Deposits made at 3:10 and 3:18 AM during search operations ruled involuntary, refund ordered with 6% interest

Delhi HC held that deposits made by petitioner at 3:10 and 3:18 AM during search operations were involuntary, violating CBIC Instruction No. 01/2022-2023. The court found no evidence supporting respondent's claim of voluntary deposit, noting absence of any prior claim against petitioner. HC directed respondents to refund Rs. 15,06,342 with 6% statutory interest from deposit date and re-credit Rs. 25,00,000 to petitioner's Electronic Credit Ledger within four weeks. Petition disposed.

---

---

Issues Involved:
1. Legality of the GST deposit during the search operation.
2. Voluntariness of the deposit.
3. Entitlement to refund and interest.

Issue-wise Comprehensive Details of the Judgment:

1. Legality of the GST deposit during the search operation:
The petitioner sought a refund of Rs. 40,06,342/- (Rs. 15,06,342/- towards stock variation and Rs. 25,00,000/- towards wrongful input tax credit) recovered without authority of law. The search operation was conducted based on GST INS-01 dated 16.11.2023, alleging suppression of transactions and contravention of GST provisions to evade tax. The petitioner claimed that the deposit was made under duress during the search operation, without any statutory demand being raised.

2. Voluntariness of the deposit:
The petitioner argued that the deposit made at 3:10 AM and 3:18 AM during the search operation was not voluntary. The court referred to the decision in 'M/s Vallabh Textiles vs. Senior Intelligence Officer,' which emphasized that deposits made under coercion are not voluntary. The court noted that the deposit was made before the search ended, indicating a lack of voluntariness. The CBIC Instruction No. 01/2022-2023 dated 25.05.2022, which prohibits recovery of tax dues during search operations, was also cited.

3. Entitlement to refund and interest:
The court held that the amounts deposited lacked voluntariness and were liable to be returned with interest. The court directed the respondents to refund Rs. 15,06,342/- with statutory interest @ 6% p.a. from the date of deposit till repayment and to re-credit Rs. 25,00,000/- to the petitioner's Electronic Credit Ledger. It was clarified that no interest would be paid on the amount deposited by way of adjustment from the Electronic Credit Ledger unless an appropriate application had been made prior to the alleged non-voluntary deposit.

Conclusion:
The court disposed of the petition, directing the respondents to refund the amounts as specified, without prejudice to the ongoing proceedings under Section 73 of the Act.

---