Refund of payment made during search available as refund when no DRC-04 or Notice

The Punjab and Haryana High Court in the case ofM/s. Samyak Metals Pvt. Ltd. v. Union of India and Others [CWP No.26529 of 2022 dated May 24, 2023] directed the Revenue Department to return the amount paid by the assessee during the search proceeding where neither DRC-04 nor notice under Section 74(1) of the Central Goods and Services Tax Act, 2017 ("the CGST Act") was issued.

Facts

M/s. Samyak Metals Pvt. Ltd.("the Petitioner") is engaged in the business of manufacturing ofaluminium ingots. The business premises of the Petitioner were searched on February 25, 2021 by the Revenue Department. During search, the Revenue Department asked about the purchases made from one M/s D.G. Enterprises. The Petitioner did not provide any documents to the Revenue Department during the search. The Petitioner was forced to deposit INR 71,46,294/- in lieu of the input tax credit claimed by it on the purchases made from M/s D.G. Enterprise (including interest and penalty). The Petitioner paid the tax, interest and penalty vide DRC-03 dated February 26, 2021.

The Petitioner filed writ before the Punjab and Haryana High Court praying that even after depositing INR 71,46,294/-, no DRC-04 has been issued by the Revenue Department.

The Revenue Department contended that as per statement recorded under Section 70 of the CGST Act where Mr. Ankur Jain, Director of the Petitioner admitted that they had accepted only bills from M/s. DG Enterprises without goods, for which, he was ready to pay/reverse the duty amount along with interest and penalty as applicable. Hence, he had voluntarily paid total amount of INR 71,46,294/- under Section 74(5) of the CGST Act.

Issue

Whether the proper officer is liable to issue acknowledgement in case the Petitioner made voluntary payment vide DRC-03?

Held

The Punjab and Haryana High Court inCWP No.26529 of 2022 held as under:

• Observed that, the Instruction no. 01/2022-23 issued by the CBIC dated May 25, 2022 ("the Instruction") in respect to the GST investigation wherein it was clarified that no recovery of tax should be made during search, inspection or investigation unless, it is voluntary.
• Further observed, the case of M/s. Vallabh Textiles vs. Senior Intelligence Officer and others, 2022 SCC OnLine Del 4508 wherein the Hon’ble Delhi High Court held that deposit of tax by the assessee during search was not voluntary and the amount cannot be retained, if no summons had been issued under Section 74 (1) of the CGST Act.
• Noted that, the proper officer is bound to issue acknowledgment, accepting the payment made by the said person in DRC-04. However, till date, neither they have issued DRC-04 nor issued any notice under Section 74 (1) of the CGST Act and the Revenue Department have not followed the Instruction which states that it is the duty of the officer to inform the taxpayers regarding the provisions of voluntary tax payment through DRC- 03. Neither the Department has followed the provisions of Rule 142 (2) of the Central Goods and Services Tax Rules, 2017 nor has issued any notice under Section 74 (1) of the CGST Act.
• Directed the Revenue Department to return the amount to the Petitioner along with simple interest @ 6% p.a. from the date of deposit till the payment is made.