Karnataka High Court
M/S. Gunnam Infra Projects Private ... vs The Union Of India on 7 November, 2025
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
1
Reserved on : 11.09.2025
Pronounced on : 07.11.2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 07TH DAY OF NOVEMBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.17779 OF 2025 (T - RES)
BETWEEN:
M/S. GUNNAM INFRA PROJECTS PRIVATE LIMITED
REGISTERED UNDER THE COMPANIES ACT, 2013
NO.2, 19/6, STATION ROAD, NEAR MULBERRY WOODS,
CARMELARAM, JANATHA COLONY, DODDAKANNELLI,
BENGALURU, KARNATAKA - 560035.
REPRESENTED BY ITS
AUTHORISED REPRESENTATIVE
SHRI GUNNAMREDDY SAI TEJASWIN REDDY.
... PETITIONER
(BY SMT.LOCHANA S. BABU, ADVOCATE)
AND:
1. THE UNION OF INDIA
REPRESENTED HEREIN BY THE SECRETARY
DEPARTMENT OF REVENUE, MINISTRY OF FINANCE,
GOVERNMENT OF INDIA, NORTH BLOCK,
NEW DELHI - 110 001.
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2. THE SUPERINTENDENT OF CENTRAL TAX
HEADQUARTERS / ANTI-EVASION UNIT
O/O THE PRINCIPAL COMMISSIONER OF CENTRAL TAX
GST EAST COMMISSIONERATE,
BANGALORE EAST DIVISION
TTMC-BMTC BUILDING, HAL OLD AIRPORT ROAD,
DOMLUR, BENGALURU - 560 071.
3. THE PRINCIPAL COMMISSIONER OF CENTRAL TAX
BANGALORE EAST DIVISION
4TH FLOOR, TTMC-BMTC BUILDING,
HAL OLD AIRPORT ROAD, DOMLUR,
BENGALURU - 560 071.
4. THE SENIOR INTELLIGENCE OFFICER
DGGI, BANGALORE ZONAL UNIT
NO. 112, S.P. ENCLAVE, K.H. ROAD
ADJACENT TO KARNATAKA BANK
BENGALURU - 560 027.
5. THE ASSISTANT DIRECTOR OF DGGI
O/O PRINCIPAL ADDITIONAL DIRECTOR, DGGI
DGGI, BANGALORE ZONAL UNIT
NO. 112. S.P. ENCLAVE, K.H. ROAD
ADJACENT TO KARNATAKA BANK
BENGALURU - 560 027.
6. THE DEPUTY COMMISSIONER OF CENTRAL TAX
BANGALORE EAST DIVISION
4TH FLOOR, TTMC-BMTC BUILDING
HAL OLD AIRPORT ROAD, DOMLUR
BENGALURU - 560 071.
7. THE DEPUTY COMMISSIONER
DGGI, BANGALORE ZONAL UNIT
NO. 112, S.P. ENCLAVE, K.H. ROAD
ADJACENT TO KARNATAKA BANK
3
BENGALURU - 560 027.
... RESPONDENTS
(BY SRI M.N.KUMAR, CGSPC FOR R-1;
SRI M.UNNIKRISHNAN, ADVOCATE FOR R-2, R-3 AND R-6;
SRI MADHU N.RAO, ADVOCATE FOR R-4 AND R-5)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO (I) QUASHING
THE RFD-03 DEFICIENCY MEMOS BEARING NOS.
ZD290525068873S; ZD290525068876M; ZD2905250689360 AND
ZD290525068948J, ALL OF WHICH DATED 20.05.2025 VIDE
ANNEXURE A TO A3, ISSUED BY R6; (II) QUASHING THE RFD-03
DEFICIENCY MEMOS BEARING NOS. ZD2905250728390,
ZD290525072859M; ZD290525072866R AND ZD2905250728504,
ALL OF WHICH DATED 21.05.2025 VIDE ANNEXURE-B TO B3
ISSUED BY R6; (III) ISSUE A WRIT OF MANDAMUS, OR SUCH
OTHER WRIT, ORDER OR DIRECTION(S), TO RESPONDENT NO. 06
TO PROCESS THE REFUND APPLICATIONS FILED BY THE
PETITIONER IN ACCORDANCE WITH LAW AND; (IV) ISSUE A WRIT
OF MANDAMUS, OR SUCH OTHER WRIT, ORDER OR DIRECTION(S),
TO RESPONDENT NO. 06 ISSUE INTEREST ON DELAYED REFUND IN
ACCORDANCE WITH LAW AND; (V) TO ISSUE ORDER(S),
DIRECTIONS, WRIT(S) OR ANY OTHER RELIEF, HOLDING THAT THE
ACTIONS OF THE RESPONDENTS ARE ILLEGAL AND AWARD A COST
APPROPRIATE AS THIS HON'BLE COURT DEEMS IT FIT AND PROPER
IN THE FACTS AND CIRCUMSTANCE OF THE CASE IN THE
INTEREST OF JUSTICE AND EQUITY; (VI) TO ISSUE ORDER(S),
DIRECTIONS, WRIT(S) OR ANY OTHER RELIEF AS THIS HON'BLE
COURT DEEMS IT FIT AND PROPER IN THE FACTS AND
CIRCUMSTANCE OF THE CASE IN THE INTEREST OF JUSTICE AND
EQUITY.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 11.09.2025, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
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CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CAV ORDER
The petitioner - assessee is at the doors of this Court calling
in question certain deficiency memos issued by the 6th respondent -
Deputy Commissioner of Central Tax on two different dates i.e., on
20-05-2025 and 21-05-2025, rejecting the petitioner's application
for refund of the amount in DRC-03 forms.
2. Facts in brief, germane, are as follows:
2.1. The petitioner - assessee is a private limited company,
registered under the provisions of the Companies Act, 2013 and is
said to be duly registered under the Goods and Services Tax
enactment. On 08-06-2023, officers from the Director General of
GST Intelligence and the Anti-Evasion Unit conduct simultaneous
inspection at the registered office premises of the petitioner-
Company purportedly under Section 67(1) of the Central Goods and
Services Tax Act, 2017 ('CGST Act'). During the course of the
proceedings, it is the case of the petitioner that he was compelled
to make immediate payment of Rs.2,42,00,000/- in form DRC-03
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as obtaining under Section 74(5) of the CGST Act, to avoid threat of
adverse consequences.
2.2. After the inspection conducted on 08-06-2023, summons
was issued on 24-11-2023 directing the authorized representative
of the petitioner to appear in person for conduct of an enquiry. The
petitioner claims to have appeared before the concerned Officers,
and during the proceedings, it is said that they once again
demanded payment of Rs.22,46,400/- purportedly to cover the
liability, without furnishing any determination or quantification of
liability. The issuance of summons goes on this way. Between 05-
11-2024 and 06-02-2025, 4 more summons are issued directing
the presence of the authorized representative of the petitioner. The
assessee is said to have complied with all the summons and
appears in person before the concerned authorities. Between the
dates 08-06-2023 and 29-05-2024 the assessee makes four
payments in DRC-03 under Section 74(5) of the CGST Act, totally
amounting to Rs.3,11,59,298/-.
6
2.3. After due compliance with the summons issued by the
respondent officials, on 09-05-2025 and 16-05-2025, the petitioner
submits two applications seeking refund of the amount so
deposited, under Section 54 of the CGST Act, through a form RFD-
01. The 6th respondent - Deputy Commissioner of Central Tax, on
20-05-2025 issues deficiency memos in form RFD-03 against the
refund applications filed in the RFD-01 forms on the ground that
relevant supporting documents were not appended to the
application seeking refund.
2.4. It is the averment in the petition that the assessee had
enclosed all the documents and therefore, there was nothing afresh
to be submitted. However, the petitioner still submitted the RFD-01
forms afresh along with all the relevant documents, on 20-05-2025.
The refund is once again rejected by the 6th respondent - Deputy
Commissioner of Central Tax by deficiency memos on 21-05-2025,
on the same ground. Therefore, the assessee is before this Court
seeking quashment of the deficiency memos dated 20-05-2025 and
21-05-2025, and a direction to process the refund applications and
the interest on delayed refund.
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3. Heard Smt Lochana S Babu, learned counsel appearing for
petitioner, Sri M N Kumar, learned Central Government Senior
Panel Counsel appearing for respondent No.1, Sri Madhu N Rao,
learned counsel appearing for respondents 4 and 5 and
Sri M Unnikrishnan, learned counsel appearing for respondents 2, 3
and 6.
4.1. The learned counsel appearing for the petitioner would
vehemently contend that refund applications ought to have been
processed by the proper officer, as it was duly filled along with all
necessary documents in place. The proper officer has no jurisdiction
to adjudicate over the merit of a refund application and is required
to process the refund application, if the application is complete and
in conformity with the statutory requirements. The issuance of
deficiency memos without any legally tenable or reasoned
justification, amounts to colorable exercise of administrative power
and would be in contravention of Section 54 of the CGST Act. The
GST Intelligence ought to have issued an acknowledgement in
terms of Rules 90(2) and Rule 92(1) of the of the Central Goods
8
and Services Tax Rules, 2017 ('CGST Rules'). since the petitioner-
assessee has duly submitted the refund applications.
4.2. The learned counsel would submit that a Division Bench
of this Court in the case of INTELLIGENCE OFFICER,
DIRECTORATE GENERAL OF GST INTELLIGENCE, BENGALURU
v. KESAR COLOR CHEM INDUSTRIES, reported in 2025 SCC
OnLine Kar 18697, has held that recovery made during
investigation without adjudication was contrary to law and in
violation of Article 265 of the Constitution. The learned counsel
would also place reliance upon the judgment of the Division Bench
of the High Court of Delhi in the case of AB ENTERPRISES v.
COMMISSIONER OF DELHI GOODS AND SERVICES TAX,
reported in 2023 SCC Online Del 7434, wherein the Division
Bench holds that an application can be rejected only if the
application is incomplete in terms of Rule 89 of CGST Rules. The
withholding of funds by the respondent-Authorities is in violation of
Article 265 of the Constitution of India and that no tax shall be
collected except with the authority of law.
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5. Contrariwise, the learned counsel Sri Madhu N Rao,
representing respondents 4 and 5-CGST Intelligence, and learned
counsel Sri M Unnikrishnan, learned counsel appearing for
respondents 2, 3 and 6-Central Tax-Anti-Evasion Unit would
contend that the assessee has not proved that payments made
under DRC-03 was under any duress. Mere filing of refund under
Section 54 of the CGST Act does not entitle the assessee for a
refund, especially when the payment is reflected as a voluntary
payment; the assessee has not submitted any documents
substantiating their claims that the payments have been made
under coercion or under duress. The impugned deficiency memos
have been issued in strict consonance with Rule 90(3) of the CGST
Rules, since the application of the petitioner-assessee was
incomplete. The deficiency memos did not refuse refund to the
assessee on merits, but merely pointed out deficiency in
documentation while applying for refund. The assessee was not
barred from resubmitting the application complying with the
deficiencies. Therefore, the learned counsel appearing for the
respondents would, in unison, seek dismissal of the petition.
10
6. I have given my anxious consideration to the submissions
made by the learned counsel for the respective parties and have
perused the material on record.
7. The afore-narrated facts are not in dispute. The issue that
falls for consideration is, whether the deficiency memos suffer from
want of legal tenability and requires a direction for processing of
refund?
8. To consider the issue, certain provisions of the CGST Act
are necessary to be noticed. They read as follows:
"50. Interest on delayed payment of tax.--(1) Every
person who is liable to pay tax in accordance with the provisions
of this Act or the rules made thereunder, but fails to pay the tax
or any part thereof to the Government within the period
prescribed, shall for the period for which the tax or any part
thereof remains unpaid, pay, on his own, interest at such rate,
not exceeding eighteen per cent., as may be notified by the
Government on the recommendations of the Council:
Provided that the interest on tax payable in respect of
supplies made during a tax period and declared in the return for
the said period furnished after the due date in accordance with
the provisions of Section 39, except where such return is
furnished after commencement of any proceedings under
Section 73 or Section 74 or Section 74-A] in respect of the said
period, shall be payable on that portion of the tax which is paid
by debiting the electronic cash ledger.
11
(2) The interest under sub-section (1) shall be calculated,
in such manner as may be prescribed, from the day succeeding
the day on which such tax was due to be paid.
(3) Where the input tax credit has been wrongly availed
and utilised, the registered person shall pay interest on such
input tax credit wrongly availed and utilised, at such rate not
exceeding twenty-four per cent. as may be notified by the
Government, on the recommendations of the Council, and the
interest shall be calculated, in such manner as may be
prescribed.
... ... ...
54. Refund of tax.--(1) Any person claiming refund
of any tax and interest, if any, paid on such tax or any
other amount paid by him, may make an application
before the expiry of two years from the relevant date in
such form and manner as may be prescribed:
Provided that a registered person, claiming refund of any
balance in the electronic cash ledger in accordance with the
provisions of sub-section (6) of Section 49, may claim such
refund in such form and manner as may be prescribed.
(2) A specialised agency of the United Nations
Organisation or any Multilateral Financial Institution and
Organisation notified under the United Nations (Privileges and
Immunities) Act, 1947 (46 of 1947), Consulate or Embassy of
foreign countries or any other person or class of persons, as
notified under Section 55, entitled to a refund of tax paid by it
on inward supplies of goods or services or both, may make an
application for such refund, in such form and manner as may be
prescribed, before the expiry of two years from the last day of
the quarter in which such supply was received.
(3) Subject to the provisions of sub-section (10), a
registered person may claim refund of any unutilised input tax
credit at the end of any tax period:
Provided that no refund of unutilised input tax credit shall
be allowed in cases other than--
(i) zero rated supplies made without payment of tax;
12
(ii) where the credit has accumulated on account of
rate of tax on inputs being higher than the rate of
tax on output supplies (other than nil rated or fully
exempt supplies), except supplies of goods or
services or both as may be notified by the
Government on the recommendations of the
Council:
[* * *]
Provided also that no refund of input tax credit shall be
allowed, if the supplier of goods or services or both avails of
drawback in respect of central tax or claims refund of the
integrated tax paid on such supplies.
(4) The application shall be accompanied by--
(a) such documentary evidence as may be prescribed
to establish that a refund is due to the applicant;
and
(b) such documentary or other evidence (including the
documents referred to in Section 33) as the
applicant may furnish to establish that the amount
of tax and interest, if any, paid on such tax or any
other amount paid in relation to which such refund
is claimed was collected from, or paid by, him and
the incidence of such tax and interest had not been
passed on to any other person:
Provided that where the amount claimed as refund is less
than two lakh rupees, it shall not be necessary for the applicant
to furnish any documentary and other evidences but he may file
a declaration, based on the documentary or other evidences
available with him, certifying that the incidence of such tax and
interest had not been passed on to any other person.
(5) If, on receipt of any such application, the proper
officer is satisfied that the whole or part of the amount claimed
as refund is refundable, he may make an order accordingly and
the amount so determined shall be credited to the Fund referred
to in Section 57.
(6) Notwithstanding anything contained in sub-section
(5), the proper officer may, in the case of any claim for refund
13
on account of zero-rated supply of goods or services or both
made by registered persons, other than such category of
registered persons as may be notified by the Government on the
recommendations of the Council, refund on a provisional basis,
ninety per cent. of the total amount so claimed, [* * *] in such
manner and subject to such conditions, limitations and
safeguards as may be prescribed and thereafter make an order
under sub-section (5) for final settlement of the refund claim
after due verification of documents furnished by the applicant.
(7) The proper officer shall issue the order under sub-
section (5) within sixty days from the date of receipt of
application complete in all respects.
(8) Notwithstanding anything contained in sub-section
(5), the refundable amount shall, instead of being credited to
the Fund, be paid to the applicant, if such amount is relatable
to--
(a) refund of tax paid on ["export" and "exports"] of
goods or services or both or on inputs or input
services used in making such zero-rated supplies;
(b) refund of unutilised input tax credit under sub-
section (3);
(c) refund of tax paid on a supply which is not
provided, either wholly or partially, and for which
invoice has not been issued, or where a refund
voucher has been issued;
(d) refund of tax in pursuance of Section 77;
(e) the tax and interest, if any, or any other amount
paid by the applicant, if he had not passed on the
incidence of such tax and interest to any other
person; or
(f) the tax or interest borne by such other class of
applicants as the Government may, on the
recommendations of the Council, by notification,
specify.
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(8-A) The Government may disburse the refund of the
State tax in such manner as may be prescribed.
(9) Notwithstanding anything to the contrary contained in
any judgment, decree, order or direction of the Appellate
Tribunal or any court or in any other provisions of this Act or the
rules made thereunder or in any other law for the time being in
force, no refund shall be made except in accordance with the
provisions of sub-section (8).
(10) Where any refund is due [* * *] to a registered
person who has defaulted in furnishing any return or who is
required to pay any tax, interest or penalty, which has not been
stayed by any court, Tribunal or Appellate Authority by the
specified date, the proper officer may--
(a) withhold payment of refund due until the said
person has furnished the return or paid the tax,
interest or penalty, as the case may be;
(b) deduct from the refund due, any tax, interest,
penalty, fee or any other amount which the taxable
person is liable to pay but which remains unpaid
under this Act or under the existing law.
Explanation.--For the purposes of this sub-section, the
expression "specified date" shall mean the last date for filing an
appeal under this Act.
(11) Where an order giving rise to a refund is the subject
matter of an appeal or further proceedings or where any other
proceedings under this Act is pending and the Commissioner is
of the opinion that grant of such refund is likely to adversely
affect the revenue in the said appeal or other proceedings on
account of malfeasance or fraud committed, he may, after
giving the taxable person an opportunity of being heard,
withhold the refund till such time as he may determine.
(12) Where a refund is withheld under sub-section (11),
the taxable person shall, notwithstanding anything contained in
Section 56, be entitled to interest at such rate not exceeding six
per cent. as may be notified on the recommendations of the
15
Council, if as a result of the appeal or further proceedings he
becomes entitled to refund.
(13) Notwithstanding anything to the contrary contained
in this section, the amount of advance tax deposited by a casual
taxable person or a non-resident taxable person under sub-
section (2) of Section 27, shall not be refunded unless such
person has, in respect of the entire period for which the
certificate of registration granted to him had remained in force,
furnished all the returns required under Section 39.
(14) Notwithstanding anything contained in this section,
no refund under sub-section (5) or sub-section (6) shall be paid
to an applicant, if the amount is less than one thousand rupees.
(15) Notwithstanding anything contained in this section,
no refund of unutilised input tax credit on account of zero rated
supply of goods or of integrated tax paid on account of zero
rated supply of goods shall be allowed where such zero rated
supply of goods is subjected to export duty.]
Explanation.--For the purposes of this section,--
(1) "refund" includes refund of tax paid on zero-rated
supplies of goods or services or both or on inputs or input
services used in making such zero-rated supplies, or
refund of tax on the supply of goods regarded as deemed
exports, or refund of unutilised input tax credit as
provided under sub-section (3).
(2) "relevant date" means--
(a) in the case of goods exported out of India where a
refund of tax paid is available in respect of goods
themselves or, as the case may be, the inputs or
input services used in such goods,--
(i) if the goods are exported by sea or air, the
date on which the ship or the aircraft in
which such goods are loaded, leaves India;
or
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(ii) if the goods are exported by land, the date
on which such goods pass the frontier; or
(iii) if the goods are exported by post, the date
of despatch of goods by the Post Office
concerned to a place outside India;
(b) in the case of supply of goods regarded as deemed
exports where a refund of tax paid is available in
respect of the goods, the date on which the return
relating to such deemed exports is furnished;
(ba) in case of zero-rated supply of goods or services or
both to a Special Economic Zone developer or a
Special Economic Zone unit where a refund of tax
paid is available in respect of such supplies
themselves, or as the case may be, the inputs or
input services used in such supplies, the due date
for furnishing of return under section 39 in respect
of such supplies;
(c) in the case of services exported out of India where
a refund of tax paid is available in respect of
services themselves or, as the case may be, the
inputs or input services used in such services, the
date of--
(i) receipt of payment in convertible foreign
exchange [or in Indian rupees wherever
permitted by the Reserve Bank of India],
where the supply of services had been
completed prior to the receipt of such
payment; or
(ii) issue of invoice, where payment for the
services had been received in advance prior
to the date of issue of the invoice;
(d) in case where the tax becomes refundable as a
consequence of judgment, decree, order or
direction of the Appellate Authority, Appellate
Tribunal or any court, the date of communication of
such judgment, decree, order or direction;
17
(e) in the case of refund of unutilised input tax credit
under clause (ii) of the first proviso to sub-section
(3), the due date for furnishing of return under
Section 39 for the period in which such claim for
refund arises;
(f) in the case where tax is paid provisionally under
this Act or the rules made thereunder, the date of
adjustment of tax after the final assessment
thereof;
(g) in the case of a person, other than the supplier, the
date of receipt of goods or services or both by such
person; and
(h) in any other case, the date of payment of tax.
... ... ...
74. Determination of tax, pertaining to the period
up to Financial Year 2023-24, not paid or short paid or
erroneously refunded or input tax credit wrongly availed
or utilised by reason of fraud or any wilful-misstatement
or suppression of facts.--(1) Where it appears to the
proper officer that any tax has not been paid or short
paid or erroneously refunded or where input tax credit
has been wrongly availed or utilised by reason of fraud,
or any wilful-misstatement or suppression of facts to
evade tax, he shall serve notice on the person chargeable
with tax which has not been so paid or which has been so
short paid or to whom the refund has erroneously been
made, or who has wrongly availed or utilised input tax
credit, requiring him to show cause as to why he should
not pay the amount specified in the notice along with
interest payable thereon under Section 50 and a penalty
equivalent to the tax specified in the notice.
(2) The proper officer shall issue the notice under sub-
section (1) at least six months prior to the time limit specified in
sub-section (10) for issuance of order.
(3) Where a notice has been issued for any period under
sub-section (1), the proper officer may serve a statement,
18
containing the details of tax not paid or short paid or
erroneously refunded or input tax credit wrongly availed or
utilised for such periods other than those covered under sub-
section (1), on the person chargeable with tax.
(4) The service of statement under sub-section (3) shall
be deemed to be service of notice under sub-section (1) of
Section 73, subject to the condition that the grounds relied upon
in the said statement, except the ground of fraud, or any wilful-
misstatement or suppression of facts to evade tax, for periods
other than those covered under sub-section (1) are the same as
are mentioned in the earlier notice.
(5) The person chargeable with tax may, before
service of notice under sub-section (1), pay the amount
of tax along with interest payable under Section 50 and a
penalty equivalent to fifteen per cent. of such tax 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.
(6) The proper officer, on receipt of such information,
shall not serve any notice under sub-section (1), in respect of
the tax so paid or any penalty payable under the provisions of
this Act or the rules made thereunder.
(7) Where the proper officer is of the opinion that the
amount paid under sub-section (5) falls short of the amount
actually payable, he shall proceed to issue the notice as
provided for in sub-section (1) in respect of such amount which
falls short of the amount actually payable.
(8) Where any person chargeable with tax under sub-
section (1) pays the said tax along with interest payable under
Section 50 and a penalty equivalent to twenty-five per cent. of
such tax within thirty days of issue of the notice, all proceedings
in respect of the said notice shall be deemed to be concluded.
(9) The proper officer shall, after considering the
representation, if any, made by the person chargeable with tax,
determine the amount of tax, interest and penalty due from
such person and issue an order.
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(10) The proper officer shall issue the order under sub-
section (9) within a period of five years from the due date for
furnishing of annual return for the financial year to which the
tax not paid or short paid or input tax credit wrongly availed or
utilised relates to or within five years from the date of erroneous
refund.
(11) Where any person served with an order issued under
sub-section (9) pays the tax along with interest payable thereon
under Section 50 and a penalty equivalent to fifty per cent. of
such tax within thirty days of communication of the order, all
proceedings in respect of the said notice shall be deemed to be
concluded.
(12) The provisions of this section shall be applicable for
determination of tax pertaining to the period up to Financial
Year 2023-24.
Explanation 1.--For the purposes of Section 73 and this
section,--
(i) the expression "all proceedings in respect of the
said notice" shall not include proceedings under
Section 132;
(ii) where the notice under the same proceedings is
issued to the main person liable to pay tax and
some other persons, and such proceedings against
the main person have been concluded under
Section 73 or Section 74, the proceedings against
all the persons liable to pay penalty under
[Sections 122 and 125] are deemed to be
concluded.
Explanation 2.-- [* * *]"
(Emphasis supplied)
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Certain Rules are made in exercise of powers conferred under the
provisions of the Act. The relevant rules of the CGST Rules that are
necessary to be noticed are as follows:
"89. Application for refund of tax, interest, penalty,
fees or any other amount.-- (1) Any person, except the
persons covered under notification issued under Section
55, claiming refund of [any balance in the electronic cash
ledger in accordance with the provisions of sub-section
(6) of Section 49 or] any tax, interest, penalty, fees or
any other amount paid by him, other than refund of
integrated tax paid on goods exported out of India, may
file, subject to the provisions of Rule 10-B, an application
electronically in Form GST RFD-01 through the common
portal, either directly or through a Facilitation Centre
notified by the Commissioner:
[* * *]
Provided that in respect of supplies to a Special Economic
Zone unit or a Special Economic Zone developer, the application
for refund shall be filed by the--
(a) supplier of goods after such goods have been
admitted in full in the Special Economic Zone for
authorised operations, as endorsed by the specified
officer of the Zone;
(b) supplier of services along with such evidence
regarding receipt of services for authorised
operations as endorsed by the specified officer of
the Zone:
Provided further that in respect of supplies regarded as
deemed exports, the application may be filed by,--
(a) the recipient of deemed export supplies; or
(b) the supplier of deemed export supplies in cases
where the recipient does not avail of input tax
credit on such supplies and furnishes an
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undertaking to the effect that the supplier may
claim the refund:
Provided also that refund of any amount, after adjusting
the tax payable by the applicant out of the advance tax
deposited by him under Section 27 at the time of registration,
shall be claimed only after the last return required to be
furnished by him has been so furnished.
Explanation.--For the purposes of this sub-rule,
"specified officer" means a "specified officer" or an "authorised
officer" as defined under Rule 2 of the Special Economic Zone
Rules, 2006.
(1-A) Any person, claiming refund under Section 77 of
the Act of any tax paid by him, in respect of a transaction
considered by him to be an intra-State supply, which is
subsequently held to be an inter-State supply, may, before the
expiry of a period of two years from the date of payment of the
tax on the inter-State supply, file an application electronically in
Form GST RFD-01 through the common portal, either directly or
through a Facilitation Centre notified by the Commissioner:
Provided that the said application may, as regard to any
payment of tax on inter-State supply before coming into force of
this sub-rule, be filed before the expiry of a period of two years
from the date on which this sub-rule comes into force.
(1-B) Any person, claiming refund of additional integrated
tax paid on account of upward revision in price of the goods
subsequent to exports, and on which the refund of integrated
tax paid at the time of export of such goods has already been
sanctioned as per rule 96, may file an application for such
refund of additional integrated tax paid, electronically in FORM
GST RFD-01 through the common portal, subject to the
provisions of rule 10-B, before the expiry of two years from the
relevant date as per clause (a) of Explanation (2) of Section 54:
Provided that the said application for refund can, in cases
where the relevant date as per clause (a) of Explanation (2) of
Section 54 of the Act was before the date on which this sub-rule
comes into force, be filed before the expiry of two years from
the date on which this sub-rule comes into force.
22
(2) The application under sub-rule (1) shall be
accompanied by any of the following documentary
evidences in Annexure 1 in Form GST RFD-01, as
applicable, to establish that a refund is due to the
applicant, namely--
(a) the reference number of the order and a copy
of the order passed by the proper officer or an
appellate authority or Appellate Tribunal or
court resulting in such refund or reference
number of the payment of the amount
specified in sub-section (6) of Section 107
and sub-section (8) of Section 112 claimed as
refund;
(b) a statement containing the number and date
of shipping bills or bills of export and the
number and the date of the relevant export
invoices, in a case where the refund is on
account of export of goods, other than
electricity;
(ba) a statement containing the number and date
of the export invoices, details of energy
exported, tariff per unit for export of
electricity as per agreement, along with the
copy of statement of scheduled energy for
exported electricity by Generation Plants
issued by the Regional Power Committee
Secretariat as a part of the Regional Energy
Account (REA) under clause (nnn) of sub-
regulation 1 of Regulation 2 of the Central
Electricity Regulatory Commission (Indian
Electricity Grid Code) Regulations, 2010 and
the copy of agreement detailing the tariff per
unit, in case where refund is on account of
export of electricity;
(bb) a statement containing the number and date
of export invoices along with copy of such
invoices, the number and date of shipping
bills or bills of export along with copy of such
shipping bills or bills of export, the number
23
and date of Bank Realisation Certificate or
foreign inward remittance certificate in
respect of such shipping bills or bills of export
along with copy of such Bank Realisation
Certificate or foreign inward remittance
certificate issued by Authorised Dealer-I
Bank, the details of refund already sanctioned
under sub-rule (3) of rule 96, the number and
date of relevant supplementary invoices or
debit notes issued subsequent to the upward
revision in prices along with copy of such
supplementary invoices or debit notes, the
details of payment of additional amount of
integrated tax, in respect of which such
refund is claimed, along with proof of
payment of such additional amount of
integrated tax and interest paid thereon, the
number and date of foreign inward remittance
certificate issued by Authorised Dealer-I Bank
in respect of additional foreign exchange
remittance received in respect of upward
revision in price of exports along with copy of
such foreign inward remittance certificate,
along with a certificate issued by a practicing
chartered accountant or a cost accountant to
the effect that the said additional foreign
exchange remittance is on account of such
upward revision in price of the goods
subsequent to exports and copy of contract or
other documents, as applicable, indicating
requirement for the revision in price of
exported goods and the price revision thereof,
in a case where the refund is on account of
upward revision in price of such goods
subsequent to exports;
(bc) a reconciliation statement, reconciling the
value of supplies declared in supplementary
invoices, debit notes or credit notes issued
along with relevant details of Bank
Realisation Certificate or foreign inward
remittance certificate issued by Authorised
Dealer-I Bank, in a case where the refund is
24
on account of upward revision in price of such
goods subsequent to exports;
(c) a statement containing the number and date
of invoices and the relevant Bank Realisation
Certificates or Foreign Inward Remittance
Certificates, as the case may be, in a case
where the refund is on account of the export
of services;
(d) a statement containing the number and date
of invoices as provided in Rule 46 along with
the evidence regarding the endorsement
specified in the second proviso to sub-rule (1)
in the case of the supply of goods made to a
Special Economic Zone unit or a Special
Economic Zone developer;
(e) a statement containing the number and date
of invoices, the evidence regarding the
endorsement specified in the second proviso
to sub-rule (1) and the details of payment,
along with the proof thereof, made by the
recipient to the supplier for authorised
operations as defined under the Special
Economic Zone Act, 2005, in a case where the
refund is on account of supply of services
made to a Special Economic Zone unit or a
Special Economic Zone developer;
(f) a declaration to the effect that tax has not
been collected from the Special Economic
Zone unit or the Special Economic Zone
developer, in a case where the refund is on
account of supply of goods or services or both
made to a Special Economic Zone unit or a
Special Economic Zone developer;
(g) a statement containing the number and date
of invoices along with such other evidence as
may be notified in this behalf, in a case where
the refund is on account of deemed exports;
25
(h) a statement containing the number and the
date of the invoices received and issued
during a tax period in a case where the claim
pertains to refund of any unutilised input tax
credit under sub-section (3) of Section 54
where the credit has accumulated on account
of the rate of tax on the inputs being higher
than the rate of tax on output supplies, other
than nil-rated or fully exempt supplies;
(i) the reference number of the final assessment
order and a copy of the said order in a case
where the refund arises on account of the
finalisation of provisional assessment;
(j) a statement showing the details of
transactions considered as intra-State supply
but which is subsequently held to be inter-
State supply;
(k) a statement showing the details of the
amount of claim on account of excess
payment of tax and interest, if any, or any
other amount paid;
(ka) a statement containing the details of invoices
viz. number, date, value, tax paid and details
of payment, in respect of which refund is
being claimed along with copy of such
invoices, proof of making such payment to the
supplier, the copy of agreement or registered
agreement or contract, as applicable, entered
with the supplier for supply of service, the
letter issued by the supplier for cancellation
or termination of agreement or contract for
supply of service, details of payment received
from the supplier against cancellation or
termination of such agreement along with
proof thereof, in a case where the refund is
claimed by an unregistered person where the
agreement or contract for supply of service
has been cancelled or terminated;
26
(kb) a certificate issued by the supplier to the
effect that he has paid tax in respect of the
invoices on which refund is being claimed by
the applicant; that he has not adjusted the tax
amount involved in these invoices against his
tax liability by issuing credit note; and also,
that he has not claimed and will not claim
refund of the amount of tax involved in
respect of these invoices, in a case where the
refund is claimed by an unregistered person
where the agreement or contract for supply of
service has been cancelled or terminated;
(l) a declaration to the effect that the incidence
of tax, interest or any other amount claimed
as refund has not been passed on to any other
person, in a case where the amount of refund
claimed does not exceed two lakh rupees:
Provided that a declaration is not
required to be furnished in respect of the
cases covered under clause (a) or clause (b)
or clause (c) or clause (d) or clause (f) of
sub-section (8) of Section 54;
(m) a Certificate in Annexure 2 of Form GST RFD-
01 issued by a chartered accountant or a cost
accountant to the effect that the incidence of
tax, interest or any other amount claimed as
refund has not been passed on to any other
person, in a case where the amount of refund
claimed exceeds two lakh rupees:
Provided that a certificate is not
required to be furnished in respect of cases
covered under clause (a) or clause (b) or
clause (c) or clause (d) or clause (f) of sub-
section (8) of Section 54:
Provided further that a certificate is not
required to be furnished in cases where
refund is claimed by an unregistered person
who has borne the incidence of tax.
27
Explanation.-- For the purposes of this rule--
(i) in case of refunds referred to in clause (c) of
sub-section (8) of Section 54, the expression
"invoice" means invoice conforming to the
provisions contained in Section 31;
(ii) where the amount of tax has been recovered
from the recipient, it shall be deemed that the
incidence of tax has been passed on to the
ultimate consumer.
(3) Where the application relates to refund of input tax
credit, the electronic credit ledger shall be debited by the
applicant by an amount equal to the refund so claimed.
(4) In the case of zero-rated supply of goods or services
or both without payment of tax under bond or letter of
undertaking in accordance with the provisions of sub-section (3)
of Section 16 of the Integrated Goods and Services Tax Act,
2017 (13 of 2017), refund of input tax credit shall be granted as
per the following formula--
Refund Amount = (Turnover of zero-rated supply of
goods + Turnover of zero-rated supply of services) × Net ITC ÷
Adjusted Total Turnover
Where,--
(A) "Refund amount" means the maximum refund that
is admissible;
(B) "Net ITC" means input tax credit availed on inputs
and input services during the relevant period [* *
*];
(C) "Turnover of zero-rated supply of goods" means
the value of zero-rated supply of goods made
during the relevant period without payment of tax
under bond or letter of undertaking or the value
which is 1.5 times the value of like goods
domestically supplied by the same or, similarly
28
placed, supplier, as declared by the supplier,
whichever is less [* * *];
(D) "Turnover of zero-rated supply of services" means
the value of zero-rated supply of services made
without payment of tax under bond or letter of
undertaking, calculated in the following manner,
namely:-Zero-rated supply of services is the
aggregate of the payments received during the
relevant period for zero-rated supply of services
and zero-rated supply of services where supply has
been completed for which payment had been
received in advance in any period prior to the
relevant period reduced by advances received for
zero-rated supply of services for which the supply
of services has not been completed during the
relevant period;
(E) "Adjusted Total turnover" means the turnover in a
State or a Union territory, as defined under clause
(112) of Section 2, excluding the value of exempt
supplies other than zerorated supplies during the
relevant period;
(F) "Relevant period" means the period for which the
claim has been filed.
Explanation.--For the purposes of this sub-rule,
the value of goods exported out of India shall be taken
as--
(i) the Free on Board (FOB) value declared in
the Shipping Bill or Bill of Export form, as the
case may be, as per the Shipping Bill and Bill
of Export (Forms) Regulations, 2017; or
(ii) the value declared in tax invoice or bill of
supply,
whichever is less.
(4-A) [* * *]
29
(4-B) [* * *]
(5) In the case of refund on account of inverted duty
structure, refund of input tax credit shall be granted as per the
following formula:--
Maximum Refund Amount = [(Turnover of inverted rated
supply of goods and services) × Net ITC ÷ Adjusted Total
Turnover] − [{tax payable on such inverted rated supply of
goods and services × (Net ITC ÷ ITC availed on inputs and input
services)}].
Explanation:-- For the purposes of this sub-rule, the
expressions--
(a) Net ITC shall mean input tax credit availed on
inputs during the relevant period [* * *]; and
(b) "Adjusted Total turnover" and "relevant period"
shall have the same meaning as assigned to them
in sub-rule (4).
90. Acknowledgement.-- (1) Where the application
relates to a claim for refund from the electronic cash
ledger, an acknowledgement in Form GST RFD-02 shall be
made available to the applicant through the common
portal electronically, clearly indicating the date of filing of
the claim for refund and the time period specified in sub-
section (7) of Section 54 shall be counted from such date
of filing.
(2) The application for refund, other than claim for refund
from electronic cash ledger, shall be forwarded to the proper
officer who shall, within a period of fifteen days of filing of the
said application, scrutinize the application for its completeness
and where the application is found to be complete in terms of
sub-rules (2), (3) and (4) of Rule 89, an acknowledgement in
Form GST RFD-02 shall be made available to the applicant
through the common portal electronically, clearly indicating the
date of filing of the claim for refund and the time period
specified in sub-section (7) of Section 54 shall be counted from
such date of filing.
30
(3) Where any deficiencies are noticed, the proper officer
shall communicate the deficiencies to the applicant in Form GST
RFD-03 through the common portal electronically, requiring him
to file a fresh refund application after rectification of such
deficiencies:
Provided that the time period, from the date of filing of
the refund claim in Form GST RFD-01 till the date of
communication of the deficiencies in Form GST RFD-03 by the
proper officer, shall be excluded from the period of two years as
specified under sub-section (1) of Section 54, in respect of any
such fresh refund claim filed by the applicant after rectification
of the deficiencies.
(4) Where deficiencies have been communicated in Form
GST RFD-03 under the State Goods and Service Tax Rules,
2017, the same shall also deemed to have been communicated
under this rule along with the deficiencies communicated under
sub-rule (3).
(5) The applicant may, at any time before issuance
of provisional refund sanction order in Form GST RFD-04
or final refund sanction order in Form GST RFD-06 or
payment order in Form GST RFD-05 or refund withhold
order in Form GST RFD-07 or notice in Form GST RFD-08,
in respect of any refund application filed in Form GST
RFD-01, withdraw the said application for refund by filing
an application in Form GST RFD-01W.
(6) On submission of application for withdrawal of refund
in Form GST RFD-01W, any amount debited by the applicant
from electronic credit ledger or electronic cash ledger, as the
case may be, while filing application for refund in Form GST
RFD-01, shall be credited back to the ledger from which such
debit was made.
... ... ...
92. Order sanctioning refund.-- (1) Where, upon
examination of the application, the proper officer is
satisfied that a refund under sub-section (5) of Section
54 is due and payable to the applicant, he shall make an
order in Form GST RFD-06 sanctioning the amount of
refund to which the applicant is entitled, mentioning
31
therein the amount, if any, refunded to him on a
provisional basis under sub-section (6) of Section 54,
amount adjusted against any outstanding demand under
the Act or under any existing law and the balance amount
refundable.
[* * *]
(1-A) Where, upon examination of the application of
refund of any amount paid as tax other than the refund of tax
paid on zero-rated supplies or deemed export, the proper officer
is satisfied that a refund under sub-section (5) of Section 54 of
the Act is due and payable to the applicant, he shall make an
order in Form RFD-06 sanctioning the amount of refund to be
paid, in cash, proportionate to the amount debited in cash
against the total amount paid for discharging tax liability for the
relevant period, mentioning therein the amount adjusted against
any outstanding demand under the Act or under any existing
law and the balance amount refundable and for the remaining
amount which has been debited from the electronic credit ledger
for making payment of such tax, the proper officer shall issue
Form GST PMT-03 re-crediting the said amount as Input Tax
Credit in electronic credit ledger.
(2) Where the proper officer or the Commissioner is of
the opinion that the amount of refund is liable to be withheld
under the provisions of sub-section (10) or, as the case may be,
sub-section (11) of Section 54, he shall pass an order in 344[Part
A] of Form GST RFD-07 informing him the reasons for
withholding of such refund:
Provided that where the proper officer or the
Commissioner is satisfied that the refund is no longer liable to
be withheld, he may pass an order for release of withheld
refund in Part B of Form GST RFD-07.
(3) Where the proper officer is satisfied, for reasons to be
recorded in writing, that the whole or any part of the amount
claimed as refund is not admissible or is not payable to the
applicant, he shall issue a notice in Form GST RFD-08 to the
applicant, requiring him to furnish a reply in Form GST RFD-09
within a period of fifteen days of the receipt of such notice and
after considering the reply, make an order in Form GST RFD-06
32
sanctioning the amount of refund in whole or part, or rejecting
the said refund claim and the said order shall be made available
to the applicant electronically and the provisions of sub-rule (1)
shall, mutatis mutandis, apply to the extent refund is allowed:
Provided that no application for refund shall be rejected
without giving the applicant an opportunity of being heard.
(4) Where the proper officer is satisfied that the amount
refundable under sub-rule (1) or sub-rule (1-A) or sub-rule (2)
is payable to the applicant under sub-section (8) of Section 54,
he shall make an order in Form GST RFD-06 and issue
a payment order in Form GST RFD-05 for the amount of refund
and the same shall be electronically credited to any of the bank
accounts of the applicant mentioned in his registration
particulars and as specified in the application for refund on the
basis of a consolidated payment advice:
Provided that the order issued in FORM GST RFD-
06 shall not be required to be revalidated by the proper officer:
Provided further that the payment order in FORM GST
RFD-05 shall be required to be revalidated where the refund
has not been disbursed within the same financial year in which
the said payment order was issued.
(4-A) The Central Government shall disburse the refund
based on the consolidated payment advice issued under sub-
rule (4).
(5) Where the proper officer is satisfied that the amount
refundable under sub-rule (1) or sub-rule (1-A)] or sub-rule (2)
is not payable to the applicant under sub-section (8) of Section
54, he shall make an order in Form GST RFD-06 and issue a
payment order in Form GST RFD-05, for the amount of refund to
be credited to the Consumer Welfare Fund.
... ... ...
142. Notice and order for demand of amounts payable
under the Act.-- (1) The proper officer shall serve, along with
the
33
(a) notice issued under Section 52 or Section 73 or
Section 74 [or Section 74-A] or Section 76 or
Section 122 or Section 123 or Section 124 or
Section 125 or Section 127 or Section 129 or
Section 130, a summary thereof electronically
in FORM GST DRC-01,
(b) statement under sub-section (3) of Section 73 or
sub-section (3) of Section 74 [or sub-section (3)
of Section 74-A], a summary thereof electronically
in FORM GST DRC-02, specifying therein the
details of the amount payable.
(1-A) The proper officer may, before service of notice to
the person chargeable with tax, interest and penalty, under sub-
section (1) of Section 73 or sub-section (1) of Section 74 or
sub-section (1) of Section 74-A, as the case may be,
communicate the details of any tax, interest and penalty as
ascertained by the said officer, in Part A of FORM GST DRC-
01-A.
(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 74-A, as the case may be, or
tax, interest and penalty in accordance with the
provisions of sub-section (5) of Section 74 or clause (i) of
sub-section (9) of Section 74-A, or where any person
makes payment of tax, interest, penalty or any other
amount due in accordance with the provisions of the Act,
whether on his own ascertainment or, as communicated
by the proper officer under sub-rule (1-A), he shall
inform the proper officer of such payment in FORM GST
DRC-03 and an acknowledgement, in FORM GST DRC-04
shall be made available to the person through the
common portal electronically.
(2-A) Where the person referred to in sub-rule (1-A) has
made partial payment of the amount communicated to him or
desires to file any submissions against the proposed liability, he
may make such submission in Part B of FORM GST DRC-01-A
[,and thereafter the proper officer may issue an intimation in
34
Part-C of FORM GST DRC-01A, accepting the payment or the
submissions or both, as the case may be, made by the said
person.
(2-B) Where an amount of tax, interest, penalty or any
other amount payable by a person under Section 52 or Section
73 or Section 74 or Section 74-A or Section 76 or Section 122 or
Section 123 or Section 124 or Section 125 or Section 127 or
Section 129 or Section 130, has been paid by the said person
through an intimation in FORM GST DRC-03 under sub-rule (2),
instead of crediting the said amount in the electronic liability
register in FORM GST PMT-01 against the debit entry created for
the said demand, the said person may file an application in
FORM GST DRC-03A electronically on the common portal, and
the amount so paid and intimated through FORM GST DRC-03
shall be credited in Electronic Liability Register in FORM GST
PMT-01 against the debit entry created for the said demand, as
if the said payment was made towards the said demand on the
date of such intimation made through FORM GST DRC-03:
Provided that where an order in FORM GST DRC-05 has
been issued in terms of sub-rule (3) concluding the proceedings,
in respect of the payment of an amount in FORM GST DRC-03,
an application in FORM GST DRC-03A cannot be filed by the said
person in respect of the said payment.
(3) Where the person chargeable with tax makes
payment of tax and interest under sub-section (8) of Section 73
or under clause (ii) of sub-section (8) of Section 74-A, as the
case may be, or tax, interest and penalty under sub-section (8)
of Section 74 or under clause (ii) of sub-section (9) of Section
74-A, as the case may be, within the period specified therein, or
where the person concerned makes payment of the amount
referred to in sub-section (1) of Section 129 within seven days
of the notice issued under sub-section (3) of that section but
before the issuance of order under the said sub-section (3), he
shall intimate the proper officer of such payment in FORM GST
DRC-03 and the proper officer shall issue an intimation in FORM
GST DRC-05 concluding the proceedings in respect of the said
notice.
(4) The representation referred to in sub-section (9) of
Section 73 or sub-section (9) of Section 74 or sub-section (6) of
35
Section 74-A or sub-section (3) of Section 76 or the reply to any
notice issued under any section whose summary has been
uploaded electronically in FORM GST DRC-01 under sub-rule
(1) shall be furnished in FORM GST DRC-06.
(5) A summary of the order issued under Section 52 or
Section 62 or Section 63 or Section 64 or Section 73 or Section
74 or Section 74-A or sub-section (12) of Section 75 or Section
75 or Section 76 or Section 122 or Section 123 or Section 124
or Section 125 or Section 127 or Section 129 or Section 130
shall be uploaded electronically in FORM GST DRC-07,
specifying therein the amount of tax, interest and penalty, as
the case may be, payable by the person concerned.
(6) The order referred to in sub-rule (5) shall be treated
as the notice for recovery.
(7) Where a rectification of the order has been passed in
accordance with the provisions of Section 161 or where an order
uploaded on the system has been withdrawn, a summary of the
rectification order or of the withdrawal order shall be uploaded
electronically by the proper officer in FORM GST DRC-08.
(Emphasis supplied)
Section 74 of the CGST Act enumerates the procedure for recovery
of improperly paid tax. As per Section 74(1), the proper officer shall
issue a show-cause notice to the assessee for payment along with
interest under Section 50, where it appears to the proper officer
that tax has not been paid properly or input tax credit has been
wrongly availed. However, in terms of Section 74(5), the assessee
may, before the service of notice under Section 74(1), pay the
amount of tax along with interest payable under Section 50 and a
36
penalty equivalent to 15% of such tax 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. As
per Rule 142(2) of the CGST Rules, where payment of tax is made
under Section 74(5) of the CGST Act, the assessee shall inform the
proper officer of such payment in Form GST DRC-03, and an
acknowledgement in Form GST DRC-04 shall be made available to
the assessee through the common portal electronically. The
procedure for refund in terms of Section 54(1) of the CGST Act
would begin with a limitation of 2 years from the relevant date.
Rule 89 of the CGST Rules, mandates that refund can be claimed in
Form GST, RFD-01. Rule 89(2) stipulates complete documentation
to be submitted along with the application. Rule 92(1) holds that
where the proper officer is satisfied that a refund is payable in
terms of Section 54(5) of the CGST Act, the proper officer shall
issue refund in terms of form RFD-06. The said procedure has been
considered as to how the refund application should be processed,
by the High Court of Delhi in AB ENTERPRISES V.
37
COMMISSIONER OF DELHI GOODS AND SERVICES TAX1
wherein it is held as follows:
".... .... ....
8. It is important to note that the implication of the
impugned communication is that the petitioner would be
required to file a fresh application for refund in terms of
Rule 90(3) of the CGST Rules. Indisputably, the
petitioner's application for refund cannot be termed as
deficient if it is in accordance with Rule 89(2) of the CGST
Rules and is accompanied with the documents specified
therein. Although, the concerned officer is at liberty to
call for further documents to process the claim, the fact
that such further documents are not annexed with the
application does not render the same deficient.
9. Mr. Aggarwal, does not controvert that the documents
referred to in the file noting and also reflected in the GST portal
are not covered under Rule 89(2) of the CGST Rules.
Concededly, the petitioner had filed all relevant documents that
were mandatory in terms of Rule 89(2) of the CGST Rules.
10. This Court had considered a similar issue in National
Internet Exchange of India v. Union of India: Neutral Citation
No. 2023:DHC:6002-DB and held as under:
"19. An application can be rejected as deficient
only where any deficiencies are noted. The contextual
reading of Sub-rule (3) with Sub-rule (2) of Rule 90
of the CGST Rules, indicates that the deficiencies
referred to in Sub-rule (2) of Rule 90 of the CGST
Rules are those that render an application incomplete
in terms of Sub-rules (2), (3) and (4) of Rule 89 as
stipulated in Sub-rule (2) of Rule 90. Thus, if an
application is complete in terms of Sub-rule (2), (3)
and (4) of Rule 89 of the CGST Rules, the same
cannot be rejected, relegating the taxpayer to file
afresh. In any view of the matter, the period of
processing the said application under Sub-section (7)
1
2023 SCC Online Del 7434
38
of Section 54 of the CGST Act, is required to be
counted from the said date.
20. However, notwithstanding the fact that the
application for refund is complete inasmuch as it is
accompanied by the documents as specified in Sub-rule (2)
of Rule 89 of the CGST Rules, the proper officer may
withhold the processing of refund, if he is not completely
satisfied that the same is refundable to the taxpayer. In
such circumstances, where the proper officer requires to
further verify the claim or is unable to process it on account
of discrepancies noticed by him, he is required to issue
notice in Form GST RFD-08 in terms of Sub-rule (5) of Rule
90 of the CGST Rules."
11. In view of the above, we set aside the impugned
communication. We direct the concerned officer to issue the
acknowledgement in terms of Rule 90 of the CGST Rules and
process the petitioner's application for refund in accordance with
law."
(Emphasis supplied)
The High Court of Delhi holds that a refund application can be
rejected only if the application is incomplete or deficient and the
proper officer is required to issue a deficiency memo only then. In
the light of the said judgment of the High Court of Delhi which
delineates the procedure, the case at hand requires consideration.
9. The applications submitted by the petitioner seeking refund
under Section 54 of the CGST Act is as follows:
"Refund ARN Receipt
39
This is an application receipt for Refund application GST RFD-01
filed by you at the common portal:
Application Reference Number (ARN): AA290525020550H
Date of Application: 09/05/2025
Time of Filing of Application: 12:35 PM
GSTIN/ UIN/ Temporary ID: 29AAHCG3230C1ZZ
Trade Name: GUNNAM INFRA
PROJECTS PRIVATE
LIMITED
Legal Name: GUNNAM INFRA
PROJECTS PRIVATE
LIMITED
Reason of Refund: Any other (specify)
Center Jurisdiction: State-CBIC,Zone-
BENGALURU,
Commissionerate-
BENGALURU EAST,
Division - EAST
DIVISION-8, Range-
RANGE-BEDB
(Jurisdictional Office)
State Jurisdiction: State - Karnataka,
Division - DGSTO-4,
Bengaluru, LOCAL GST
Office - LGSTO 015 -
Bengaluru
From Period: NA
To Period: NA
Refund Specification
Registered person has paid taxes under duress through cash
and credit ledger during inspection proceedings vide DRC 03
Amount of Refund Claimed (In INR)
Particulars Tax Interest Penalty Fee Others Total
Integrated 0 0 0 0 0 0
Tax
Central 12200000 0 0 0 0 12200000
Tax
State/UT 12000000 0 0 0 0 12000000
Tax
40
Cess 0 0 0 0 0 0
Total 24200000 0 0 0 0 24200000
Note. It is a system generated application receipt and does not
require any signature. The Acknowledgement (RFD-02) shall be
issued after verification of the completeness of the application
by the Refund Processing Officer.
Refund ARN Receipt
This is an application receipt for Refund application GST RFD-01
filed by you at the common portal:
Application Reference Number (ARN): AA290525041279Y
Date of Application: 16/05/2025
Time of Filing of Application: 01:42 PM
GSTIN/ UIN/ Temporary ID: 29AAHCG3230C1ZZ
Trade Name: GUNNAM INFRA
PROJECTS PRIVATE
LIMITED
Legal Name: GUNNAM INFRA
PROJECTS PRIVATE
LIMITED
Reason of Refund: Any other (specify)
Center Jurisdiction: State-CBIC, Zone-
BENGALURU,
Commissionerate-
BENGALURU EAST,
Division - EAST
DIVISION-8, Range-
RANGE-BEDB
(Jurisdictional Office)
State Jurisdiction: State - Karnataka,
Division - DGSTO-4,
Bengaluru, LOCAL GST
Office - LGSTO 015 -
Bengaluru
From Period: NA
To Period: NA
Refund Specification
Registered person has paid taxes under duress through cash
and credit ledger during inspection proceedings vide DRC 03
41
Amount of Refund Claimed (In INR)
Particulars Tax Interest Penalty Fee Others Total
Integrated 0 0 0 0 0 0
Tax
Central 1593414 0 0 0 0 1593414
Tax
State/UT 1793414 0 0 0 0 1793414
Tax
Cess 0 0 0 0 0 0
Total 3386828 0 0 0 0 3386828
Note. It is a system generated application receipt and does not
require any signature. The Acknowledgement (RFD-02) shall be
issued after verification of the completeness of the application
by the Refund Processing Officer.
Refund ARN Receipt
This is an application receipt for Refund application GST RFD-01
filed by you at the common portal:
Application Reference Number (ARN): AA290525041441D
Date of Application: 16/05/2025
Time of Filing of Application: 02:05 PM
GSTIN/ UIN/ Temporary ID: 29AAHCG3230C1ZZ
Trade Name: GUNNAM INFRA
PROJECTS PRIVATE
LIMITED
Legal Name: GUNNAM INFRA
PROJECTS PRIVATE
LIMITED
Reason of Refund: Any other (specify)
Center Jurisdiction: -
State Jurisdiction: -
From Period: NA
To Period: NA
Refund Specification
Registered person has paid taxes under duress through credit
ledger during inspection proceedings vide DRC 03
42
Amount of Refund Claimed (In INR)
Particulars Tax Interest Penalty Fee Others Total
Integrated 1326070 0 0 0 0 1326070
Tax
Central 0 0 0 0 0 0
Tax
State/UT 0 0 0 0 0 0
Tax
Cess 0 0 0 0 0 0
Total 1326070 0 0 0 0 1326070
Note. It is a system generated application receipt and does not
require any signature. The Acknowledgement (RFD-02) shall be
issued after verification of the completeness of the application
by the Refund Processing Officer.
Refund ARN Receipt
This is an application receipt for Refund application GST RFD-01
filed by you at the common portal:
Application Reference Number (ARN): AA2905250413770
Date of Application: 16/05/2025
Time of Filing of Application: 01:53 PM
GSTIN/ UIN/ Temporary ID: 29AAHCG3230C1ZZ
Trade Name: GUNNAM INFRA
PROJECTS PRIVATE
LIMITED
Legal Name: GUNNAM INFRA
PROJECTS PRIVATE
LIMITED
Reason of Refund: Any other (specify)
Center Jurisdiction: -
State Jurisdiction: -
From Period: NA
To Period: NA
Refund Specification
Registered person has paid taxes under duress through cash
and credit ledger during inspection proceedings vide DRC 03
43
Amount of Refund Claimed (In INR)
Particulars Tax Interest Penalty Fee Others Total
Integrated 2246400 0 0 0 0 2246400
Tax
Central 0 0 0 0 0 0
Tax
State/UT 0 0 0 0 0 0
Tax
Cess 0 0 0 0 0 0
Total 2246400 0 0 0 0 2246400
Note: It is a system generated application receipt and does not
require any signature. The Acknowledgement (RFD-02) shall be
issued after verification of the completeness of the application
by the Refund Processing Officer.
... .... ....
Certificate under Section 54 of the Central Goods and
Services Tax Act, 2017 ("CGST Act") and Section 54 of
the Karnataka Goods and Services Tax Act, 2017 ("KGST
Act"), read along with Rule 89/2)tm) of the CORT and
KGST Rules, 2017
This is to certify that in respect of the refund amounting
to Rs. 13,26,070/- (Rupees Thirteen Lakhs Twenty-Six
Thousand Seventy) as provided in Annexure A, claimed by M/s.
Gunnam Infra Projects Pvt. Ltd. GSTIN: 29AAHCG3230C1ZZ
for the tax period FY: 2024-25, the incidence of tax, interest,
and penalty has not been passed on to any other person. This
certificate in based on the examination of the books of account
and other relevant records and returns particulars
maintained/furnished by the applicant.
Note: The above payments are made from cash/credit ledger
through DRC03 in the common online portal of the Registered
Person and is not against any tax liability on any supply under
forward or reverse charge basis and this is retained as
'Receivable' in the books of accounts/Balance Sheet of the
Registered Person
44
for JCSS & Co
CHARTERED ACCOUNTANTS
(FIRM REGISTRATION NO: 009178S)
___________________________________________________
ICAI UDIN: 25205709BNFYGW6074 sd/-
Place: Bangalore A Jatin Christopher
Date: 30 Apr 2025 MEMBERSHIP NO: 205 709
Encl: Annexure A.
JCSS & CO
CHARTERED ACCOUNTANTS
Annexure A:
Details of payment made claimed as refund:
Mode of Date of payment Cash/Credit Amount in
payment Ledger Debit Rupees
details
Credit Ledger 29 May 2024 D12905240389940 13,26,070
Total 13,26,070
... .... ...
Certificate under Section 54 of the Central Goods and
Services Tax Act, 2017 ["CGST Act") and Section 54 of
the Karnataka Goods and Services Tax Act, 2017 ("KGST
Act"), read along with Rule 89(2)(m) of the CGST and
KGST Rules, 2017
This is to certify that in respect of the refund amounting
to Rs. 22,46,400/- (Rupees Twenty-Two Lakhs Forty-Six
Thousand Four Hundred) as provided in Annexure A, claimed by
M/s. Gunnam Infra Projects Pvt. Ltd.
GSTIN: 29AAHCG3230C1ZZ for the tax period FY: 2023-24,
the incidence of tax, interest, and penalty has not been passed
on to any other person. This certificate is based on the
45
examination of the books of account and other relevant records
and returns particulars maintained/furnished by the applicant.
Note: The above payments are made from cash and credit
ledger through DRC03 in the common online portal of the
Registered Person and is not against any tax liability on any
supply under forward or reverse charge basis and this is
retained as 'Receivable' in the books of accounts/Balance Sheet
of the Registered Person.
for JCSS & Co
CHARTERED ACCOUNTANTS
(FIRM REGISTRATION NO: 009178S)
___________________________________________________
ICAI UDIN: 25205709BNFYGT2166 sd/-
Place: Bangalore A Jatin Christopher
Date: 30 Apr 2025 MEMBERSHIP NO: 205 709
Encl: Annexure A.
JCSS & CO
CHARTERED ACCOUNTANTS
Annexure A:
Details of payment made claimed as refund:
Sl. Mode of Date of Cash/Credit Amount in
No. payment payment Ledger Debit Rupees
details
1 Credit Ledger 23 Jan 2024 DC2901240401129 10,21,057
2 Credit Ledger 23 Jan 2024 DI2901240427860 12,25,343
TOTAL 22,46,400
... .... ....
Certificate under Section 54 of the Central Goods and
Services Tax Act, 2017 ("CGST Act") and Section 54 of
the Karnataka Goods and Services Tax Act, 2017 ("KGST
46
Act"), read along with Rule 89(2)(m) of the CGST and
KGST Rules, 2017
This is to certify that in respect of the refund amounting
to Rs. 33,86,828/- (Rupees Thirty-Three Lakhs Eighty-Six
Thousand Eight Hundred and Twenty-Eight) as provided in
Annexure A, claimed by M/s. Gunnam Infra Projects Pvt. Ltd.
GSTIN: 29AAHCG3230C1ZZ for the tax period FY: 2023-24,
the incidence of tax, interest, and penalty has not been passed
on to any other person. This certificate is based on the
examination of the books of account and other relevant records
and returns particulars maintained/furnished by the applicant.
Note: The above payments are made from cash /credit ledger
through DRC03 in the common online portal of the Registered
Person and is not against any tax liability on any supply under
forward or reverse charge basis and this is retained as
'Receivable' in the books of accounts/Balance Sheet of the
Registered Person.
for JCSS & Co
CHARTERED ACCOUNTANTS
(FIRM REGISTRATION NO: 009178S)
___________________________________________________
ICAI UDIN: 25205709BNFYGU8570 sd/-
Place: Bangalore A Jatin Christopher
Date: 30 Apr 2025 MEMBERSHIP NO: 205 709
Encl: Annexure A.
JCSS & CO
CHARTERED ACCOUNTANTS
Annexure A:
Details of payment made claimed as refund:
47
Mode of Date of payment Cash/Credit Amount in
payment Ledger Debit Rupees
details
Credit Ledger 05 Jul 2023 D12907230006768 33,86,828
Total 33,86,828
Certificate under Section 54 of the Central Goods and
Services Tax Act, 2017 ("CGST Act") and Section 54 of
the Karnataka Goods and Services Tax Act, 2017 ("KGST
Act"), read along with Rule 89(2)(m) of the CGST and
KGST Rules, 2017
This is to certify that in respect of the refund amounting
to Rs. 2,42,00,000/- (Rupees Two Crore Forty-Two Lakhs) as
provided in Annexure A, claimed by M/s. Gunnam Infra Projects
Pvt. Ltd. GSTIN: 29AAHCG3230C1ZZ for the tax period
FY: 2023-24, the incidence of tax, interest, and penalty has not
been passed on to any other person. This certificate is based on
the examination of the books of account and other relevant
records and returns particulars maintained/furnished by the
applicant
Note: The above payments are made from cash and credit
ledger through DRC03 in the common online portal of the
Registered Person and is not against any tax liability on any
supply under forward or reverse charge basis and this is
retained as 'Receivable' in the books of accounts/Balance Sheet
of the Registered Person.
for JCSS & Co
CHARTERED ACCOUNTANTS
(FIRM REGISTRATION NO: 009178S)
___________________________________________________
ICAI UDIN: 25205709BNFYGV8356 sd/-
Place: Bangalore A Jatin Christopher
Date: 30 Apr 2025 MEMBERSHIP NO: 205 709
Encl: Annexure A.
48
JCSS & CO
CHARTERED ACCOUNTANTS
Annexure A:
Details of payment made claimed as refund:
Sl. Mode of Date of Cash/Credit Amount in
No. payment payment Ledger Debit Rupees
details
1 Credit Ledger 08 Jun 2023 DC2906230027610 2,40,00,000
2 Credit Ledger 08 Jun 2023 DI2906230014324 2,00,000
TOTAL 2,42,00,000
.... .... ....
Date: 30.04.2025
UNDERTAKING
I Shri. Sai Tejaswin Reddy Gunnamreddy in my
capacity as Director of M/s.Gunnam Infra Projects Pvt.
Ltd do hereby undertake to return to the Government the
amount of refund sanctioned along with interest in case it is
found that the requirements of clause (c) of sub-section (2)
of section 16 read with sub-section (2) of section 42 of the
Central GST Act and Karnataka GST Act made applicable to
the Integrated GST Act and Compensation Cess Act, have
not been complied with in respect of the amount refunded for
the payments made on 05 Jul 2023 through Cash and Credit
ledger to the extent of Rs.33,86,828/-.
for M/s. Gunnam Infra Projects Pvt. Ltd.
For GUNNAM INFRA PROJECTS PVT.
Sd/-
Director
......................................................
Shri. Sai Tejaswin Reddy G
(Director)
No 2/19/6, Near Mulberry Woods Apt,
49
Carmelaram Station Road
Doddakannelli, Bangalore 560 035
GSTIN: 29AAHCG3230C1ZZ
.... .... ....
Date: 30.04.2025
UNDERTAKING
I Shri. Sai Tejaswin Reddy Gunnamreddy in my
capacity as Director of M/s. Gunnam Infra Projects Pvt.
Ltd do hereby undertake to return to the Government the
amount of refund sanctioned along with interest in case it is
found that the requirements of clause (c) of sub-section (2)
of section 16 read with sub-section (2) of section 42 of the
Central GST Act and Karnataka GST Act made applicable to
the Integrated GST Act and Compensation Cess Act, have
not been complied with in respect of the amount refunded for
the payments made on 29 May 2024 through Credit ledger to
the extent of Rs.13,26,070/-
for M/s. Gunnam Infra Projects Pvt. Ltd.
For GUNNAM INFRA PROJECTS PVT.
Sd/-
Director
......................................................
Shri. Sai Tejaswin Reddy G
(Director)
No 2/19/6, Near Mulberry Woods Apt,
Carmelaram Station Road
Doddakannelli, Bangalore 560 035
GSTIN: 29AAHCG3230C1ZZ
... .... ...
Date: 30.04.2025
50
UNDERTAKING
I Shri. Sai Tejaswin Reddy Gunnamreddy in my
capacity as Director of M/s. Gunnam Infra Projects Pvt.
Ltd do hereby undertake to return to the Government the
amount of refund sanctioned along with interest in case it is
found that the requirements of clause (c) of sub-section (2)
of section 16 read with sub-section (2) of section 42 of the
Central GST Act and Karnataka GST Act made applicable to
the Integrated GST Act and Compensation Cess Act, have
not been complied with in respect of the amount refunded for
the payments made on 23 Jan 2024 through Cash and Credit
ledger to the extent of Rs.22,46,400/-.
for M/s. Gunnam Infra Projects Pvt. Ltd.
For GUNNAM INFRA PROJECTS PVT.
Sd/-
Director
......................................................
Shri. Sai Tejaswin Reddy G
(Director)
No 2/19/6, Near Mulberry Woods Apt,
Carmelaram Station Road
Doddakannelli, Bangalore 560 035
GSTIN: 29AAHCG3230C1ZZ
... ... ...
Date: 30.04.2025
UNDERTAKING
I Shri. Sai Tejaswin Reddy Gunnamreddy in my
capacity as Director of M/s. Gunnam Infra Projects Pvt.
Ltd do hereby undertake to return to the Government the
amount of refund sanctioned along with interest in case it is
found that the requirements of clause (c) of sub-section (2)
of section 16 read with sub-section (2) of section 42 of the
Central GST Act and Karnataka GST Act made applicable to
51
the Integrated GST Act and Compensation Cess Act, have
not been complied with in respect of the amount refunded for
the payments made on 08 Jun 2023 through Cash and Credit
ledger to the extent of Rs.2,42,00,000/-.
for M/s. Gunnam Infra Projects Pvt. Ltd.
For GUNNAM INFRA PROJECTS PVT.
Sd/-
Director
......................................................
Shri. Sai Tejaswin Reddy G
(Director)
No 2/19/6, Near Mulberry Woods Apt,
Carmelaram Station Road
Doddakannelli, Bangalore 560 035
GSTIN: 29AAHCG3230C1ZZ"
The aforesaid are the applications under Section 54 of the CGST Act
submitted by the petitioner seeking refund. They are in tune with
what is necessary. All the documents as is considered by the High
Court of Delhi are placed on record by the petitioner. Therefore, the
applications ought to have merited appropriate consideration at the
hands of the respondents.
10. The next question would be, whether payments made at
the time of search can become the subject matter of refund under
52
Section 54 of the CGST Act. The payments are admittedly made
under Section 74(5) of the CGST Act at the time of search. The
interpretation of whether payment made during search proceedings
may be considered voluntary Section 74(5) of the CGST Act need
not detain this Court for long or delve deep into the matter.
10.1. The Apex Court in the judgment rendered in the case of
RADHIKA AGARWAL v. UNION OF INDIA2 has held as follows:
".... .... ....
66. In this regard, we may refer to Circular F. No.
GST/INV/Instructions/2022-2023 (Instruction No. 01/2022-23)
dated 25-5-2022 issued by the Central Board of Indirect Taxes
and Customs referring to the taxpayers depositing partial or full
GST liability during the course of search, inspection or
investigation. The relevant extracts of the circular read:
"F. No. GST/INV/Instructions/2022-23
GST-Investigation Unit
25-5-2022
Instruction No. 01/2022-23 [GST -- Investigation]
Subject: Deposit of tax during the course of search,
inspection or investigation -- reg.
***
3. It is further observed that recovery of taxes not paid
or short-paid, can be made under the provisions of Section 79
of the CGST Act, 2017 only after following due legal process of
issuance of notice and subsequent confirmation of demand by
issuance of adjudication order. No recovery can be made unless
the amount becomes payable in pursuance of an order passed
2
(2025) 6 SCC 545
53
by the adjudicating authority or otherwise becomes payable
under the provisions of the CGST Act and Rules made therein.
Therefore, there may not arise any situation where "recovery"
of the tax dues has to be made by the tax officer from the
taxpayer during the course of search, inspection or
investigation, on account of any issue detected during such
proceedings. However, the law does not bar the taxpayer from
voluntarily making payment of any tax liability ascertained by
him or the tax officer in respect of such issues, either during
the course of such proceedings or subsequently.
4. Therefore, it is clarified that there may not be any
circumstance necessitating "recovery" of tax dues during the
course of search or inspection or investigation proceedings.
However, there is also no bar on the taxpayers for voluntarily
making the payments on the basis of ascertainment of their
liability on non-payment/short-payment of taxes before or at
any stage of such proceedings. The tax officer should however
inform the taxpayers regarding the provisions of voluntary tax
payments through DRC-03.
***"
67. The circular notes that instances have been
noticed where allegations of force and coercion were
made by the officers for making recovery during the
course of search, inspection and investigation. Some of
the taxpayers had accordingly approached the High
Courts. Reference is made to Section 79 of the CGST Act
to state that recovery can be made only after following
the due process of issuance of notice and subsequent
confirmation of demand by issuance of an adjudicating
order. On the last aspect, reference is made to Sections
73(5) and 74(5) of the CGST Act, which help 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
the CGST Act. The statement in the circular that an
assessee may voluntarily deposit tax as noticed was a
cause of discussion before us. In this regard, our
attention was drawn to Section 74(5) of the CGST Act,
which states that a person chargeable with tax may,
before service of notice under sub-section (1), pay the
amount of tax along with interest payable under Section
50 and a penalty equivalent to 15% of such tax on the
54
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. Sub-section (5) to
Section 74 relates to voluntary payment, and does not
postulate payment under force, coercion or threat of
arrest. The aforesaid circulars are binding and should be
adhered to in letter and spirit. The authorities must
exercise due care and caution as coercion and threat to
arrest would amount to a violation of fundamental rights
and the law of the land. It is desirable that the Central
Board of Indirect Taxes and Customs promptly formulate
clear guidelines to ensure that no taxpayer is threatened
with the power of arrest for recovery of tax in the garb of
self-payment. Way back in the year 1978, a three-Judge
Bench of this Court in Nandini Satpathy v. P.L. Dani [Nandini
Satpathy v. P.L. Dani, (1978) 2 SCC 424 : 1978 SCC (Cri) 236]
had observed as under: (SCC p. 454, para 57)
"57. ... We are disposed to read "compelled
testimony" as evidence procured not merely by physical
threats or violence but by psychic torture, atmospheric
pressure, environmental coercion, tiring interrogative
prolixity, overbearing and intimidatory methods and the like
-- not legal penalty for violation."
68. We called upon the Revenue to submit data in this
regard. A chart has been filed before us and the same is
reproduced below:
Total Number of GST Offence Cases
Period: July 2017 to March 2024
Period Formation No. of cases Detection Recovery No. of
(In Rs (In Rs Cr) arrest
Cr)
2017-18 w.e.f. July CGST Zones 273 384 224 3
2017 DGGI 151 832 171 0
Total 424 1216 394 3
2018-19 CGST Zones 5894 18,658 10,338 115
DGGI 1474 19,288 8878 76
Total 7368 37,946 19,216 191
2019-20 CGST Zones 8367 19,482 6956 123
DGGI 2290 21,371 11,508 108
Total 10,657 40,853 18,464 231
2020-21 CGST Zones 8756 18,247 3380 224
55
DGGI 3840 31,137 8855 236
Total 12,596 49,384 12,235 460
2021-22 CGST Zones 8770 24,757 5393 191
DGGI 3804 48,481 19,764 151
Total 12,574 73,238 25,157 342
2022-23 CGST Zones 10,500 31,053 12,509 93
DGGI 5062 1,00,560 20,717 97
Total 15,562 1,31,613 33,226 190
2023-24 (up to CGST Zones 14,492 35,377 7742 84
March 2024) DGGI 6090 1,94,955 24,016 139
Total 20,582 2,30,332 31,758 223
Total Number of ITC Fraud Cases
Period: July 2017 to March 2024
Period Formation No. of cases Detection Recovery No. of
(In Rs (In Rs Cr) arrest
Cr)
2017-18 w.e.f. July CGST Zones 5 13 12 2
2017 DGGI 0 0 0 0
Total 5 13 12 2
2018-19 CGST Zones 1221 7993 676 97
DGGI 399 3258 510 57
Total 1620 11,251 1186 154
2019-20 CGST Zones 3231 12,003 1086 100
DGGI 1027 7929 1331 95
Total 4258 19,932 2417 195
2020-21 CGST Zones 5292 13,502 743 202
DGGI 1976 17,731 1489 227
Total 7268 31,233 2232 429
2021-22 CGST Zones 4636 14,895 825 178
DGGI 1330 13,127 1202 114
Total 5966 28,022 2027 292
2022-23 CGST Zones 5291 10,965 887 85
DGGI 1940 13,175 1597 68
Total 7231 24,140 2484 153
2023-24 (up to CGST Zones 6993 15,374 836 69
March 2024) DGGI 2197 21,000 2577 113
Total 9190 36,374 3413 182
69. Analysing the aforesaid data indicates that the
number of people arrested is normally in hundreds or
more. [ The data reflects that the number of arrests is
inversely proportional to the percentage of amount
recovered against the amount detected i.e. when
payments are made, the power of arrest is not being
56
exercised. Further, the amount classified as the
"detection" amount is not the amount ascertained
through assessment/adjudication, but an amount
quantified by the Department/authority conducting
search and seizure.] However, it is to be noted that the
figures with regard to the tax demand and the tax
collected would, in fact, indicate some force in the
petitioners' submission that the assessees are compelled
to pay tax as a condition for not being arrested. Sub-
section (5) to Section 74 of the CGST Act gives an option
to the assessee and does not confer any right on the Tax
Authorities to compel or extract tax by threatening
arrest. This would be unacceptable and violative of the
rule of law.
70. We would observe that in case there is a breach of
law, and the assessees are put under threat, force or
coercion, the assessees would be entitled to move the
courts and seek a refund of tax deposited by them. The
Department would also take appropriate action against
the officers in such cases."
(Emphasis supplied)
10.2. Long before the Apex Court rendering the said
judgment, different High Courts have considered this issue. A
Division Bench of the High Court of Gujarat in the case of BHUMI
ASSOCIATE v. UNION OF INDIA3, has held as follows:
".... .... ....
2. The officers of the concerned department who were
asked to join the video conference did join, but at a very later
stage. They were unable to witness the discussion that took
place between the Court and Mr. Vyas. We propose to pass an
interim order issuing the following directions.
3
2021 SCC OnLine Guj 3016
57
"The Central Board of Indirect Taxes and Customs as well
as the Chief Commissioner of Central/State Tax of the State of
Gujarat are hereby directed to issue the following guidelines by
way of suitable circular/instructions:
(1) No recovery in any mode by cheque, cash, e-payment
or adjustment of input tax credit should be made at the time of
search/inspection proceedings under Section 67 of the
Central/Gujarat Goods and Services Tax Act, 2017 under any
circumstances.
(2) Even if the assessee comes forward to make
voluntary payment by filing Form DRC-03, the assessee
should be asked/advised to file such Form DRC-03 on the
next day after the end of search proceedings and after
the officers of the visiting team have left the premises of
the assessee.
(3) Facility of filing complaint/grievance after the
end of search proceedings should be made available to
the assessee if the assessee was forced to make payment
in any mode during the pendency of the search
proceedings.
(4) If complaint/grievance is filed by assessee and officer
is found to have acted in defiance of the afore-stated directions,
then strict disciplinary action should be initiated against the
concerned officer."."
(Emphasis supplied)
10.3. A Division Bench of the High Court of Delhi in the case
of VALLABH TEXTILES v. SENIOR INTELLIGENCE OFFICER4,
has held as follows:
".... .... ....
4
2022 SCC OnLine Del 4508
58
39. Furthermore, the Instruction falls short,
inasmuch as it sidesteps direction number two (2)
contained in Bhumi Associate, which states 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 the day after the search has
ended and the concerned officers have left the premises
of the assessee.
39.1 Clearly, the aforementioned direction, issued
by the Gujarat High Court as far back as on February 16,
2021, is binding on the official respondents/Revenue,
which was not followed in the instant case.
39.2 The violation of the safeguards put in place by
the Act, Rules and by the court, to ensure that
unnecessary harassment is not caused to the assessee,
required adherence by the official respondents/Revenue,
as otherwise, the collection of such amounts towards tax,
interest and penalty would give it a colour of coercion,
which is not backed by the authority of law."
(Emphasis supplied)
10.4. A Division Bench of this Court in UNION OF INDIA v.
BUNDL TECHNOLOGIES PRIVATE LIMITED5, has held as
follows:
".... .... ....
15. In the obtaining factual matrix following issues arise
for our consideration :
(I) Whether the amount was voluntarily paid during the
investigation by the company under section 74(5) of the CGST
Act ?
5
2022 SCC OnLine Kar 565
59
(II) Whether the amount was recovered from the company
during investigation under the coercion and threat of arrest ?
(III) Whether the DGGI officers conducted in a High handled
and arbitrary manner during the course of investigation ?
(IV) Whether writ petition filed by company suffers from delay
or laches ?
16. Now we may proceed to deal with issues ad-seriatim.
(I) whether the amount paid during investigation by the
company was voluntarily paid, under section 74(5) of the CGST
Act ?
17. Section 74 of the Act deals with determination of tax
not paid or short paid or erroneously refunded or input-tax
credit wrongly availed or utilized by reason of fraud or any wilful
misstatement or suppression of facts. The relevant extract of
section 74 reads as under :
"74. Determination of tax not paid or short paid or
erroneously refunded or input-tax credit wrongly availed or
utilised by reason of fraud or any wilful-misstatement or
suppression of facts.--(1) Where it appears to the proper
officer that any tax has not been paid or short paid or
erroneously refunded or where input tax credit has been
wrongly availed or utilised by reason of fraud, or any wilful-
misstatement or suppression of facts to evade tax, he shall
serve notice on the person chargeable with tax which has
not been so paid or which has been so short paid or to
whom the refund has erroneously been made, or who has
wrongly availed or utilised input-tax credit, requiring him to
show cause as to why he should not pay the amount
specified in the notice along with interest payable thereon
under section 50 and a penalty equivalent to the tax
specified in the notice.. ..
(5) The person chargeable with tax may, before service
of notice under sub-section (1), pay the amount of tax
along with interest payable under section 50 and a penalty
equivalent to fifteen per cent, of such tax on the basis of his
own ascertainment of such tax or the tax as ascertained by
60
the proper officer and inform the proper officer in writing of
such payment."
Thus section 74(5) of the Act gives an option to a person
to make payment of tax, along with interest and 15 per cent. of
penalty on its own ascertainment of the tax ascertained by
proper officer and inform him in writing about such payment.
18. It is pertient to note that a Division Bench of
the Gujarat High Court in Bhumi Associate v. Union of
India by an interim order directed the Central Board of
Indirect Taxes and Customs was directed to enforce the
following guidelines by issuing suitable
circular/instructions :
(1) No recovery in any mode by cheque, cash e-
payment or adjustment of input-tax credit should be
made at the time of search/inspection proceedings under
section 67 of the Central/Gujarat Goods and services tax
Act, 2017 under any circumstances.
(2) Even if the assessee comes forward to make
voluntary payment by filing Form DRC 03, the assessee
should be asked/advised to file such form DRC 03 on the
next day after the end of search proceedings and after
the officers of the visiting team have left the premises of
the assessee.
(3) Facility of filing complaint/grievance after the
end of search proceedings should be made available to
the assessee if the assessee was forced to make payment
in any mode during the pendency of the search
proceedings.
(4) If complaint/grievance is filed by assessee and
officer is found to have acted in defiance of the afore
stated directions, then strict disciplinary action should be
initiated against the concerned officer.
The guidelines issued by the division bench are
intended to regulate the powers of officers carrying out
search and seizure as well as to safeguard the interest of
the assessee.
61
19. The issue which arises for consideration is
whether amount of Rs.27,51,44,157 has been paid by the
company on its own ascertainment under section 74(5) of
the Act. In the instant case, there is no material on
record to indicate that the amount of Rs.15 Crores and an
amount of Rs.12,51,44,157 which were paid at about 4
a.m. and 1 p.m. on December 30, 2019 and December 27,
2019 respectively were paid on admission by the
company about 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 November 30, 2019 that it reserves
its right to claim refund of the amount and the same
should not be treated as admission of its liability. The
relevant extract of communication dated November 30, 2019
reads as under :
Bundl Technologies Private Limited
Registered Office, 4th Floor, Annex Building, Maruthi
Chambers, Survey No. 17/9B, Begur Hobli, Roopana
Agrahara. Bengaluru, Karnataka India 560 068 CIN:
J74110KA2013PTC096530
November 30, 2019
To,
The Office of the Commissioner,
Directorate General of Goods and
Service Tax Intelligence, Hyderabad
H. No. 1-11-222/4, Lane Opp. HDFC Bank
Nalli Silks, Begumpet, Hyderabad-500 016.
Sub : Submission related to investigation
62
Ref : Inspection dt : 28/29 November 2019 by DGGSTI
Officials at BTPL's offices situated at Bangalore, Gurugram
and Hyderabad.
Dear Sir,
XXXXX
As an extension of our goodwill conduct and bona fide, we
have deposited INR 15,00,00,000 (rupees fifteen crores
only) with the exchequer of Government during the
pendency of inspection proceedings. The above deposit is
without prejudice to and with full reservation of our rights
and contentions to seek necessary refund at the appropriate
time and, therefore, should not be regarded as an admission
of liability. The challan of payment of the aforesaid deposit is
enclosed herewith for your ready reference as annexure E.
We assure you of our full co-operation in this matter
going forward.
20. The company has also reiterated its stand in GST
DRC-03 generated on December 2, 2019, the relevant portion of
which is reproduced below :
Form GST DRC-03
[See rule 142(2) and 142(3)]
Intimation of payment made voluntarily or made against
the show- cause notice (SCN) or statement
ARN : AD291219000080K Date : 2-12-2019
8. Reasons, if any :
The above payment is made as an extension of our
goodwill and bona fide. It is without prejudice to and with
full reservation of our rights and contentions to seek
necessary refund at the appropriate time and, therefore,
should not he regarded as an admission of liability.
63
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.
(II) Whether the amount was recovered from the
company during investigation under the coercion and threat of
arrest ?
22. The officers of the Department have power of
inspection, search and seizure under section 67(1) of the CGST
Act whereas section 70 of the Act confers the power on the
authority to summon person to give evidence as well as to
adduce evidence. The relevant extract of section 67(1) and
section 70 of the Act read as under :
"67. Power of inspection, search and seizure.--(1)
Where the proper officer, not below the rank of Joint
Commissioner, has reasons to believe that--
(a) a taxable person has suppressed any transaction
relating to supply of goods or services or both or the stock
of goods in hand, or has claimed input-tax credit in excess
of his entitlement under this Act or has indulged in
contravention of any of the provisions of this Act or the
rules made thereunder to evade tax under this Act ; or
(b) any person engaged in the business of
transporting goods or an owner or operator of a warehouse
or a godown or any other place is keeping goods which have
escaped payment of tax or has kept his accounts or goods
in such a manner as is likely to cause evasion of tax payable
under this Act.
He may authorise in writing any other officer of
central tax to inspect any places of business of the taxable
person or the persons engaged in the business of
64
transporting goods or the owner or the operator of
warehouse or godown or any other place.
70. Power to summon person to give evidence and
produce documents.--(1) The proper officer under this Act
shall have power to summon any person whose attendance
he considers necessary either to give evidence or to
produce a document or any other thing in any inquiry in the
same manner, as provided in the case of a civil court under
the provisions of the Code of Civil Procedure, 1908 (5 of
1908).
(2) Every such inquiry referred to in sub-section (1)
shall be deemed to be a 'judicial proceedings' within the
meaning of section 193 and section 228 of the Indian Penal
Code (45 of 1860)."
23. In Vodafone Essar South Ltd. v. Union of India
(2009) 237 ELT 35 (Bom) it was held by Division Bench of
the Bombay High Court that without adjudication of
liability, during the course of an investigation the
assessee should not be forced to pay any amount. Similar
view was taken by the Delhi High Court in MakeMyTrip
(India) Pvt. Ltd. v. Union of India [2016] 96 VST 37
(Delhi) ; (2016) 44 STR 481 (Delhi) and it was held that
amount collected during investigation proceeding without
any adjudication is liable to be refunded. In Century
Knitters (India) Ltd. v. Union of India [2014] 24 GSTR 12
(P&H) ; (2013) 293 ELT 504 (P&H) it was held that any
amount illegally collected cannot be retained without
issuance of show- cause notice and adjudication of
liability and such amount is liable to be refunded. Similar
view was taken in Concepts Global Impex v. Union of
India (2019) 365 ELT 32 (P&H).
24. In the instant case, an investigation was initiated by
DGGI officers and they entered the premises of the company on
November 28, 2019 at 10.30 a.m. in exercise of powers under
section 67(1) of the CGST Act. On November 30, 2019 at about
4.00 a.m., a sum of Rs. 15 crores was deposited by the
company under the GST cash ledger. Thereafter summons were
issued to officers of company under section 70 of the Act. The
officers of the company made a further deposit of Rs.
12,51,44,157 at about 1.00 a.m. The aforesaid amounts
65
were not deposited under section 74(5) of the Act. The
amounts were deposited by the company at odd hours,
without admitting its liability. The company has been
regularly filing service tax returns. There is no iota of
material on record to indicate that on the day that the
company made payment of the amount, any amount was
due to the Department. Therefore, it can safely be
inferred that payment of the amount was made
involuntarily. There is also no materia! on record to hold
that any threat of arrest was extended to officers of the
company.
25. The question whether any threat was extended
to officers of the company is a question of fact which
can't be adjudicated in a summary proceeding under
article 226 of the Constitution of India. Liberty is
reserved to the parties to agitate the issue of threat and
coercion in an appropriate proceeding. Accordingly the
second issue is answered by stating that amounts were
paid by the company involuntarily.
... ... ...
30. In the backdrop of well settled legal principles and
the statutory provision we may advert to the facts of case in
hand. The company deposited a sum of Rs. 15 crores at about
4.00 a.m. on November 30, 2019 and a sum of Rs.
12,51,44,157 on December 27, 2019. The company filed an
application seeking refund on September 29, 2020. Thereafter
the company filed an application seeking refund on December
16, 2020 on December 16, 2020 before jurisdictional GST
authority. The company requested the Department to refund the
amount. When the attempts of the company to seek refund did
not yield any result, the writ petition was filed on February 25,
2021. Section 54 of the CGST Act provides for a time-limit of
two years to claim refund. The company not only filed the claim
for refund within two years but the writ petition as well. No
rights have accrued to the department, as the claim for refund
made by the company is well within time. Therefore in the light
of legal principles referred to in the preceding paragraph, it can
not be said that there was any delay or laches in filing writ
petition. Therefore the fourth issue is answered by stating that
there is no delay or laches in filing the writ petition.
66
31. The submission by the company that Green Finch is
neither a non existent entity nor that the company has rightly
availed input-tax credit is concerned need not be adverted to in
this proceeding, as the same is pending investigation. Article
265 of the Constitution mandates that collection of tax
has to be by the authority of law. If tax is collected
without any authority of law, the 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 the 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 articles 265 and
300A of the Constitution. Therefore, the contention of the
Department that amount under deposit be made subject
to the outcome of the pending investigation can not be
accepted. The Department, therefore, is liable to refund
the amount to the company.
(Emphasis supplied)
10.5. Another Division Bench of this Court in the case of
INTELLIGENCE OFFICER, DIRECTORATE GENERAL OF GST
INTELLIGENCE, BENGALURU v. KESAR COLOR CHEM
INDUSTRIES6, has held as follows:
".... .... ....
27. Having heard the learned counsel for the parties
and perused the record, the learned single judge [Kesar
Colour Chem Industries v. Intelligence Officer, (2025)
145 GSTR 265 (Karn).] has allowed the writ petition on a
finding that the deposit of the amount of Rs. 1,00,00,000
on July 31, 2021 and Rs. 1,50,00,000 on August 3, 2021
6
2025 SCC OnLine Kar 18697
67
cannot be treated as a self-ascertainment as the element
of voluntariness is absent. According to the learned single
judge [Kesar Colour Chem Industries v. Intelligence
Officer, (2025) 145 GSTR 265 (Karn).] , the sine qua non
of self-ascertainment is not fulfilled and as such, the
payment is under coercion, the same is liable to be
refunded back to the respondent.
28. The issue is whether such a conclusion of the learned
single judge is justified ?
29. The submission of Sri. Kamath was as there is no
allegation that the deposit of the two amounts was under
coercion and duress, the finding of the learned single judge is
not sustainable. We are not in agreement with the said
submission for the reason that, the statement of the proprietor
of the respondent was recorded at 12:30 a.m. on July 31, 2021
after the Officers of the appellants visited the office of the
respondent at 10:30 a.m. on July 29, 2021 and continued to be
in the office till 23:30 p.m. on July 30, 2021 and thereafter, also
served summons for appearance of the proprietor at Bengaluru
on August 2, 2024. It is the case of the respondent that, he was
forced to sign the statement at 12:30 a.m. when the Officers
were still in office and similarly the statement of August 3, 2021
was recorded at Bengaluru, to which place the proprietor of the
respondent was summoned. The facts demonstrate the
interference that the recording of statement was under the
threat, that he shall be arrested. It is also a fact that, one
deposit was made in the afternoon of July 31, 2021 and the
same was after he was issued summons for appearance in
Bengaluru on August 2, 2021 (appeared on August 3, 2021). So
in that sense, there was likelihood that he may be arrested at
Bengaluru if he does not deposit the money is writ large.
Similarly, second payment was made on August 3, 2021 while
the proprietor of the respondent was in Bengaluru. So it
suggests, the statements were recorded and deposits were
made under threat and coercion. The statements and the
payments made cannot be separated nor it can be concluded
that there is no allegation of threat and coercion for the purpose
of payment/deposit of the amounts.
68
30. Section 74(1) of the CGST Act contemplates
that the assessee has an opportunity under section 74(5)
to make his own ascertainment of tax and deposit the
same. The appellants' case is that the respondent has
deposited the amount upon self-ascertainment of tax,
which stand is contested by the respondent by stating
that the deposit was under threat and coercion,
otherwise no amount is payable. So, the issue is whether
any tax is payable at all ? So, pending decision on the
issue, can the amount remain deposited with the
appellants ? The answer has to be "NO",more so when it
is concluded by the learned single judge [Kesar Colour
Chem Industries v. Intelligence Officer, (2025) 145 GSTR
265 (Karn).] that the same was not voluntary, with which
we agree.
31. Having said that, insofar as the affidavit dated August
10, 2021 is concerned, the plea of Sri. Kamath is, such an
affidavit was not given to the authorities and it is for the first
time filed along with the writ petition with an intention to resile
out of the statements made to the appellants cannot be relied
upon, is unsustainable. This we say so because, the only stand
of the appellants in the appeal/affidavit is, the same is belated.
If that be so it is noted, the affidavit is dated August 10, 2024,
i.e., one week after the statement dated August 3, 2024 was
made. One week is not a large period to be considered as
fatal/belated. The learned counsel for the respondent is justified
in relying upon the judgment of the Delhi High Court in the case
of Lovelesh Singhal [Lovelesh Singhal v. Commissioner, Delhi
Goods and Services Tax, (2024) 121 GSTR 422 (Delhi); (2023)
7 HCC (Del) 237.] , wherein the Delhi High Court has, in
paragraph Nos. 21 to 24, 28 to 32, 35 and 36, held as under
(pages 430-434 in 121 GSTR):
"21. The next question to be examined is whether
the petitioner is entitled to reversal of the ITC that was
debited from his ECL. As noted above, according to the
petitioner, he was coerced to make the deposit of tax by
debiting the ECL at 2:06 a.m. on October 8, 2022.
22. According to the respondents, the concerned
officers of the Department had reached the principal place
of business as well as other additional places of business at
about 4 p.m. on October 7, 2022. The respondents state
69
that the petitioner provided access to its additional place of
business at 3411/249, 2nd floor, Hansapuri, Tri Nagar, Delhi
but the relevant documents were not available at the said
place. Accordingly, the officers had insisted that the access
to the principal place of business (Property No. 66, Third
Floor, Pocket-13, Sector-24, Rohini, Delhi), which was
closed, be provided. The respondents have averred in their
counter-affidavit that the 'petitioner also requested not to
break open or seal the premises as it would bring bad name
to its business and the petitioner requested the Officers to
wait at the additional place of business at Tri Nagar till the
time keys got arranged by some family member at 12:30
a.m.' According to the respondents, the survey and
inspection at the principal place of business began after
12:30 a.m. and was concluded at 2:30 a.m. on October 8,
2022.
23. Admittedly, the petitioner had deposited a sum
of Rs. 18,72,000 at 2:06 a.m. by debiting the ECL.
Concededly, the search and inspection proceedings were
continuing at the material time.
24. In the given facts, we are inclined to accept the
petitioner's claim that the deposit was made under duress
and in compelling circumstances. The petitioner had been
subjected to the search/inspection operations way beyond
the normal business hours. Admittedly, the petitioner was
called upon to provide copies of various books of account.
The statement recorded on the said date-which is also relied
upon by the respondents-clearly indicates that the
petitioner had provided several documents to the concerned
officers including the trading account for the period April 1,
2022 to October 7, 2022; cash book for the period October
1, 2022 to October 7, 2022; stock group summary as on
October 7, 2022; copies of the last purchase and sale bills;
profit and loss account for the period April 1, 2021 to March
31, 2022; and parties ledger....
28. Given the scheme of permitting the
taxpayers to voluntarily deposit tax prior to issuance
of notices (either under section 73 or section 74 of
the CGST Act) to avail of the benefit of absolving
themselves from the liability to pay penalty either in
entirety or in excess of 15 per cent. of tax payable as
the case may be; in cases where the said tax is
collected under coercion, the same is required to be
returned.
70
29. It is not necessary to examine in detail any
controversy whether such payments were made
voluntarily. Clearly, where a taxpayer turns around
and states that the payments had not been made
involuntarily and the circumstances prima facie
indicate so, the taxpayer must be granted the benefit
of withdrawing such payments. Obviously, in such
cases, the taxpayer would forfeit immunity from levy
of any penalty and the concerned authorities are not
precluded from proceeding against the taxpayer in
respect of any default and to the full extent as
permissible under law.
30. It is relevant to note that the payment of
tax on a self-ascertainment basis would necessarily
require acceptance of the grounds on which such
payments had been made. In the present case, it
would be necessary for the petitioner to acknowledge
the underlying liability on account of which the tax is
paid. This is also required to be acknowledged by the
respondents.
31. However, in the present case the petitioner
has disputed that he is liable to pay any tax. There is
no determination of the petitioner's liability to pay
tax. Clearly, in such circumstances, the tax deposited
by the petitioner cannot be considered as voluntary
and within the scheme of section 73(5) of the CGST
Act.
32. It is also important to note that the
requisite procedure under rule 142 of the CGST Rules
has also not been complied with. Admittedly, the
respondents have not issued any acknowledgement
accepting the payment made by the petitioner in form
GST DRC-04 as required under the CGST Rules.
In Vallabh Textiles v. Senior Intelligence
Officer [(2023) 120 GSTR 213 (Delhi); 2022 SCC
OnLine Del 4508.] , a co-ordinate Bench had held that
failure to follow the prescribed procedure would also
lead to the conclusion that the deposit made by the
taxpayer was not voluntary....
35. However, it appears that the said directions have
not been implemented. In Vallabh Textiles v. Senior
Intelligence Officer [(2023) 120 GSTR 213 (Delhi); 2022
71
SCC OnLine Del 4508.] , a co-ordinate Bench of this court
had respectfully concurred with the aforesaid directions.
36. The Central Board of Indirect Taxes and Customs
(CBIC) has also issued instructions emphasizing that the tax
must be collected only after following the due process of
law. The relevant extract of the said instructions dated May
25, 2022 are set out below:
'3. It is further observed that recovery of taxes not
paid or short paid, can be made under the provisions of section
79 of the CGST Act, 2017 only after following due legal process
of issuance of notice and subsequent confirmation of demand
by issuance of adjudication order. No recovery can be made
unless the amount becomes payable in pursuance of an order
passed by the adjudicating authority or otherwise becomes
payable under the provisions of the CGST Act and rules made
therein. Therefore, there may not arise any situation where
"recovery" of the tax dues has to be made by the tax officer
from the taxpayer during the course of search, inspection or
investigation, on account of any issue detected during such
proceedings. However, the law does not bar the taxpayer from
voluntarily making payment of any tax liability ascertained by
him or the tax officer in respect of such issues, either during
the course of such proceedings or subsequently.
4. Therefore, it is clarified that there may not be any
circumstance necessitating "recovery" of tax dues during the
course of search or inspection or investigation proceedings...'."
32. The judgment was sought to be distinguished by Sri.
Kamath by stating the statements which were recorded in the
relied upon case were in the midnight and it is on that basis, the
court has come to the conclusion that the deposits made were
under coercion and duress. The said submission is not
appealing. The court need to look into the facts in totality
to come to a conclusion whether there was threat and
coercion resulting in the statements recorded and also
the deposits made. On a cumulative reading of the facts of
this case, we are of the view that the learned single judge
[Kesar Colour Chem Industries v. Intelligence Officer, (2025)
145 GSTR 265 (Karn).] is right in coming to a conclusion in
paragraph Nos. 24 and 28 of the impugned order which we have
reproduced above that the payments were recovery and were
contrary to law.
(Emphasis supplied)
72
10.6. A coordinate bench of this Court in the judgment
rendered in the case of J. RAMESH CHAND V. UNION OF INDIA7
has held as follows:
"25. In the instant case, the material on record discloses
that on 23.03.2023, the 3rd respondent undertook a raid at the
residence of the petitioner and seized a laptop; thereafter, on
24.03.2023, the respondents 3 and 4 along with other officials
undertook search and inspection proceedings in the principal
place of business of the petitioner, during the course of which, a
sum of Rs.10 crores was obtained / received / collected by them
from the petitioner on 24.03.2023 itself. In my considered
opinion, the material on record clearly indicates that the
aforesaid payment of Rs.10 crores by the petitioner to the
respondents was involuntary and the same was not voluntary or
by way of self-ascertainment as contended by the respondents
for the following reasons:-
(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 GST DRC-03, the respondents are bound to issue an
acknowledgment in Form GST DRC-04 to the petitioner;
undisputedly, respondents did not issue any such
7
W.P.No.9890 of 2023 disposed on 13.10.2025
73
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
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 words, in the light of Form GST
DRC-03 said to have been submitted by the petitioner
along with the payment by invoking Section 74 (5) of the
74
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.
(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
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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 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
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
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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.
(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)
In the light of the judgments rendered by the Apex Court and
different High Courts, what would unmistakably emerge is, that the
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payments made by the petitioner cannot be construed as voluntary
under Section 74(5) of the CGST Act. Therefore, the petitioner is
entitled for refund of the payments made in form DRC-03. If the
refund applications and the documents appended to it are in
appropriate format, such applications cannot be denied on the score
that there are no supporting documents attached. Both the issues
standing completely answered by the Apex Court and different High
Courts, the petition deserves to succeed, with a direction to the
respondents to process the applications for refund and pass
necessary orders thereon, in accordance with law.
11. For the aforesaid reasons, the following:
ORDER
(i) Writ Petition is allowed.
(ii) The impugned Deficiency Memos dated 20-05-2025 and
21-05-2025 issued by the 6th respondent stand
quashed.
(iii) Petitioner becomes entitled to the consequential relief
that would flow from the quashment of the Deficiency
Memos.
Sd/-
(M.NAGAPRASANNA)
JUDGE
bkp
CT:MJ
