Tax payment during ongoing search proceedings deemed involuntary; Rs.30,00,000 refund ordered and interest claim allowed

Whether payment made during search proceedings was voluntary: HC held that a payment of tax made during the course of a search, i.e. before completion of search, cannot be regarded as voluntary; moreover, the department had not issued GST DRC-04 receipt, undermining any claim of voluntary payment - payment deemed coerced and refundable. Outcome: writ dismissal set aside and respondents directed to refund Rs. 30,00,000 within six weeks. Interest claim: appellants permitted to raise claim for interest in adjudication of the show-cause notice; appeal allowed.

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Issues:
1. Refund of a sum of Rs. 30,00,000/- allegedly paid under coercion during a search.
2. Validity of the search and the authorization process.
3. Determination of whether the payment was voluntary or coerced.

Issue 1: Refund of Rs. 30,00,000/-:
The appellants sought a refund of Rs. 30,00,000/- paid during a search, alleging coercion. The Court noted that no proper authorization was initially presented but was later produced. The appellants' claim of coercion was based on discrepancies in signatures and lack of proper communication. The Court emphasized that such factual issues cannot be resolved through affidavits in a writ petition. The department argued that the appellants can contest the search validity during the show-cause notice stage. The Court referred to circulars emphasizing voluntary payments and proper procedures for tax recovery.

Issue 2: Validity of the Search:
The appellants contested the validity of the search based on alleged discrepancies in signatures and procedural lapses. The Court highlighted that such issues should be addressed during the show-cause notice process, not in a writ petition. The department indicated that the investigation was nearing completion, and the search authorization could be challenged in the subsequent stages.

Issue 3: Determination of Payment Voluntariness:
The Court analyzed the circumstances surrounding the payment of Rs. 30,00,000/- during the search. It noted discrepancies in the search conclusion time, payment time, and lack of a proper acknowledgment receipt. Referring to previous cases, the Court concluded that the payment was not voluntary due to the timing and absence of formal procedures. The Court ordered the refund of the amount, emphasizing the lack of voluntary nature of the payment and non-compliance with statutory rules.

In conclusion, the High Court directed the return of the sum paid by the appellants, highlighting procedural lapses, lack of voluntary payment determination, and the need for adherence to statutory rules. The Court stressed the importance of proper procedures during tax recovery processes and the necessity to address issues like search validity and payment voluntariness at the appropriate stages of adjudication.

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