TaxTMI 
TaxTMI 
2026 (9) TMI 728
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....direction in the nature of a Writ of Certiorari, quashing the impugned Orders in Appeal vide ARN No. AD2902250288123 dated 28.08.2025 for FY 2017-18 and ARN No. AD290225028856R dated 28.08.2025 for FY 2018-19, both passed by Respondent No. 03 under Section 107(11) of Karnataka GST Act, 2017 (Annexure Y1 and Annexure Y2 respectively); b. Issue an appropriate writ, order or direction, holding and declaring that the petitioner is legally entitled to receive a refund amount of Rs.53,97,352 (38,97,352+15,00,000) along with applicable interest, which the Respondent No. 07 has recovered from the Petitioner during the course of investigation under duress by adopting coercive and forceful means without any pre-dated subsisting tax demand outstanding at relevant time; c. Issue a Writ of Mandamus, or such other writ, Order or direction, as this Honourable Court may deem fit to Respondent No. 06 to grant refund of the entire amount of Rs.53,97,352 (38,97,353+15,00,000) coercively recovered along with applicable interest; and d. Pass such other or further orders as this Honourable Court may deem fit and proper in the facts and circumstances of the case, and in the int....
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....4.05.2025 (Annexure-A2 to the writ petition) under Section 73(5) of the CGST Act. The petitioner has also filed Form GST DRC-03 with respect to the said payment. It is the contention of the petitioner that the said payment of Rs.18,00,000/- is also under duress. 6. Thereafter, a Show-cause notice dated 18.07.2024 has been issued in Form DRC 01A under Section 74 of the CGST and KGST Act, making a demand of a sum of Rs.3,21,870/- along with interest and penalty (Annexure-Q to the writ petition). The petitioner, vide reply dated 29.07.2024, (Annexure-R to the writ petition), has replied to the said Show-cause notice dated 18.07.2024. Thereafter, a Show-cause notice dated 07.08.2024, (Annexure-S to the writ petition), has been issued in Form GST DRC-01 Rule 142(1A), being a Show-cause notice issued under Section 74 of the KGST Act. The petitioner vide reply dated 02.09.2024, (Annexure-T to the writ petition), has replied to the same. In the said reply, the petitioner has specifically stated that he was coerced to pay a sum of Rs.53,97,352/-, which was involuntary and under the protest. 7. Thereafter, the petitioner made refund applications dated 12.09.2024 (Annexures-C1 and C2 to....
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....ection 73(5) of the Act to contend that there is a provision for making payment voluntarily, which has been availed by the petitioner. It is pertinent to notice Section 73(5) of the CGST Act, reads as under: "73(5). The person chargeable with tax may, before service of notice under subsection (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment." 13. It is also pertinent to notice Rule 142(2) of the Central Goods and Services Tax Rules, 2017 [Hereinafter referred to as the 'CGST Rules'] which reads as under: "142(2). Where, before the service of notice or statement, the person chargeable with tax makes payment of the tax and interest in accordance with the provisions of sub-section (5) of section 73 [or clause (i) of sub-section (8) of section 74A, as the case may be, or tax, interest and penalty in accordance with the provisions of subsection (5) of section 74 or clause (i) of sub-section (9) of section 74A], or where any ....
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....gal position of voluntary payment of taxes for ensuring correct application of law and to protect the interest of the taxpayers. It is observed that under CGST Act, 2017 a taxpayer has an option to deposit the tax voluntarily by way of submitting DRC-03 on GST portal. Such voluntary payments are initiated only by the taxpayer by logging into the GST portal using its login id and password. Voluntary payment of tax before issuance of show cause notice is permissible in terms of provisions of Section 73(5) and Section 74 (5) of the CGST Act, 2017. This helps the taxpayers in discharging their admitted liability, self-ascertained or as ascertained by the tax officer, without having to bear the burden of interest under Section 50 of CGST Act, 2017 for delayed payment of tax and may also save him from higher penalty imposable on him subsequent to issuance of show cause notice under Section 73 or Section 74, as the case may be. 3. It is further observed that recovery of taxes not paid or short paid, can be made under the provisions of Section 79 of CGST Act, 2017 only after following due legal process of issuance of notice and subsequent confirmation of demand by issuance of adju....
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....its liability. There is no communication in writing from company to the proper officer about either self ascertainment or admission of liability by company to infer that such a payment was made under section 74(5) of the Act. The company intimated the Department vide Communication dated 30-11-2019 that it reserves its right to claim refund of the amount and the same should not be treated as admission of its liability. xxxxxx 21. Thus it is evident that payments have not been made admitting the liability. On the other hand, the company reserved its right to seek refund and made it expressly clear that payment of the amount should not be treated as admission of its liability. Besides the aforesaid, there is no material on record to establish that guidelines issued by division bench of High Court of Gujarat were followed. Thus for the aforementioned reasons, the first issue is answered in the negative and it is held that the amount was not paid voluntarily under section 74(5) of the CGST Act." 18. Further, while considering as to whether the amounts recovered from the company during investigation was under coercion and threat, and as to whether the action of th....
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....he same would amount to depriving a person of his property without any authority of law and would infringe his right under article 300A of the Constitution of India as well. In the instant case, the only provision which permits deposit of an amount during pendency of an investigation is section 74(5) of CGST Act, which is not attracted in the fact situation of the case. Therefore, it is evident that amount has been collected from Company in violation of article 265 and 300-A of the Constitution. Therefore, the contention of the Department that amount under deposit be made subject to the outcome of the pending investigation cannot be accepted. The Department, therefore, is liable to refund the amount to the Company." 19. A Co-ordinate Bench of this Court while considering a similar fact situation in the case of Sri. J. Ramesh Chand vs. Union of India and Others [W.P.No.9890/2023, dated 13.10.2025, NC:2025:KHC:40313] after noticing the Division Bench judgment of this Court in the case of Bundl Technologies [[2022] 136 taxmann.com 112(Karnataka)], as well as the judgment of the Supreme Court in the case of Dabur India Ltd. Vs. State of Uttar Pradesh [(1990) 4 SCC 113] and Radhika A....
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.... by the petitioner are conspicuously absent except for filling up Form DRC-03 which merely contains the amount without additional details in this regard; interestingly, there are no other contemporaneous document in this regard, thereby establishing that the payment made by the petitioner cannot be construed or treated as voluntary as contended by the respondents. (v) It is pertinent to note that the respondents would be entitled to invoke Section 74 only in cases of tax not paid / short paid / erroneously refunded / input tax credit wrongly availed or utilised by reason of fraud or any wilful - misstatement or suppression of facts; it follows therefrom that the provisions contained in Section 74 would apply only if the respondents were to prove the aforesaid allegations contemplated in the said provision made against the assessee; in such proceedings to be initiated under Section 74, it is highly inconceivable that a tax payer / assessee in respect of whom, search, seizure and inspection proceedings are being conducted by the respondents would voluntarily make payment thereby exposing himself to the risk of admitting that he is guilty of the allegations contemplated in Se....
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....rdingly, voluntarily make payment of Rs.10 crores to the respondents; in other words, in the light of the undisputed fact that all necessary material, account etc., which was the basis for self-ascertainment having been seized by the respondents, it is highly improbable that the petitioner was in a position to carryout self-ascertainment and make payment which is yet another circumstance to establish that the said payment was not voluntary as falsely contended by the respondents, whose contention is liable to be rejected on this score also. (viii) As stated supra, except conducting search, inspection and seizure proceedings, no other proceedings or order were initiated or passed by the respondents prior to the payment made by the petitioner and no ascertainment had been made / done by the respondents till that time; the undisputed fact that the respondents themselves ascertained the actual amount payable by the petitioner only during the pendency of the present petition by issuance of intimation in Form GST DRC01A dated 17.02.2025, is sufficient to come to the conclusion that prior thereto and at the time of search, seizure and inspection proceedings during the course of w....
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.... rejected. (xi) A perusal of the material on record will indicate that the payment of Rs.10 crores by the petitioner during the course of search, inspection and seizure proceedings is contrary to the directions issued by the respondents themselves in Instruction No.1/2022-23 dated 25.05.2022, in which the officials of the respondents have been cautioned / warned against taking steps to collect / receive / obtain voluntary payment and reiterated by the Apex Court in Radhika Agarwal's case supra, and as such, the contentions of the respondents cannot be accepted on this ground also." (emphasis supplied) 20. As noticed by the Division Bench of this Court in the case of Bundl Technologies [[2022] 136 taxmann.com 112(Karnataka)] and a Co-ordinate Bench of this Court in the case of Sri. J. Ramesh Chand [W.P.No.9890/2023, dated 13.10.2025, NC:2025:KHC:40313], in the present case, the alleged voluntary payment made by the petitioner is admittedly under sub-section (5) of Section 74 of the CGST Act. The same mandates that the said voluntary payment of tax is to be made along with interest and penalty. However, in the DRC-03, it is clear that no payment is made by the peti....