Delhi High Court


Delhi High Court: In a case filed questioning whether the cumulative sum of Rs. 1,80,10,000/- deposited on behalf of the petitioner concern, during search proceedings carried out between 16-02-2022 and 17.02.2022, was a voluntary act or not, on allegations that certain entities were sold by the petitioner company in form of cash and even the commission was received in cash, which was not disclosed, and tax has been evaded, a Division Bench of Rajiv Shakdher and Tara Vitasta Ganju, JJ., held that the amounts which were deposited on behalf of the petitioner-concern, lacked an element of voluntariness and directed to the official respondents/revenue to return Rs. 1,80,10,000/- to the petitioner-concern, along with interest at the rate of 6% (simple) per annum.

The petitioner concerned is in the business of trading in Ready Made Garments (RMG), engaged in selling goods on behalf of third parties in the domestic market on a commission basis. It is alleged by the official respondents/revenue, that the petitioner concerned sold goods in cash on behalf of two entities i.e., Empire Apparels Pvt. Ltd. and M/s Navrang Enterprises, during the period spanning between July 2017 and February 2022.

The Court noted that the CGST Act, 2017 and the CGST Rules, 2017 have provisions that where the person chargeable with tax is served with a show cause notice and pays the tax, along with interest, within thirty days of the issue of the show cause notice, in such an eventuality, a penalty is not leviable, and all proceedings in respect of such notice are deemed to be concluded.

The Court further noted that these provisions must be read alongside Rule 142, in Chapter XVIII of CGST Rules, 2017 which states that under sub-rule (1A) of Rule 142 of CGST Rules, 2017, where a proper officer, before service of notice under Section 73(1) or Section 74(1) of the CGST Rules, 2017 seeks to communicate details of tax, interest or penalty, he is required to do so in the prescribed form i.e., via Part A of Form GSTDRC01A.

The Court stated that if the payments/deposits were voluntary, then an acknowledgement of having received the payment should emanate from the proper officer, as mandated in the prescribed form i.e., GST DRC-04, as prescribed under sub-section (2) of Rule 142 of CGST Rules, 2017.

Placing reliance on an interim order of Gujarat High Court in Bhumi Associate v. Union of India, wherein the Court directed guidelines regarding the power of officers carrying out search and seizure and specifically directed that no recovery of tax should be made during search, inspection or investigation unless it is voluntary- it does not elaborate on various modes for collection adopted in such circumstances, for example via cheque, cash, e-payment or even via adjustment of input tax credit.

In the same order I.e. Bhumi Associate (supra), the Court further directed that even if the assessee comes forward to make voluntary payment in the prescribed form i.e., GST DRC-03, he/she should be advised to file the same day after the search has ended and the concerned officers have left the premises of the assessee.

Considering the directions laid down in Bhumi Associates (supra) and the facts of the present case, the Court opined that although payments were made in the prescribed form i.e., GST DRC-03, no document was placed on record by the official respondents/revenue, demonstrating an acknowledgement of having accepted the payment.

Thus, the Court held that the amounts deposited I.e., the cumulative sum did not have an element of voluntariness attached to it and must be returned.

[Vallabh Textiles v. Senior Intelligent Officer, 2022 SCC OnLine Del 4508, decided on 20-12-2022]

Advocates who appeared in this case :

Mr Vivek Sarin with Mr Dibya Prashant Singh, Advocates for the Petitioner;

Mr. Satish Kumar, Sr. St. Counsel for respondent 1 and 2;

Ms. Anushree Narain, Adv. for the Respondent 3.

*Arunima Bose, Editorial Assistant has reported this brief.

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