M/S B.G. Granites vs. Assistant Commisisoner (Hpu)

CAV ORDER

In this petition, petitioner has sought for the following reliefs:-

"(a) To issue a Writ of Certiorari or order or direction in the nature of Writ of Certiorari declaring that the inspection conducted by the Respondent-2 on the business premises of the Petitioner is without juri iction;

(b) Issue a Writ of Certiorari or order or direction in the nature of Writ of Certiorari quashing the Closure Proceedings, vide No.GEXCOM/AE/INSP/538/2024-AE- 1640124 0/0 Letter Pr. COMMR-CGST-Mysore, 1640/2024 dated 27-06-2024 as at ANNEXURE-A;

(c) To issue a Writ of Mandamus or order or direction in the nature of Writ of Mandamus directing the Respondents to give a reasonable opportunity of hearing to the Petitioner and then to proceed as per law;

(d) To issue a Writ of Mandamus or order or direction in the nature of Writ of Mandamus to refund the tax amount of Rs. 1,48,89,060-00 dated 03-06-2024, paid through Form GST DRC-03 (ARN: AD290624002353A), as HC-KAR NC: 2025:KHC:40313 at ANNEXURE-D1, and to remit the same to the bank account of the Petitioner;

(e) To issue a Writ of Mandamus or order or direction in the nature of Writ of Mandamus to refund the interest and penalty amount of Rs.54,23,430-00, dated 06-06-2024, paid through Form GST DRC-03 (ARN: AD2906240053819), as at ANNEXURE-D2, and to remit the same to the bank account of the Petitioner;

(f) For costs of this Petition;

g) Pass such other order/s as this Hon'ble Court deems fit and proper in the circumstances of the case."

Petitioner is doing business of production and export of granites slabs, monuments and memorials to USA, UK and other countries, having obtained a GST registration from the respondents. On 03.06.2024, the respondents undertook search, inspection and seizure operations at the business premises of the petitioner and during the course of the same, respondent obtained / collected / received a sum of Rs.1,48,89,060/- from the petitioner by way of reversal of Input Tax Credit (ITC) by debiting the electronic cash ledger of the petitioner. On 04.06.2024, the HC-KAR NC: 2025:KHC:40313 respondents called upon the petitioner to appear on 05.06.2024, to which, the petitioner requested for time and appeared on 11.06.2024. Meanwhile, on 06.06.2024, the respondents collected additional sum of Rs.54,23,430/- from the petitioner towards interest and penalty by reversal of ITC and by debiting the electronic cash ledger of the petitioner. It was contended that apart from the fact that the aforesaid amounts were obtained / collected / received by the respondents from the petitioner by exercising coercion / threat / duress, when the petitioner appeared before the respondents on 11.06.2024, they obtained a letter from him under coercion, threat and duress purporting to request the respondents to close the matter, pursuant to which, the respondents issued a closure order dated 27.08.2024. Aggrieved by the impugned closure order and seeking refund of the amounts paid by it, petitioner is before this Court by way of the present petition.

(i) It is an undisputed fact that prior to the search and inspection conducted by the respondents on 24.03.2023, they did not issue any notice to the petitioner nor were any proceedings to ascertain, adjudicate or determine the tax, interest and penalty payable by the petitioner which indicates that there was no occasion for the petitioner to pay the said sum voluntarily by way of self-ascertainment to the respondents, thereby indicating that the said amount was not paid voluntarily by the petitioner.

(ii) Rule 142(2) of the CGST Rules, 2017, contemplates that upon the petitioner making payment in Form DRC-03, the respondents are bound to issue an acknowledgment in Form DRC-04 to the petitioner; undisputedly, respondents did not issue any such acknowledgment to the petitioner which is a circumstance to clearly indicate that the said amount was not a voluntary payment made by the petitioner.

(iii) Prior to the search and inspection made by the respondents, there was no demand made by the respondents in relation to the amount paid by the petitioner under any of the provisions of the CGST Act, 2017, which is yet another circumstance to indicate that there was no warrant / reason for the petitioner to make HC-KAR NC: 2025:KHC:40313 voluntary payment during the course of search and inspection proceedings.

(iv) The material on record also indicates that even at the time of payment by the petitioner, the details, material particulars, quantification etc., of the alleged self - ascertainment and voluntary payment 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 Section 74 of the CGST Act; in other HC-KAR NC: 2025:KHC:40313 words, in the light of Form DRC-03 said to have been submitted by the petitioner along with the payment by invoking Section 74 (5) of the CGST Act, it is highly / inherently improbable that the said payment was made voluntarily by the petitioner that too during the course of search, seizure and inspection proceedings and even before he became aware or came to know whether proceedings under Sections 73 to 74 would be initiated against him and as such, the payment made by the petitioner cannot be said to be voluntary by way of self- ascertainment on this ground also.

(vi) A perusal of the material on record will clearly indicate that prior to the payment made by the petitioner, there was no proceeding or order by the respondents which adjudicated or quantified or ascertained the amount payable by the petitioner nor any such quantification or ascertainment done / made by the petitioner for the purpose of arriving at the sum of Rs.10 crores paid by the petitioner, which was not preceded by any order or basis so as to arrive at the said figure; to put it differently, in the absence of any material to establish as to how the petitioner or quantified or arrived at a sum of Rs.10 crores paid by him and in the absence of requisite / necessary material particulars / details in this regard, it cannot be said that the said sum paid by the petitioner was voluntary and by way of self - ascertainment as contended by the respondents whose contention in this regard deserves to be rejected. HC-KAR NC: 2025:KHC:40313 (vii) A perusal of the material pertaining to search, inspection and seizure proceedings comprising of mahazar, seizure order etc., will indicate that on 23.03.2023 itself, the residence of the petitioner was inspected by the respondents who seized one laptop from the petitioner; on the very next day i.e., on 24.03.2023, the respondents seized various movable, articles comprising of account books, desktops, server disks, mobile phones, hard disks, laptop etc., from the business premises of the petitioner and all necessary data that was required for the purpose of self- ascertainment had been seized from the petitioner by the respondents; it follows therefrom that at the time of payment, there could not have been any material, accounts, etc., available with the petitioner that would enable him to proceed with self-ascertainment and accordingly, 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 HC-KAR NC: 2025:KHC:40313 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 - DRC-01A 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 which, payment was made, there was no ascertainment of the actual tax, interest and penalty payable by the petitioner which also establishes that the payment made by the petitioner was involuntary and not on his own account but at the instance of the respondents, whose contentions are liable to be rejected on this ground also.

(ix) A perusal of the provisions contained in Section 74(5) of the CGST Act will indicate that voluntary payment by the petitioner would have to be made as per the procedure prescribed in the said provision, viz., firstly, ascertain the actual tax payable by him after verification / scrutiny of his accounts, secondly, calculate the interest payable by him in terms of Section 50 of the CGST Act, which provides for discretion in payment of interest upto 18% / 24% p.a. and thirdly, to calculate the penalty at 15% on the tax payable by him; in other words, this process of self-ascertainment calls for and demands verification / scrutiny of accounts and HC-KAR NC: 2025:KHC:40313 calculation of discretionary rate of interest up to 18% / 24% which is not a fixed rate of interest and penalty, all of which is highly improbable and physically / humanly impossible to be done by a tax payer / assessee who is already under immense pressure on account of search, inspection and seizure operation being conducted, particularly when all equipment which would be required / necessary for such self-ascertainment was not available with the petitioner and as such, even on this ground also, I am of the view that the payment made by the petitioner was clearly not voluntary and at the behest / instance of the respondents during the course of their proceedings.

(x) A perusal of the payment made by the petitioner in Form GST DRC-03 will indicate that the same is made under Section 74(5) of the CGST Act which mandates that such voluntary payment of tax should have been made by the petitioner along with interest under Section 50 of the CGST Act and penalty; in this context, the said payment in Form GST DRC-03 will indicate that no payment is made by the petitioner towards interest or penalty and the relevant columns in this regard are shown as 'Nil' which is yet another circumstance to indicate that the payment was not made by the petitioner voluntarily in terms of Section 74(5) of the CGST Act, 2017, as contended by the respondents whose contentions are liable to be rejected. HC-KAR NC: 2025:KHC:40313 (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.

(i) Petition is hereby allowed.

(ii) The impugned closure order at Annexure-A dated 27.08.2024 passed by the respondents is hereby quashed.

(ii) The petitioner is declared to be entitled to refund of Rs.1,48,89,060/- and Rs.54,23,430/- together with interest @ 6% p.a. from 03.06.2024 and 06.06.2024 respectively till the date of payment.

(iii) The respondents are directed to refund the aforesaid amounts of Rs.1,48,89,060/- and Rs.54,23,430/- together with interest @ 6% p.a. from 03.06.2024 and 06.06.2024 respectively HC-KAR NC: 2025:KHC:40313 till the date of payment to the petitioner within a period of two months from the date of receipt of a copy of this order.

(iv) All rival contentions between the parties pursuant to the show cause notice and adjudication proceedings of the respondents are kept open and no opinion is expressed on the same. (S.R.KRISHNA KUMAR) JUDGE

Srl.