2023 (6) TMI 183 - HC - GST

Tax Recovery Invalidated: Procedural Errors Render Enforcement Void Under CGST Act Section 73

M/s. Samyak Metals Pvt. Ltd. Versus Union of India and others

HC ruled that tax recovery by respondents was illegal due to procedural violations under CGST Act. The court found no proper show cause notice was issued, ... Seeking refund the amount, which was recovered illegally from the petitioner - no GST DRC-04 has been issued by respondent No. 3 - amount recovered by the respondents without passing any adjudicating order or following any procedure under Sections 73/74 of the Act - HELD THAT:- In the facts of the present case, after the search was conducted on 25.02.2021, amount of Rs. 35,73,147/- (Tax of Rs. 29,48,601/-, interest of Rs. 1,82,255/- and penalty of Rs. 4,42,291/-) was deposited by the petitioner under Section 74 (5) of CGST Act, 2017. As per Rule 142 (2) of the CGST Rules, when a payment is made in FORM GST DRC-03, the proper officer has to issue acknowledgment, accepting the payment made by the said person in FORM GST DRC-04. In the present case, the said payment was made way back on 26.02.2021. Till date, neither they have issued FORM GST DRC-04 nor issued any notice under Section 74 (1) of the CGST Act. The respondents have not followed the Govt. instruction No. 01/2022-23 dated 25.05.2022 (Annexure P-10) issued by the CBIC. In these instructions, it is clarified that there is no bar on the taxpayers for voluntarily making the payments on the basis of ascertainment of their liability on non-payment/short payment of taxes before or at any stage of such proceedings. It is the duty of the officer to inform the taxpayers regarding the provisions of voluntary tax payment through DRC- 03. However, in the present case, as per these instructions, the petitioner has deposited the amount of Rs. 35,73,147/-, but the officer has not issued DRC-03 till date. Neither the department has followed the provisions of Rule 142 (2) of the CGST Rules nor has issued any notice under Section 74 (1) of the CGST Act. The respondents are directed to return the amount in question to the petitioner along with simple interest at the rate of 6% per annum from the date of deposit till the payment is made - Petition allowed. Issues Involved:1. Illegal recovery of tax without following proper procedure under Sections 73/74 of the Act.The petitioner, engaged in the business of manufacturing aluminum ingots, sought a writ of mandamus to direct the respondent to refund the amount recovered without issuing a show cause notice or passing an order under the Central GST Act and Haryana GST Act. The petitioner was forced to deposit tax on purchases made from a specific entity, without the issuance of a GST DRC-04 or following the necessary adjudicating procedures. The respondent had not issued any notice under Section 74(1) of the CGST Act, leading to the recovery of a significant amount without due process.2. Compliance with government instructions and legal provisions.The Court referred to a previous judgment involving a similar issue, highlighting the importance of following government instructions to prevent harassment to taxpayers. The instructions emphasized that tax recovery should not occur during a search unless voluntary, and payments should be made in the prescribed form, such as GST DRC-03. Failure to issue the acknowledgment in FORM GST DRC-04 and non-compliance with Rule 142(2) of the CGST Rules were noted in the present case. The respondents were directed to adhere to the government instructions and return the amount with interest as per the ruling.3. Duty of the officer and procedural lapses.The Court emphasized the duty of the officer to inform taxpayers about voluntary tax payment provisions and issue necessary documents like DRC-03 promptly. In this case, despite the petitioner depositing the amount as per the liability assessed, the officer failed to issue the required documents or notices under the CGST Act. The lack of compliance with procedural requirements and government instructions led to the Court's decision to direct the refund of the amount with interest to the petitioner within a specified timeframe.The judgment by the High Court of Punjab and Haryana addressed the issues of illegal tax recovery, compliance with government instructions, and procedural lapses, ultimately directing the respondents to refund the amount to the petitioner with interest due to the failure to follow proper procedures under the CGST Act.