Voluntariness of GST reversal declarations depends on surrounding circumstances, and set-aside closure restores proceedings and limitation.

A declaration of reversal of ineligible input tax credit under Section 74(5) of the CGST Act is voluntary only if surrounding circumstances support free consent; a bare allegation of coercion is insufficient without corroboration. The Court noted that a delay in complaining against coercion weakens involuntariness, though reversal during an ongoing inspection may support the assessee's case. Where closure under Section 74(6) is set aside, proceedings must be restored to the stage before the declaration so the Proper Officer may proceed under Sections 73 or 74 and the statutory limitation period is not defeated.

---

---

Issues: Whether the reversal of ineligible input tax credit, the payment of interest and penalty, and the declaration seeking closure under Section 74(5) of the Central Goods and Services Tax Act, 2017 were voluntary or were made under coercion, and whether the closure order under Section 74(6) was liable to be set aside with consequential restoration of proceedings and exclusion of time for limitation.

Analysis: The reversal of input tax credit was made during the inspection and in the presence of the inspecting authorities. The mere allegation of coercion was held insufficient by itself and had to be supported by corroborative material and surrounding circumstances. The absence of any complaint to higher authorities for a considerable period weighed against the plea of involuntariness, but the timing of the reversal during the ongoing inspection provided some support to the assessee's case. The Court applied the test that voluntariness must be assessed from attending circumstances, and that coercion cannot be presumed only from a later assertion. At the same time, the Court recognised that if the closure under Section 74(6) were set aside, the position must be restored so that the Revenue is not deprived of the opportunity to proceed under Section 73 or 74 and the statutory time limit is not defeated.

Conclusion: The finding that the reversal was not voluntary was not disturbed, but the relief was modified by restoring the proceedings to the stage prior to the declaration under Section 74(5), permitting the Proper Officer to proceed under Sections 73 or 74, and excluding the intervening period for limitation.

Ratio Decidendi: A declaration under Section 74(5) of the Central Goods and Services Tax Act, 2017 can be treated as involuntary only when coercion or pressure is established from corroborative surrounding circumstances; if such declaration is set aside, the proceedings must be restored so that the statutory scheme and limitation under Sections 73 and 74 are not defeated.

---