Deposit During GST Search Not Voluntary; Refund with 6% Interest Ordered Under Article 265 and 300A Violations

HC held that the amount deposited by the petitioner during search proceedings was not a voluntary payment under s.74(5) of the GST Act and lacked authority of law as mandated by Art. 265 of the Constitution. Absence of a proper receipt and statutory basis rendered the collection unconstitutional, infringing the petitioner's property right under Art. 300A. The departmental contention that the amount be retained subject to investigation was rejected. HC partly allowed the writ petition and directed respondent-authority to refund Rs. 1,99,90,000/- to the petitioner with interest at 6% per annum.

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Issues involved:
The issues involved in the judgment are the refund of a sum of Rs. 1,99,90,000/- along with interest and the unblocking of input tax credit amounting to Rs. 24,18,516/-.

Refund of Rs. 1,99,90,000/-:
The petitioner, engaged in manufacturing lead products, filed a writ petition seeking a refund of Rs. 1,99,90,000/- along with interest, which was forcibly deposited by respondent No. 1 after a search conducted on the petitioner's premises. Respondent No. 1 contended that the amount was voluntarily deposited by the petitioner, as indicated in the FORM GST DRC-03. The investigation revealed illegal availment of input tax credit and discrepancies in invoices. The department issued a show cause notice raising a demand, which was confirmed by respondent No. 2. The petitioner sought a refund based on precedents emphasizing that tax collection must be by the authority of law to avoid infringing on the right to property.

Unblocking of Input Tax Credit:
Respondent No. 2 had initially blocked input tax credit amounting to Rs. 24,18,516/- in the petitioner's electronic ledger, leading to objections from the petitioner. However, the court noted that the matter involving respondent No. 2 had become infructuous as the account was unblocked after a year, and steps were taken against the demand raised. The focus shifted to respondent No. 1, with the court adjourning the matter to allow further steps to be determined. The petitioner's claim for the unblocking of input tax credit was intertwined with the overall dispute and subsequent legal proceedings.

Judicial Precedents and Legal Provisions:
The judgment referenced various legal provisions, including Section 74(5) of the CGST Act, 2017, and Section 142(2) of the CGST Rules, 2017, to emphasize the importance of tax collection being in accordance with the law. Precedents from different High Courts were cited to support the petitioner's claim for a refund, highlighting the constitutional mandate that tax collection must be authorized by law to avoid violating property rights. The court's decision to partially allow the writ petition and direct respondent No. 1 to refund the disputed amount, along with interest, was based on these legal principles and precedents.

Conclusion:
The judgment addressed the issues of refunding a significant sum and unblocking input tax credit, emphasizing the legal requirement for tax collection to be authorized by law. The court's decision to partially allow the petition and order the refund, along with interest, was influenced by legal precedents and constitutional provisions safeguarding property rights in tax matters. The detailed analysis of the facts, legal provisions, and precedents formed the basis for the court's decision in this complex tax dispute.

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