2023 (8) TMI 691 - HC - GST

GST recovery without Section 74(1) show cause notice violates natural justice principles, deposits under investigation pressure not voluntary

M/s. Parsvnath Traders and M/s Mahavira Dyes & Chemicals Versus Principal Commissioner, CGST And Another

M/s. Parsvnath Traders and M/s Mahavira Dyes & Chemicals Versus Principal Commissioner, CGST And Another - 2023 (77) G.S.T.L. 413 (P & H) Issues Involved:1. Legality of the recovery of GST amount without issuing a show cause notice.2. Entitlement of the petitioner to a refund of the amount deposited during the investigation.3. Compliance with Section 74 of the Central Goods and Services Tax Act, 2017.4. Violation of principles of natural justice.Summary:1. Legality of the recovery of GST amount without issuing a show cause notice:The petitioner challenged the recovery of Rs. 50.70 lacs by the respondents on the grounds that it was done without issuing a show cause notice as required under Section 74(1) of the Central Goods and Services Tax Act, 2017. The petitioner argued that the amount was deposited under coercion during the investigation and not voluntarily.2. Entitlement of the petitioner to a refund of the amount deposited during the investigation:The court noted that the petitioner had consistently contested its liability and sought a refund shortly after depositing the amount. The court found that the recovery of the amount without a show cause notice and final determination of liability was not permissible. It was held that the petitioner was entitled to a refund of the amount deposited during the investigation.3. Compliance with Section 74 of the Central Goods and Services Tax Act, 2017:The court discussed the provisions of Section 74, which provide for the determination of tax liability and the issuance of a show cause notice. It was emphasized that Section 74(5) allows for voluntary payment of tax before the issuance of a show cause notice, but such payment must be unconditional and amount to self-assessment. The court found that the deposit made by the petitioner did not meet these criteria and was not voluntary.4. Violation of principles of natural justice:The court observed that no show cause notice had been issued to the petitioner even till the date of the judgment, and the amount was recovered during the investigation without following the prescribed procedure. This was found to be a violation of the principles of natural justice, as the petitioner was not given an opportunity to contest the liability.Conclusion:The court ordered the refund of Rs. 50.70 lacs to the petitioner along with interest at 6% per annum from the date of deposit until the refund is released. Similar directions were issued for the petitioner in the connected petition, who had deposited Rs. 45.65 lacs. The writ petitions were allowed with no order as to costs.