued that the reversal was done under threat and coercion, without their voluntary consent, and in violation of the court's previous directions.2. Legality of the Search and Seizure Operation:The search and seizure operation was conducted on 11th February 2022 by CGST officials. The petitioner alleged that the officers forced them to log in to the GST portal and reverse the ITC using the personal laptop and mobile number of a partner's son. The petitioner claimed no tax evasion and that all records were made available during the search.3. Compliance with Guidelines and Court Directions:The petitioner heavily relied on the Gujarat High Court's decision in Special Civil Application No. 3196 of 2021, which directed that no recovery should be made during search/inspection proceedings. The court had issued specific guidelines to prevent coercive recovery, including advising assessees to file Form DRC-03 the day after the search and making provisions for filing complaints if coerced.4. Voluntariness of ITC Reversal:The petitioner contended that the reversal of ITC was not voluntary but forced by the CGST officials. The respondent denied these allegations, stating that the petitioner voluntarily reversed the ITC and signed the necessary documents without any coercion. The court examined the petitioner's affidavit, retraction affidavit, and the transcript of a recorded call, which supported the claim of coercion.5. Request for Refund:The petitioner sought a writ of mandamus to quash and set aside Form DRC-03 dated 12.02.2022 and restrain the respondent from generating Form DRC-05. They also requested the court to direct the respondent authorities to refund the amount of Rs. 37,68,300/- recovered by reversing the ITC.Court's Observations and Conclusion:The court noted that the respondent's actions violated the directions issued in Special Civil Application No. 3196 of 2021, which were binding and had not been challenged. The court found that the petitioner's reversal of ITC lacked voluntariness, as evidenced by the recorded call transcript. The court directed the respondent authorities to reverse the ITC amount of Rs. 37,68,300/- along with 6% interest. The petition was disposed of with these directions.