Karnataka High Court

M/S B.G. Granites vs Assistant Commisisoner (Hpu) on 13 October, 2025

Author: S.R.Krishna Kumar

Bench: S.R.Krishna Kumar

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 13TH DAY OF OCTOBER, 2025

BEFORE
R
THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION NO. 9890 OF 2023 (T-RES)

BETWEEN:

SRI J RAMESH CHAND
S/O LATE JAWAHARLAL
AGED ABOUT 67 YEARS,
PROPRIETOR M/S MILLION LIGHTS
HAVING RESIDENT AT NO.221/24
34TH CROSS, 6TH MAIN, 4TH BLOCK,
JAYANAGAR
BENGALURU-560 001
ALSO HAVING ITS PLACE OF BUSINESS
AT NO.32/1, 2ND AND 4TH FLOOR
SIDDAIAH ROAD, WILSON GARDEN
BENGALURU - 560 027.
...PETITIONER

(BY SRI.BHARAT RAICHANDANI, ADV. FOR SRI. RAGHUL PIRANESH,
SRI. CHANDRA KIRAN, SRI. VISHWARANJAN, ADVOCATES)

Digitally signed AND:
by CHANDANA
BM
Location: High 1. UNION OF INDIA
Court of THROUGH ITS SECRETARY,
Karnataka CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS
MINISTRY OF FINANCE
NORTH BLOCK, CABINET SECRETARIAT
RAISINA HILLS
NEW DELHI-110 001.

2. COMMISSIONER SOUTH GST
CUSTOMS AND CENTRAL EXCISE
DEPARTMENT HAVING OFFICE AT
XHJ2 PR8 QUEENS RD
SAMPANGI RAMA NAGAR
BENGALURU - 560 001.
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3. INSPECTOR OF CENTRAL TAX
GST WEST COMMISSIONERATE HAVING
ITS OFFICE AT BMTC BUS STAND,
1ST FLOOR, TTMC KANAKAPURA ROAD
BENGALURU-560 070.

4. INTELLIGENCE OFFICER
DGGI BZU BENGLAURU
HAVING OFFICE AT SP ENCLAVE NO.112,
KENGALAHANUMANTHIAHA NARJUNA ENCLAVE
RAJARAM MOHAN ROY EXTENSION
SUDHAMANAGR, BENGALURU-560 027.
...RESPONDENTS

(BY SMT. ANUPARNA BORDOLOI.,ADVOCATE FOR R-1
SRI. JEEVAN NEERALAGI, ADVOCATE FOR R-2 & R-3
SRI. M.N. KUMAR, ADVOCATE FOR R-4)

THIS W.P IS FILED UNDER ARTICLE 226 OF THE CONSTITUITON
OF INDIA PRAYING TOQUASH THE PAYMENT OF RS.10,00,00,000/-
(RUPEES TEN CRORES TOTALLY) ALLEGEDLY VOLUNTARILY MADE BY
THE PETITIONER TOWARDS THE GOODS AND SERVICE TAX IN THE
FOLLOWING MANNER (ANNEXURE - A, A1, A2 AND A3) DT. 24.03.2023
ACT - AMOUNT - DEBIT ENTRY NO. - DEBIT ENTRY DATE.CGST -
70,00,000 - DC2903230298599 - 24.03.2023.CGST - 70,00,000 -
DC2903230298599 - 24.03.2023CGST - 60,00,000 - DC2903230298599 -
24.03.2023CGST - 1,20,00,000 - DC2903230298668 - 24.03.2023CGST -
1,40,00,000 - DC2903230298668 - 24.03.2023CGST - 1,40,00,000 -
DC2903230298668 - 24.03.2023CGST - 60,00,000 - DC2903230298712 -
24.03.2023CGST - 70,00,000 - DC2903230298712 - 24.03.2023CGST -
70,00,000 - DC2903230298712 - 24.03.2023CGST - 60,00,000 -
DC2903230298768 - 24.03.2023CGST - 70,00,000 - DC2903230298768 -
24.03.2023CGST - 70,00,000 - DC2903230298768 - 24.03.2023BEARING NO.
ARN- AD2903230275560ARN - AD290323027539WARN - AD2903230275057.

THIS PETITION IS BEING HEARD AND RESERVED ON 16.07.2025
COMING ON FOR PRONOUNCEMENT OF ORDERS THIS DAY, THE
COURT MADE THE FOLLOWING:-
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CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR

CAV ORDER
In this petition, petitioner seeks for the following reliefs:-

a) Issue a writ, order or direction in the nature of
certiorari or any other appropriate writ in quashing the payment of
Rs.10,00,00,000/- (Rupees Ten Crores totally) allegedly voluntarily
made by the Petitioner towards the Goods and Service Tax in the
following manner: (Annexure-A,A1,A2 and A3), Bearing No. ARN:
AD2903230275560, ARN:AD290323027539W,
ARN:AD2903230275057, ARN: AD2903230275718, DATE:
24.03.2023.

Act Amount Debit entry NO. Debit
Entry Date

CGST 70,00,000 DC2903230298599 24.03.2023

CGST 60,00,000 DC2903230298599 24.03.2023

CGST 1,20,00,000 DC2903230298668 24.03.2023

CGST 1,40,00,000 DC2903230298668 24.03.2023

CGST 60,00,000 DC2903230298712 24.03.2023

CGST 70,00,000 DC2903230298712 24.03.2023

CGST 60,00,000 DC2903230298768 24.03.2023

CGST 70,00,000 DC2903230298768 24.03.2023

b) Issue a writ, order or direction in the nature of
mandamus or any other appropriate writ directing the
Respondents herein to refund a sum of Rs.10,00,00,000/-
obtained from the petitioner on 24.03.2023 on the pretext of
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voluntary contribution towards various heads of Goods and
Service Tax (Annexure-A,A1, A2 &A3)

c) Grant such other relief that this Hon'ble Court may deem fit
in the facts and circumstances of the present matter."

2. Briefly stated the facts giving rise to the present petition

are as under:-

The petitioner is doing business of trading in electronic

equipment and footwear etc., and obtained a GST registration from

the respondents and was filing GST returns and making payment

from 01.07.2017 onwards. On 23.03.2023, the 3rd respondent

undertook a raid at the residence of the petitioner and seized

certain movable articles including laptop etc. which was handed

over back to the petitioner on 28.03.2023. Meanwhile, on

24.03.2023, respondents 3 and 4 conducted search, inspection and

seizure operations at the business premises of the petitioner and

are alleged to have obtained transfer of Rs.10 crores from the

petitioner by coercion and under the threat of arrest vide Form BRC

03. In pursuance of the same, the petitioner approached this Court

on 03.05.2023 till which date, the respondents had not issued any

notice to the petitioner under Section 73 or 74 of the CGST Act.
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During the pendency of the petition, some of the respondents have

issued notice / intimation in GST DRC -01A followed by a show

cause notice in GST DRC - 01 to the petitioner. It is the specific

contention of the petitioner that he did not voluntarily make the

aforesaid payment of Rs.10 crores to the respondents and that the

same was received / obtained / collected by them under coercion

and threat and as such, the said obtainment / collection of Rs.10

crores from the petitioner on 24.03.2023 was illegal and that the

respondents are to be directed to refund the entire sum together

with interest back to the petitioner, who is before this Court by way

of the present petition.

3. As stated supra, when the present petition was preferred

on 03.05.2023, the respondents had not issued any notice to the

petitioner. It is also relevant to state that upon collecting / obtaining

the aforesaid payment from the petitioner vide Form GST DRC -

03, the respondents did not issue any acknowledgment in the

prescribed form GST DRC - 04 so as to appropriate the payment

towards GST allegedly payable by the petitioner. In fact, the

respondents have not issued the said acknowledgment in Form

GST DRC - 04 even till today.
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4. On 21.06.2023, the 4th respondent filed statement of

objections disputing and denying the claim of the petitioner and

interalia contending that the payment of Rs.10 crores by the

petitioner was on purely voluntary basis and based on their self-

ascertainment of tax and as such, the said payment was legal and

proper and the petition was liable to be dismissed.

5. The petitioner filed rejoinder to the statement of

objections on 13.07.2023 to the statement of objections filed by the

4th respondent, who thereafter filed additional statement of

objections on 11.09.2024. The petitioner has filed additional

rejoinder to the additional statement of objections filed by the 4th

respondent.

6. Heard learned counsel for the petitioner and learned

counsel for the respondents-Revenue and perused the material on

record.

7. In addition to reiterating the various contentions urged in

the memorandum of petition and referring to the material on record,

learned counsel for the petitioner submits that the petitioner did not

voluntarily make payment by way of self ascertainment but the

same was obtained / received / collected by the respondents under
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coercion and threat which is impermissible in law, which is contrary

to Instruction No.1 / 2022-23 dated 25.05.2022 issued by the

respondents and in the light of various judgments of the Apex

Court, this Court and other High Courts, the respondents are to be

directed to refund the entire sum of Rs.10 crores together with

interest back to the petitioner. In support of his submissions,

learned counsel for the petitioner placed reliance upon the

following judgments:-

(i) Mahavir Singh vs. Assistant Commissioner;
(2024) 163 taxmann.com 543 (Del);
(ii) Lovelesh Singhal vs. Commr., Delhi GST;
(2023) 157 taxmann.com 611 (Del);

(iii) Parsvnath Traders vs. Pr. Commr., CGST;
(2023) 153 taxmann.com 361 (P&H);

(iv) Samyak Metals Pvt. Ltd. vs. UOI; (2023) 151
taxmann.com 225 (P&H);

(v) Modern Insecticides Ltd. and Anr. vs. Commr.
CGST and Anr.; (2023) 153 taxmann.com 548 (P&H);

(vi) Shree Ganesh Molasses Trading Co. vs.
Supdt., Office of the Commr.; (2023) 148 taxmann.com
36 (Guj.);

(vii) Union of India vs. Bundl Technologies Pvt.
Ltd.; (2022) 136 taxmann.com 112 (Kar.);
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(viii) Bundl Technologies Pvt. Ltd. vs. UOI; W.P.
No. 4467/2021 dated 14.09.2021;

(ix) Vallabh Textiles vs. SIO & Ors.; (2022) 145
taxmann.com 596 (Delhi);

(x) Bhumi Associates vs. UOI.; (2021) 124
taxmann.com 429 (Guj.).

8. Per contra, learned counsel for the respondents-Revenue

submits that there is no merit in the petition and that the same is

liable to be dismissed.

9. I have given my anxious consideration to the rival

submissions and perused the material on record.

10. Before adverting to the facts of the instant case, it is

significant to note that the practice of the respondents in receiving /

collecting / obtaining forced / involuntary payments from the tax

payer / assessee during the course of search / inspection / seizure

/ adjudication proceedings has been deprecated by the Apex Court

and High Courts on several occasions. In Dabur India Ltd. v. State

of U.P., - (1990) 4 SCC 113, the Apex court held as under:-

"31. Before we part with this case, two aspects have
to be adverted to -- one was regarding the allegation of
the petitioner that in order to compel the petitioners to
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pay the duties which the petitioners contended that they
were not liable to pay, the licence was not being
renewed for a period and the petitioners were
constantly kept under threat of closing down their
business in order to coerce them to make the payment.
This is unfortunate. We would not like to hear from a
litigant in this country that the government is coercing
citizens of this country to make payment of duties which
the litigant is contending not to be leviable.
Government, of course, is entitled to enforce payment
and for that purpose to take all legal steps but the
government, Central or State, cannot be permitted to
play dirty games with the citizens of this country to
coerce them in making payments which the citizens
were not legally obliged to make. If any money is due to
the government, the government should take steps but
not take extra-legal steps or manoeuvre. Therefore, we
direct that the right of renewal of the petitioner of licence
must be judged and attended to in accordance with law
and the occasion not utilised to coerce the petitioners to
a course of action not warranted by law and procedure.
Secondly, in a situation of this nature, we are of the
opinion that the government should consider feasibility
of setting up of a machinery under a Council to be
formed under Article 263 of the Constitution to
adjudicate and adjust the dues of the respective
governments. In these peculiar facts, it appears that the
dispute is under two different Central legislations and
under one the State authorities will realise and impose
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the taxes on finding on certain bases and under the
other the same transaction may be open to imposition
by Central Government authorities on a particular view
of the matter. In such a situation, how and wherein the
refund should be made of any duty paid in respect of
part of a transaction to one of the authorities, the State
or the Centre, to be adjusted should be the subject
matter of a settlement by the Council to be set up under
Article 263 of the Constitution. This is a matter on which
we draw the attention of the concerned authorities for
examination because Section 3 of the 1955 Act and
Section 3 of the 1944 Act may overlap similar
transaction in certain cases."

11. It is profitable to extract the provisions of Section 74(5) of

the CGST Act, 2017 and Rule 142(2) of the CGST Rules, 2017, as

under:-

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) xxxxxxxx
(2) xxxxxxxx
(3) xxxxxxxx
(4)xxxxxxxx
(5) The person chargeable with tax may, before
service of notice under sub-section (1), pay the amount of
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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.

Rule 142(2) of the CGST Rules, 2017:-

Notice and order for demand of amounts payable
under the Act.-
142. (1) xxxxxxx

(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 [of clause (i) of sub-section (8) of
section 74A, as the case may be, or tax, interest and
penalty in accordance with the provisions of sub-section (5)
of section 74 or clause(i) of sub-section (9) of section 74A],
or where any person makes payment of tax, interest and
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(1A),]
[he shall inform the proper officer of such payment in
FORM GST DRC-03 and an acknowledgment, in FORM
GST DRC-04 shall be made available to the person
through the common portal electronically].

12. In its recent judgment in Radhika Agarwal v. Union of

India -(2025) 6 SCC 545, the Apex Court held as under:-
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"63. The Central Board of Indirect Taxes and
Customs (GST-Investigation Wing), has accepted the
said position vide Circular dated 17-8-2022, the relevant
portion of which reads as under:
"F. No. GST/INV/Instructions/2021-22
GST-Investigation Unit
17-8-2022
Instruction No. 02/2022-23 [GST -- Investigation]
Subject: Guidelines for arrest and bail in relation
to offence punishable under the CGST Act, 2017 --
reg.
Hon'ble Supreme Court of India in its judgment
dated 16-8-2021 in Siddharth v. State of
U.P. [Siddharth v. State of U.P., (2022) 1 SCC 676 :
(2022) 1 SCC (Cri) 423] , has observed as follows:
(SCC p. 682, para 10)
'10. We may note that personal liberty is an
important aspect of our constitutional mandate. The
occasion to arrest an accused during investigation
arises when custodial investigation becomes
necessary or it is a heinous crime or where there is a
possibility of influencing the witnesses or accused
may abscond. Merely because an arrest can be
made because it is lawful does not mandate that
arrest must be made. A distinction must be made
between the existence of the power to arrest and the
justification for exercise of it [Joginder Kumar v. State
of U.P., (1994) 4 SCC 260 : 1994 SCC (Cri) 1172] . If
arrest is made routine, it can cause incalculable harm
to the reputation and self-esteem of a person. If the
investigating officer has no reason to believe that the
accused will abscond or disobey summons and has,
in fact, throughout cooperated with the investigation
we fail to appreciate why there should be a
compulsion on the officer to arrest the accused.'
***
3. Conditions precedent to arrest:
3.1. Sub-section (1) of Section 132 of the CGST
Act, 2017 deals with the punishment for offences
specified therein. Sub-section (1) of Section 69 gives
the power to the Commissioner to arrest a person
where he has reason to believe that the alleged
offender has committed any offence specified in
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clause (a) or clause (b) or clause (c) or clause (d) of
sub-section (1) of Section 132 which is punishable
under clause (i) or clause (ii) of sub-section (1), or
sub-section (2) of the Section 132 of the CGST Act,
2017. Therefore, before placing a person under
arrest, the legal requirements must be fulfilled. The
reasons to believe to arrive at a decision to place an
alleged offender under arrest must be unambiguous
and amply clear. The reasons to believe must be
based on credible material.
3.2. Since arrest impinges on the personal liberty
of an individual, the power to arrest must be
exercised carefully. The arrest should not be made in
routine and mechanical manner. Even if all the legal
conditions precedent to arrest mentioned in Section
132 of the CGST Act, 2017 are fulfilled, that will not,
ipso facto, mean that an arrest must be made. Once
the legal ingredients of the offence are made out, the
Commissioner or the competent authority must then
determine if the answer to any or some of the
following questions is in the affirmative:
3.2.1. Whether the person was concerned in the
non-bailable offence or credible information has been
received, or a reasonable suspicion exists, of his
having been so concerned?
3.2.2. Whether arrest is necessary to ensure
proper investigation of the offence?
3.2.3. Whether the person, if not restricted, is
likely to tamper the course of further investigation or
is likely to tamper with evidence or intimidate or
influence witnesses?
3.2.4. Whether person is mastermind or key
operator effecting proxy/benami transaction in the
name of dummy GSTIN or non-existent persons, etc.
for passing fraudulent input tax credit, etc.?
3.2.5. As unless such person is arrested, his
presence before investigating officer cannot be
ensured.
3.3. Approval to arrest should be granted only
where the intent to evade tax or commit acts leading
to availment or utilisation of wrongful Input Tax Credit
or fraudulent refund of tax or failure to pay amount
collected as tax as specified in sub-section (1) of
Section 132 of the CGST Act, 2017, is evident and
element of mens rea/guilty mind is palpable.
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3.4. Thus, the relevant factors before deciding to
arrest a person, apart from fulfilment of the legal
requirements, must be that the need to ensure proper
investigation and prevent the possibility of tampering
with evidence or intimidating or influencing witnesses
exists.
3.5. Arrest should, however, not be resorted to in
cases of technical nature i.e. where the demand of
tax is based on a difference of opinion regarding
interpretation of law. The prevalent practice of
assessment could also be one of the determining
factors while ascribing intention to evade tax to the
alleged offender. Other factors influencing the
decision to arrest could be if the alleged offender is
cooperating in the investigation viz. compliance to
summons, furnishing of documents called for, not
giving evasive replies, voluntary payment of tax, etc.
***"
64. The circular also refers to the procedure of arrest
and that the Principal Commissioner/Commissioner has
to record on the file, after considering the nature of the
offence, the role of the person involved, the evidence
available and that he has reason to believe that the
person has committed an offence as mentioned in
Section 132 of the CGST Act. The provisions of the
Code, read with Section 69(3) of the CGST Act, relating
to arrest and procedure thereof, must be adhered to.
Compliance must also be made with the directions
in D.K. Basu [D.K. Basu v. State of W.B., (1997) 1 SCC
416 : 1997 SCC (Cri) 92] .
64.1. The format of arrest, as prescribed by the
Central Board of Indirect Taxes and Customs in Circular
No. 128/47/2019-GST dated 23-12-2019, has also been
referred to in this Instruction. Therefore, the arrest
memo should indicate the relevant section(s) of the
GST Act and other laws.
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64.2. In addition, the grounds of arrest must be
explained to the arrested person and noted in the arrest
memo. This instruction regarding the grounds of arrest
came to be amended by the Central Board of Indirect
Taxes and Customs (GST-Investigation Wing) vide
Instruction No. 01/2025-GST dated 13-1-2025
(GST/INV/Instructions/21-22). The Circular dated 13-1-
2025 now mandates that the grounds of arrest must be
explained to the arrested person and also be furnished
to him in writing as an Annexure to the arrest memo.
The acknowledgment of the same should be taken from
the arrested person at the time of service of the arrest
memo.
64.3. Instruction No. 02/2022-23 GST (Investigation)
dated 17-8-2022 further lays down that a person
nominated or authorised by the arrested person should
be informed immediately, and this fact must be
recorded in the arrest memo. The date and time of the
arrest should also be mentioned in the arrest memo.
Lastly, a copy of the arrest memo should be given to the
person arrested under proper acknowledgment.
64.4. The circular also makes other directions
concerning medical examination, the duty to take
reasonable care of the health and safety of the arrested
person, and the procedure of arresting a woman, etc. It
also lays down the post-arrest formalities which have to
be complied with. It further states that efforts should be
made to file a prosecution complaint under Section 132
of the CGST Act at the earliest and preferably within 60
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days of arrest, where no bail is granted. Even
otherwise, the complaint should be filed within a definite
time-frame. A report of arrests made must be
maintained and submitted as provided in Para 6.1 of the
Instruction.
64.5. The aforesaid directions in the
circular/instruction should be read along with the
specific directions outlined in the earlier judgments of
this Court and the present judgment.
65. One of the assertions and allegations made on
behalf of the petitioners is that the parties are compelled
and coerced to admit and make payment of tax in view
of the threat of arrest. This is in spite of the fact that
there is no assessment or adjudication as to the alleged
demand.
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
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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. 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,
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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 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)
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"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
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 14,492 35,377 7742 84
March 2024) Zones
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 Detection Recovery No. of
cases (In Rs (In Rs Cr) arrest
Cr)
2017-18 w.e.f. July CGST 5 13 12 2
2017 Zones
DGGI 0 0 0 0
Total 5 13 12 2
2018-19 CGST 1221 7993 676 97
Zones
DGGI 399 3258 510 57
Total 1620 11,251 1186 154
2019-20 CGST 3231 12,003 1086 100
Zones
DGGI 1027 7929 1331 95
Total 4258 19,932 2417 195
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2020-21 CGST 5292 13,502 743 202
Zones
DGGI 1976 17,731 1489 227
Total 7268 31,233 2232 429
2021-22 CGST 4636 14,895 825 178
Zones
DGGI 1330 13,127 1202 114
Total 5966 28,022 2027 292
2022-23 CGST 5291 10,965 887 85
Zones
DGGI 1940 13,175 1597 68
Total 7231 24,140 2484 153
2023-24 (up to CGST 6993 15,374 836 69
March 2024) Zones
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
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.
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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."

13. In Bhumi Associates case supra, the Division Bench

of the Gujarat High Court held as under:-

"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.

"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
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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."

14. In pursuance of the directions issued by the Gujarat High

Court, the respondents issued Instruction No.01/2022-23 (GST -

Investigation) dated 25.05.2022 as hereunder:-

" F.No.GST/INV/Instruction /2022-23
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Investigation Wing.

10TH Floor, Tower-2
Jeevan Bharathi Building
Connaught Circus, New Delhi - 100 001.
Dated: 25th May 2022.

Instruction No. 01/2022-23 [GST - Investigation]

Subject: Deposit of tax during the course of search,
inspection or investigation - reg.
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During the course of search, inspection or investigation,
sometimes the taxpayers opt for deposit of their partial or full GST
liability arising out of the issue pointed out by the department
during the course of such search, inspection or investigation by
furnishing DRC-03. Instances have been noticed where some of
the taxpayers after voluntarily depositing GST liability through
DRC-03 have alleged use of force and coercion by the officers for
making 'recovery' during the course of search or inspection or
investigation. Some of the taxpayers have also approached
Hon'ble High Courts in this regard.

2. The matter has been examined. Board has felt the necessity
to clarify the legal position of voluntary payment of taxes for
ensuring correct application of law and to protect the interest of the
taxpayers. It is observed that under CGST Act, 2017 a taxpayer
has an option to deposit the tax voluntarily by way of submitting
DRC-03 on GST portal. Such voluntary payments are initiated only
by the taxpayer by logging into the GST portal using its login id and
password. Voluntary payment of tax before issuance of show cause
notice is permissible in terms of provisions of Section 73(5) and
Section 74 (5) of the CGST Act, 2017. This helps the taxpayers in
discharging their admitted liability, self-ascertained or as
ascertained by the tax officer, without having to bear the burden of
interest under Section 50 of CGST Act, 2017 for delayed payment
of tax and may also save him from higher penalty imposable on
him subsequent to issuance of show cause notice under Section
73 or Section 74, as the case may be.

HC-KAR

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.

5. Pr. Chief Commissioners/ Chief Commissioners, CGST
Zones and Pr. Director General, DGGI are advised that in case,
any complaint is received from a taxpayer regarding use of force or
coercion by any of their officers for getting the amount deposited
during search or inspection or investigation, the same may be
enquired at the earliest and in case of any wrongdoing on the part
of any tax officer, strict disciplinary action as per law may be taken
against the defaulting officers.

Sd/-
(Vijay Mohan Jain)
Commissioner (GST-Inv.),CBIC"

15. The issue as to whether payments made by the tax

payer / assessee during search / inspection / seizure / adjudication

proceedings was involuntary / under coercion, threat, duress etc.,
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or whether it was voluntary by way of self-ascertainment under

Sections 73(5) and 74(5) of the CGST / KGST Act has come up for

consideration before various Courts including the co-ordinate

Bench of this Court in Bundl Technologies case supra, wherein it

was held as under:-

35. Accordingly, it is clear that the procedure
of self-ascertainment under sub-section (5) of Section
74 contains a scheme that is concluded after following
the procedure under sub-sections (6), (7) and (8) of
Section 74 of the CGST Act. In the present case, it
must be noted that though there is payment of tax and
even if it is accepted that payment of tax is also
followed by requisite Challan DRC-03, the mere
payment of tax cannot be construed to be a payment
towards self-ascertainment as contemplated under
Section 74 (5) of CGST Act.
36. The letter of the petitioner dated
30.11.2019 is clear and unambiguous, wherein it is
asserted by the petitioner that the amount is made in
furtherance of their good will conduct and bona fide
and that it is made during the pendency of the
inspection proceedings and the deposit is without
prejudice and with reservation of rights, and
contention to seek necessary refund at the
appropriate time and should not be regarded as an
admission of liability.
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37. Clearly, the payment of tax by itself even
if construed to be voluntary will not by itself in any way
lead to a conclusion that the same is paid in
furtherance of self-ascertainment under Section
74(5) of CGST Act. The scheme of self-
ascertainment as contained in sub-sections
(5), (6), (7), (8) of Section 74 of CGST Act would not
admit of making of payment and continuance of
investigation. Upon payment of tax after collection of
the same with penalty, if the same is accepted even
before the issuance of notice under Section 74(1)
during investigation, there ends the matter and there
is nothing further to be proceeded with.

38. If it is that the petitioner has paid tax on
self-ascertainment, the question of respondents
contending that the investigation is pending would
also indicate that the contention of self-ascertainment
as made out by the respondent is clearly an
afterthought. The respondents have not taken the
stand that self-ascertained tax falls short and if that
were to be so, it could have proceeded to issue notice
as contemplated under Section 74(7) and could have
even rejected the self-ascertainment in its entirety
while asserting that it would issue notice under
Section 74(1) of CGST Act, if facts so warrant. The
stand of the respondents is ambiguous as self-
ascertainment is put forward only as defence to the
assertion of the petitioner that the payment of amount
has been made involuntarily. Accordingly, the
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contention of payment being made by way of self-
ascertainment is liable to be rejected.

** ** **

45. Insofar as the aspect as to whether
amount is paid under coercion as asserted by the
petitioner, suffice it to say that the amounts are paid
contemporaneous to the very dates when
investigation was being made and during times when
the petitioner's Officers or Directors were at the place
of investigation, which fact is not in dispute. If it is that
the petitioners were otherwise regularly filing their
returns and paying taxes as evidenced from the table
extracted supra at Para 18, the dispute if any as
regards to the wrongful availment of input tax credit as
regards certain set of transactions is a matter that was
pending investigation. But, instead of allowing
investigation to proceed and be concluded, it appears
that the Department has acted in undue haste insofar
as to ensure that taxes were paid during the process
of investigation. While considering the time at which
the amount was deposited in the Cash Ledger and the
date of deposit, it would indicate that amounts were
paid during times when there was no legal obligation
to make payment."

16. The appeal preferred by the respondents - Revenue was

also dismissed by the Division Bench of this Court as hereunder:-
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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
CGST Act?

(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?

"74. (1) Where it appears to the proper officer that
any tax has not been paid or short paid or
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erroneously refunded or where input tax credit has
been wrongly availed or utilised by reason of fraud,
or any wilful-mis.statement 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 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% of penalty on its own
ascertainment of the tax ascertained by proper officer and inform
him in writing about such payment.

18. It is pertinent to note that a division bench of Gujarat High
Court in Bhumi Associate v. Union of India [2021] 124
taxmann.com 429/84 GST 634 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.
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(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.

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 4AM and 1PM on 30-11-2019 and 27-12-2019 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 30-11-2019 that it reserves its right to claim refund of the
amount and the same should not be treated as admission of its
liability. The relevant extract of communication dated 30-11-2019
reads as under:--
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"BUNDL TECHNOLOGIES PRIVATE LIMITED

Registered Office, 4th Floor, Annex Building,
Maruthi Chambers, Survey N0.17/9B

Bequr Hobli, Roopana Aqrahara, Bengaluru,
Karnataka, India 560068
CIN:U74110KA2013PTC096530

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-500016.
Sub: Submission related to investigation

Ref: Inspection dt:28/29 November 2019 by
DGGSTI Officials at BTPL's offices situated at
Bangalore, Gurugram and Hyderabad.

Dear Sir,

** ** **

As an extension of our goodwill conduct
and bonafide, 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."
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20. The company has also reiterated its stand in GST DRC-03
generated on 2-12-2019, the relevant portion of which is
reproduced below:

"FORM GST DRC - 03

[See Rule 142(2) & 142(3)]

Intimation of payment made voluntarily or made against the show
cause notice (SCN) or statement

ARN:AD291219000080K

Date: 2-12-2019

1. GSTIN 29aafcb7707d1zq
2. Name Bundl Technolgies Private Limited
3. Cause of payment Others
4. Section under which voluntary Others
payment is made
5. Details of show cause notice, if Reference No.NA Date of issue: NA
payment made within 30 days of
its issue
6. Financial year 2017-18
7. Details of payment made including interest and penalty if applicable (Amount in Rs.)
Sr.N Tax Act Place Tax Interest Penalty Others Total Ledger Debi Date of
o period of / if utilized t debit
supply cess applica (Cash / entry entry
ble Credit) No.
1. Jul ITST Karnata 5,05 0.00 0.00 0.00 5,05 Cash DC2 02/12/2
2017 - ka 6,60 6,60 9121 019
Mar 4.00 4.00 9000
2018 3301

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 be regarded as an admission of liability."

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.
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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."

17. This court in the case of Suretex Prophylactics (India)

Private Limited vs. Union of India and Others;

W.P.No.2444/2022 dated 27.02.2023, held as under:-

"5. In addition to reiterating the various contentions urged in the
petition and referring to the material on record, learned Senior
counsel for the petitioner has put forth the following contentions:-
(i) That the collection / recovery of INR 1.5 crores by the
respondents was without jurisdiction or authority of law as required
under Article 265 of the Constitution of India and on this ground
alone, the said amount deserves to be refunded back to the
petitioner together with interest;

(ii) No recovery can be made prior to investigation and / or
during the course of investigation and recovery can be made only
after / post investigation and passing of orders and in the instant
case, since no adjudication was done as on the date of recovery,
much less any order being passed, the amount collected by the
respondents is without jurisdiction or any authority of law, the same
deserves to be refunded.

(iii) My attention is invited to the Board Circulars dated
25.05.2022 and 19.01.2022 in order to contend that in the absence
of adjudication or order for payment, the question of recovery of
any money from the petitioner does not arise.

(iv) It is contended that the amounts collected / recovered from
the petitioner without there being adjudication are in the nature of
pre-deposit and the same not in the nature of tax / duty, the same
deserves to be refunded back to the petitioner.
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In support of his contentions, learned Senior counsel for the
petitioner has placed reliance upon the following decisions:-

(i) LML Ltd., vs Collector of Central Excise, Kanpur - 2002 (
142) ELT 273(SC);

(ii) Concepts Global Impex V. UOI - 2018 (11) TMI 688 - P&H
HC;

(iii) Century Metal Recycling Pvt Ltd V. UOI - [2008 (10) TMI 96
- P&H H]

(iv) M/S Bhumi Associate V. Union of India - R/SCA 3196 of
2021, Gujarat High Court;

(v) M/S. Vallabh Textiles V. Senior Intelligence Officer & Ors. -[
W.P. (C) 9834/2022, Delhi High Court;

(vi) Makemytrip (India) Pvt. Ltd & Ibibo Group Pvt. Ltd Vs.
Union of India & Ors., [(2016) 233 DLT 484 (DB)] ( Upheld by
the Hon'ble High COurt in Union of India Vs. Makemytrip
(India) (P) Ltd., [(2019) 11 SCC 765];

(vii) Union of India and Ors. Vs. Bundl Technologies Private
Limited and Ors [ Judgment dated 03.03.2022 in W.P. No 4467
of 2021];

(viii) Sivashankar Granites Pvt Ltd V Asst Commr of C. Ex.,
Warangal [1998 (98) E.L.T 32 AP];

(ix) M/s FCI OEN Connectors Ltd. V Union of India & Ors [ WP
5901 of 2021 T- RES, Karnataka High Court ];

(x) Commissioner of Cus., Bangalore V. Next Fashion Creators
Pvt. Ltd [2012 (280) ELT 374 (Kar)];

(xi) Mount Shivalik Breweries V. Union of India [2003 (157) ELT
9 (Del)]
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(xii) Commissioner of Customs, Bangalore V. Sami Labs Ltd., -
[2012(278) ELT 601 (Kar)];

(xiii) Phthalo Colours and Chemicals India Ltd V.
Commissioner of C.E, ST- 2019 - TIOL - 1176- CESTAT- AHM;

(xiv) Reliance Transport & Travels Ltd. V. Commissioner of
Customs 2018- TIOL- 3620- CESTAT- DEL;

(xv) Commr. of Customs V. Reliance Transport &
Travels Ltd., -[2020(372) ELT A105(SC)];

(xvi) Swadeshi Cotton Mills Co. Ltd V. Union of India - AIR
1981 SC 818, 831;

(xvii) Rajesh Kumar v. Dy. CIT- [2006] 157 Taxmann 168
(SC);

(xviii) EBIZ. Com Pvt LTd. V. Commissioner of Central
Excise, Customs and Service Tax and Ors [2016 (9) TMI 1405 -
Allahabad High Court];

6. Per contra, learned counsel for the respondents - revenue
has made the following submissions:-

(i) The show cause notice has already been issued and
investigation adjudication is under way and consequently, the
question of directing refund at this stage would not arise and the
petitioner be relegated to appear before the authority, as disputed
question of facts arise for consideration for recovery of payment /
non-payment of tax / duty;

(ii) There is no pleading with regard to the subject amount of
INR 1.5 crores being a pre-deposit and consequently, even this
contention cannot be accepted;

(iii) There is no application for refund in the prescribed form as
required under Section 27 of the said Act of 1962 and on this
ground also, the petition is liable to be dismissed;
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(iv) Since the petitioner has already submitted his reply dated
22.02.2022 to the show cause notice dated 11.02.2022 issued by
the respondents, the petitioner is not entitled to any relief at this
stage.

7. By way of reply, learned Senior counsel for the petitioner
submits that since the present petition was preferred on
29.01.2022 and that the right to claim refund got crystallized when
the moment the subject amount of INR 1.5 crores was recovered
and any subsequent show-cause notice or adjudication
proceedings cannot be made the basis to deny refund sought for
by the petitioner. My attention is invited to paragraph-10 of the
statement of objections in order to point out that the admission
made by the respondents that INR 1.5 crores was actually paid by
the petitioner under protest during investigation. It is therefore
contended that in the light of the submission of the petitioner that
the petitioner has paid the said amount under protest, the petitioner
would be entitled to refund.

It is contended that the proceedings pursuant to the show
cause notice are independent proceedings, which are mutually
exclusive, independent and distinct from the right of the petitioner
to claim refund and consequently, the said proceedings cannot be
relied upon by the respondents to deny the refund sought for by the
petitioner.

8. I have given my anxious consideration to the rival
submissions and perused the material on record.

9. Before adverting to the rival contentions, it is necessary to
extract the two Circulars dated 25.05.2022 and 19.01.2022.

The Circular dated 25.05.2022 reads as under:-

F.No.GST/INV/Instruction /2022-23
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Investigation Wing.
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10TH Floor, Tower-2
Jeevan Bharathi Building
Connaught Circus, New Delhi -
100 001.
Dated: 25th May 2022.

Instruction No. 01/2022-23 (GST-Investigation)

Subject: Deposit of tax during the course of
search, inspection or investigation - reg.

During the course of search, inspection or
investigation, sometimes the taxpayers opt for
deposit of their partial or full GST liability arising out
of the issue pointed out by the department during the
course of such search, inspection or investigation by
furnishing DRC-03. Instances have been noticed
where some of the taxpayers after voluntary
depositing GST liability through DRC-03 have alleged
use of force and coercion by the officers for making '
recovery' during the course of search or inspection or
investigation. Some of the taxpayers have also
approached Hon'ble High Courts in this regard.

2. The matter has been examined. Board has felt
the necessity to clarify the legal position of voluntary
payment of taxes for ensuring correct applications of
law and to protect the interest of the taxpayers. It is
observed that under CGST Act, 2017 a taxpayer has
an option to deposit the tax voluntarily by away of
submitting DRC-03 on GST portal. Such voluntary
payments are initiated only by the taxpayer by
logging into the GST portal using its login id and
password. Voluntary payment of tax before issuance
of show cause notice is permissible in terms of
provisions of Section 73(5) and Section 74 (5) of the
CGST Act, 2017. This helps the taxpayers in
discharging their admitted liability, self- ascertained or
as ascertained by the tax officer, without having to
bear the burden of interest under Section 50 of CGST
Act, 2017 for delayed payment of tax and may also
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save him from higher penalty imposable on him
subsequent to issuance of show cause notice under
Section 73 or Section 74, as the case may be.

3. It is further observed that recovery of taxes not
paid or short paid, can be made under the provisions
of Section 79 of CGST Act, 2017 only after following
due legal process of issuance of notice and
subsequent confirmation of demand by issuance of
adjudication order. No recovery can be made unless
the amount becomes payable in pursuance of an
order passed the adjudicating authority or otherwise
becomes payable under the provisions of 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 circumstances 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.

5. Pr. Chief Commissioners/ Chief
Commissioners, CGST Zones, and Pr. Director
general, DGGI are advised that in case, any
complaint is received from a taxpayer regarding use
of force or coercion by any of their officers for getting
the amount deposited during search or inspection or
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investigation, the same may be enquired at the
earliest and in case of any wrongdoing on the part of
any tax officer, strict disciplinary action as per law
may be taken against the defaulting officers.

Sd/-
(Vijay Mohan Jain)
Commissioner (GST-Inv.), CBIC

The Circular dated 19.01.2022 reads as under:-

F.No.296/63/2020-CX9
GOVERNMENT OF INDIA
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs.
.............

Dated: 19.01.2022.

All Principal Chief Commissioners/Chief
Commissioners of ST &CX

All Principal Chief Commissioners/Chief
Commissioners of Customs

All Principal Director Generals/Director Generals,
CBIC.

SUBJECT: Master circular on Recovery and Write-
Off Arrears of Revenue

1. Board has issued Instruction/Circulars relating to
recovery of arrears under Central Excise, Service Tax
and Customs from time to time. Considering the
changes that have taken place, especially after the
introduction of GST in July, 2017, it has become
imperative to update and revamp the procedure for
recovery of arrears of Indirect taxes and Customs.
Accordingly, in suppression of instructions issued
earlier on the subjects which are annexed herewith
as Annexure-A, this consolidated Circulars is being
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issued providing guidelines for recovery and write -
off of arrears of Indirect taxes and Customs.

2. THE CONCEPT OF ARREAR:

(i) Arrears are the overdue payment of the
amount tax, interest, fine or penalty that is confirmed
against a person who is liable to pay the same to the
exchequer. It arises as result of Order-in-Original,
Order of Appellate forum, like the Commissioner
Appeals/ADC/JC/Appeals or the CESTA and the
Courts of law.

(ii) The amount in the case under investigation,
unconfirmed demands (i.e., show Cause Notice,
including those in Call Book), Order-in-Original that
has been set aside or remanded for de-novo
adjudication by Appellate authority do not fall under
the category of ' arrears'.

10. As can be seen from the Circular dated 25.05.2022, no
recovery can be made unless the amount become payable in
pursuance of the order passed by the Adjudicating Authority or
otherwise become payable under the provisions of the GST Act as
well as under the provisions of the Customs Act also. The Circular
dated 19.01.2022 clearly states that arrears are the over due
payment of the amount of tax, interest, fine or penalty that is
confirmed against a person who is liable to pay the same to the
exchequer and it arises as result of Order-in-Original. The said
Circular also clarifies the amount in the case under investigation,
unconfirmed demands, Show Cause Notice etc., and the Order-in-
Original that has been set aside or remanded for de-novo
adjudication by Appellate authority do not fall under the category of
arrears.

11. In the instant case, it is an undisputed fact that prior to
recovery of a sum of INR 1.5 crores from the petitioner, there is no
adjudication or any order made/passed by the respondents, which
entitled them to recover the money paid by the petitioner. As
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rightly contended by the learned Senior counsel for the petitioner,
the respondents have themselves admitted in their statement of
objections that the petitioner did not voluntarily make the payment
and that he made it under protest. Under these circumstances, in
the light of the aforesaid material on record, which clearly
establishes that the petitioner had made the payment under protest
and that the payment was not preceded by any order of
adjudication, the respondents did not have any jurisdiction or
authority of law to recover INR 1.5 crores, which is clearly violative
of Article 265 of the Constitution of India and consequently, the
petitioner would be entitled to refund of the aforesaid amount
collected by the respondents without jurisdiction or authority of law.
12. In the case of M/s.Vallabh Textiles vs. Senior
Intelligence Officer & others, the High Court of Delhi is held as
under:-

"33. Besides this, the following circumstances reveal,
that the amounts deposited [the cumulative sum
being Rs.1,80,10,000/-] did not have an element of
voluntariness attached to it.
33.1 There is no dispute, that Rs.1,80,10,000/- was
deposited in four (4) tranches in the prescribed format
i.e., GST DRC-03, on the dates and at the time set
forth hereinbelow:
-- Rs. 35,00,000/- vide Form GST DRC-03 dated
17.02.2022 at 01:28 AM

-- Rs. 1,00,00,000 vide Form GST DRC-03
dated 17.02.2022 at 02:15 AM

-- Rs. 20,25,000/- vide Form GST DRC-03 dated
17.02.2022 at 05:04 AM

-- Rs. 24,85,000/- vide Form GST DRC-03 dated
17.02.2022 at 07:03 AM

34. It is also not in dispute, that the search
proceedings commenced on 16.02.2022 at about
03:30 PM and were concluded on the following day
i.e., 17.02.2022 at 09:30 A.M.
35. The fact, that deposits were made [during the
early hours of 17.02.2022] when the search had not
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concluded, would show that the payments were not
voluntary. The deposits made were not aligned with
provisions of sub-section (5) of Section 73 or sub-
section (5) of Section 74.
36. As noted above, if the payments/deposits were
voluntary, then an acknowledgement of having
received the payment should emanate from the
proper officer, as mandated in the prescribed form
i.e., GST DRC-04, as prescribed under sub-section
(2) of Rule 142 of the 2017 Rules.
36.1 The official respondents/revenue, in our opinion,
have not been able to discharge this burden.
37. The malaise of officials seeking to recover tax
dues (in contrast to voluntary payments being made
by assesses towards tax dues) during search,
inspection or investigation was sought to be
addressed by the GST- Investigation, CBIC via
Instruction No. 01/2022-2023 dated 25.05.2022. For
the sake of convenience, the said instruction is
extracted hereafter:
"Date:25th May, 2022
Instruction No. 01/2022-23 [GST - Investigation]
Subject: Deposit of tax during the course of
search, inspection or investigation- reg.

1. During the course of search, inspection or
investigation, sometimes the taxpayers opt for
deposit of their partial or full GST liability arising
out of the issue pointed out by the department
during the course of such search, inspection or
investigation by furnishing DRC-03. Instances
have been noticed where some of the taxpayers
after voluntarily depositing GST liability through
DRC-03 have alleged use of force and coercion by
the officers for making 'recovery' during the
course of search or inspection or investigation.
Some of the taxpayers have also approached
Hon'ble High Courts in this regard.
2. The matter has been examined. Board has felt
the necessity to clarify the legal position of
voluntary payment of taxes for ensuring correct
application of law and to protect the interest of
the taxpayers. It is observed that under CGST Act,
2017 a taxpayer has an option to deposit the tax
voluntarily by way of submitting DRC-03 on GST
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portal. Such voluntary payments are initiated only
by the taxpayer by logging into the GST portal
using its login id and password. Voluntary
payment of tax before issuance of show cause
notice is permissible in terms of provisions of
Section 73(5) and Section 74 (5) of the CGST Act,
2017. This helps the taxpayers in discharging
their admitted liability, self-ascertained or as
ascertained by the tax officer, without having to
bear the burden of interest under Section 50 of
CGST Act, 2017 for delayed payment of tax and
may also save him from higher penalty imposable
on him subsequent to issuance of show cause
notice under Section 73 or Section 74, as the case
may be.
3. It is further observed that recovery of taxes not
paid or short paid, can be made under the
provisions of Section 79 of CGST Act, 2017 only
after following due legal process of issuance of
notice and subsequent confirmation of demand
by issuance of 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 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.
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5. Pr. Chief Commissioners/ Chief
Commissioners, CGST Zones and Pr. Director
General, DGGI are advised that in case, any
complaint is received from a taxpayer regarding
use of force or coercion by any of their officers
for getting the amount deposited during search or
inspection or investigation, the same may be
enquired at the earliest and in case of any
wrongdoing on the part of any tax officer, strict
disciplinary action as per law may be taken
against the defaulting officers.

(Vijay Mohan Jain)
Commissioner (GST-Inv.),
CBIC"
38. It appears that this Instruction was issued by the
GST-Investigation Wing, CBIC, in the backdrop of an
order dated 16.02.2021, passed by the Gujarat High
Court in the matter of Bhumi Associate v. Union of
India MANU/GJ/0174/2021, whereby the following
wholesome directions were issued-
"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 [a] 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
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action should be initiated against the concerned
officer."
38.1 It is important to note, that while in line with the
directions contained in Bhumi Associate, the
aforementioned Instruction i.e., Instruction No.
01/2022-2023 dated 25.05.2022 inter alia, provides,
as noticed above, that no recovery of tax should be
made during search, inspection or investigation
unless it is voluntary- it does not elaborate on various
modes for collection adopted in such circumstances,
for example via cheque, cash, e-payment or even via
adjustment of input tax credit.
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 16.02.2021,
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.
40. In this case, the argument of Mr Kumar, that the
objection concerning the amounts deposited was
raised only after the summon dated 13.04.2022 was
issued, in our opinion, would not help the cause of
the official respondents/revenue. The reason is, that if
a procedure is prescribed under a statute or by law,
that is, via dicta contained in a judgment, it has to be
followed to the tee.
40.1 Failure to follow the prescribed procedure will,
as in this case, have us conclude that the deposit of
tax, interest and penalty was not voluntary.
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41. The reason that the officers of the official
respondents/revenue have been asked, perhaps, to
have the amounts deposited the day after the search
is concluded, is, to also give space to the concerned
person to seek legal advice, and only thereafter
deposit tax, interest and penalty, wherever
applicable, upon a proper self-ascertainment.
41.1 Undoubtedly, in this case, no such elbowroom
was made available.
Conclusion:
42. Therefore, as alluded to hereinabove, we are
persuaded to hold, that the aforementioned amounts
which were deposited on behalf of the petitioner-
concern, lacked an element of voluntariness.
43. Given this position, we are inclined to direct the
official respondents/revenue to return
Rs.1,80,10,000/- to the petitioner-concern, along with
interest at the rate of 6% (simple) per annum.
44. The interest will run from 17.02.2022 till the date
of payment.
45. The amount will be remitted to the petitioner-
concern within ten [10] days of receipt of copy of the
judgment.
46. Since we are in respectful agreement with the
directions contained in Bhumi Associate, we direct
the CBIC to align Instruction No. 01/2022-2023 dated
25.05.2022 with the directions issued by the Gujarat
High Court in Bhumi Associate.
47. The writ petition is disposed of in the aforesaid
terms."

13. In the case of M/s.Concept Global Impex vs. Union of
India & others, the Punjab and Haryana High Court held as
under:-

The fact that a sum of ` 40,00,000/- had been taken
from the petitioner without there being any show
cause notice or the demand at that time, is not in
dispute. The only issue sought to be raised by
counsel for the respondents is that the amount was
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deposited by the petitioner voluntarily. That issue
has already been gone into by this Court in Century
Metal Recycling Pvt. Ltd and Century Knitters
(India) Ltd. cases (supra) wherein finding that certain
amount was recovered from the exporter without any
show cause notice or demand, it was ordered to be
refunded.

In Century Metal Recycling Pvt. Ltd (supra) it was
held that unless there is assessment and demand,
the amount deposited by the petitioners cannot be
appropriated. It was observed as under:-

"13. As far as the amount deposited by the petitioners
is concerned, case of the petitioners is that the same
was deposited under coercion. Case of the
respondents was that the same was deposited
voluntarily. Whatever be the position, unless there is
assessment and demand, the amount deposited by
the petitioners cannot be appropriated. No
justification has been shown for retaining the amount
deposited, except saying that since it was voluntarily
deposited. In view of this admitted position, the
petitioners are entitled to be returned the amount
paid."

In Century Knitters (India) Ltd. (supra) finding that
certain amount was recovered by the revenue without
any show cause notice or demand, while directing
retaining of 20% of the amount, the balance amount
of ` 8 crores was directed to be refunded. It was held
that unless a demand is finalized and is existing
which is liable to be discharged, the revenue cannot
retain any amount unless there is a specific provision
in the statute which authorizes such retention.
Retention of any amount by the revenue in such a
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situation would be violative of Article 265 of the
Constitution.

The relevant observations are as under:-

"11. After hearing learned counsel for the parties and
perusing the record, we find that as on date no
crystallized liability has been shown to be existing
against the petitioners. Further, only a show cause
notice has been issued whereunder a liability to the
extent of Rs.50 lacs could be fastened. Insofar, as
the matters which are under investigation, it has not
been shown that any show cause notice in respect
thereof has been issued by the respondent-
department so far.

12. It is trite law that unless a demand, which is
finalized and is existing which is liable to be
discharged, the revenue cannot retain any amount
unless there exists specific provision in the statute for
the retention of the amount.

13. On a specific query put to the learned counsel for
the revenue relating to any provision in the statute on
the basis of which the revenue could provisionally
retain the amount, learned counsel for the revenue
candidly admitted that there is no such provision to
retain the amount except to refer to Section 42 of the
Customs Act, 1962. Further, on a query as to whether
any order requiring the petitioners to refund the duty
drawback as canvassed by the revenue had been
passed, learned counsel for the revenue was unable
to show that there existed any such order or
authorization from any competent authority. It was
only urged that it was a disputed question of fact as
to whether the amount was deposited voluntarily or
under coercion. Be that as it may, whatever be the
situation, the revenue cannot retain any amount to
which it legally not entitled to as the same would be
violative of Article 265 of the Constitution of India."
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Another fact which deserves to be noticed is that
show cause notice was issued to the petitioner on
24.04.2017 and more than one year has already
been elapsed but no order has been passed. Even if
demand is confirmed against the petitioner, for
hearing of appeal upto the CESTAT, only 10% of the
amount is to be deposited, whereas the proceedings
in the present case have not been concluded yet.

Keeping in view the enunciation of law as noticed
above, after retaining the amount of ` 6,00,000/-,
balance amount deposited by the petitioner be
refunded to him within a period of four weeks from
the date of receipt of copy of the order.

The writ petition is disposed of accordingly.

14. In the case of Makemytrip (India) Pvt. Ltd., vs. Union of
India & Others, the Delhi High Court held as under;-

104. It is repeatedly urged by Mr. Satish Aggarwala
that in the bail proceedings before the Magistrate, the
Senior counsel representing Mr. Pallai volunteered
that MMT would make payment of the arrears of
service tax dues and, therefore, it cannot be said that
there was any coercion or compulsion on MMT to
make such payment. At the same time, he urged that
such payment was not a pre-condition for the grant of
bail and that in principle the DGCEI would oppose
grant of bail in criminal proceedings only because an
offer is made to pay the arrears of service tax dues in
such proceedings.

105. In the first place, the Court is unable to accept
that when an offer is made in the circumstances
outlined before a criminal court for payment of
alleged service tax arrears without even a show
cause notice in this regard being issued, it is plain
that the offer is made only to avoid the further
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consequences of continued detention. Such a
statement can hardly be said to be voluntary even
though it may be made before a Court. Secondly,
there appears a contradiction because the DGCEI did
not decline to receive the offer of payment of alleged
service tax arrears.

106. In a different context, while interpreting the
provisions of the Delhi Value Added Tax Act, 2004
('DVAT Act'), this Court in Capri Bathaid Pvt. Ltd. v.
Commissioner of Trade & Taxes 2016 (155) DRJ 526
(DB) took exception to the officials of the Department
of Trade and Taxes collecting arrears of sales tax
from dealers at the time of survey and search. The
Court pointed out that the said practice was illegal
and there could be no collection without there being
an assessment. The same principle would apply here
as well. Without even an SCN being issued and
without there being any determination of the amount
of service tax arrears, the resort to the extreme
coercive measure of arrest followed by detention was
impermissible in law. Consequently, the amount that
was paid by the Petitioners as a result of the search
of their premises by the DGCEI, without an
adjudication much less an SCN, is required to be
returned to them forthwith. It is clarified that since the
payment was collected by the DGCEI illegally, the
refund in terms of this order will not affect the bail
already granted to Mr. Pallai.

( IX) The Court is unable to accept that payment by
the two Petitioners of alleged service tax arrears was
voluntary. Consequently, the amount that was paid by
the Petitioners as a result of the search of their
premises by the DGCEI, without an adjudication
much less an SCN, is required to be returned to them
forthwith.

15. In the case of Union of India & others vs. M/s. Bundl
Technologies Private Limited, the Hon'ble Division Bench of this
Court held as under:-
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"(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 willful misstatement or
suppression of facts. The relevant extract of section
74 reads as under:-
74. (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.
XXX
(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.

Thus Section 74(5) of the Act gives an option to a
person to make payment of tax, along with interest
and 15% of penalty on its own ascertainment of the
tax ascertained by proper officer and inform him in
writing about such payment.
18. It is pertinent to note that a division bench of
Gujarat High Court in M/S BHUMI ASSOCIATE VS.
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
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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
assesee 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.
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 4AM and 1PM on
30.11.2019 and 27.12.2019 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 30.11.2019 that it reserves its
right to claim refund of the amount and the same
should not be treated as admission of its liability. The
relevant extract of communication dated 30.11.2019
reads as under:-

BUNDL TECHNOLOGIES PRIVATE LIMITED
Registered Office, 4th Floor, Annex Building, Maruthi
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Chambers, Survey No.17/9B, egur Hobli, Roopana
Agrahara, Bengaluru, Karnataka, India 560068
CIN:U74110KA2013PTC096530
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-500016.
Sub: Submission related to investigation
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
bonafide, 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 2.12.2019, the relevant portion
of which is reproduced below:

FORM GST DRC - 03
[See Rule 142(2) & 142(3)]
Intimation of payment made voluntarily or made
against the show cause notice (SCN) or statement
ARN:AD291219000080K Date: 02.12.2019
1. GSTIN 29aafcb7707d1zq
2. Name Bundl Technolgies Private Limited
3. Cause of payment Others
4. Section under which voluntary Others
payment is made
5. Details of show cause notice, if Reference No.NA Date of issue: NA
payment made within 30 days of
its issue
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6. Financial year 2017-18
7. Details of payment made including interest and penalty if applicable (Amount in Rs.)
Sr.N Tax Act Place Tax Interest Penalty Others Total Ledger Debi Date of
o period of / if utilized t debit
supply cess applica (Cash / entry entry
ble Credit) No.
1. Jul ITST Karnata 5,05 0.00 0.00 0.00 5,05 Cash DC2 02/12/2
2017 - ka 6,60 6,60 9121 019
Mar 4.00 4.00 9000
2018 3301

8. Reasons, if any:
The above payment is made as an extension of our
goodwill and bonafide. 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 be regarded as an admission of
liability.

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 u/s 67(1) of 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
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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 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 VS.
UNION OF INDIA', 2009 (237) ELT 35 (BOM) it was
held by Division Bench of 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 Delhi
High Court in MAKEMYTRIP (INDIA) PVT. LTD. VS.
UNION OF INDIA, 2016 (44) STR 481 DEL and it
was held that amount collected during investigation
proceeding without any adjudication is liable to be
refunded. In CENTURY KNITTERS (INDIA) LTD. VS.
UNION OF INDIA', 2013 (293) ELT 504 (P & H) it
was held that any amount illegally collected cannot
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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 VS. 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 28.11.2019 at 10.30 a.m. in exercise
of powers u/s 67(1) of CGST Act. On 30.11.2019 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 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 material 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."

16. As can be seen from the aforesaid judgment of this Court,
the Hon'ble Division Bench also negatived the very same
contentions urged by the learned counsel for the respondents in
the present petition that since the adjudication is pending, refund
should not be ordered. This Court has categorically held that the
contention of the Department that the amount under deposit must
be made subject to the outcome of the pending investigation
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cannot be accepted. It is therefore clear and evident that in the
instant case also, the subject amount of INR 1.5 crores collected
from the petitioner - company by the respondents is in violation of
Articles 265 and 300-A of the Constitution of India and the same
deserves to be refunded back to the petitioner.

17. In view of the aforesaid judgments and the judgment of the
Hon'ble Division Bench in Bundl Technologies case (supra), I
am of the considered opinion that in the facts of the instant case, in
the absence of any material to establish that there was any order
or adjudication made by the respondents quantifying the amount of
tax / duty payable by the petitioner as on the date of collecting /
recovering the same during investigation, the respondents were
clearly not entitled to recover the same, leading to the sole
inference that the respondents are liable to refund the amount
collected by them.

18. Learned Senior counsel for the petitioner is also correct in
his submission that in the case of Central Excise vs. KVR
Construction - 2012(50) VST 469, while construing Section 11B of
the Central Excise Act, the Hon'ble Division Bench of this Court
held as under:-

"33. We may also refer hereon a Division
Bench Judgment of Karnataka High Court in
Commissioner of Central Excise v. KVR Construction,
2012 (50) VST 469, where in construing Section 11b,
Court said that it refer to claim for refund of duty of
excise only and does not refers to any other amount
collected without authority of law. That was a case of '
Service Tax' and Court said as under:

" Though under Finance Act, 1994 such
service tax was payable by virtue of notification, they
were not liable to pay, as there was exemption to pay
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such tax because of the nature of the institution for
which they have made construction and rendered
services. In other words, if the respondent had not
paid those amounts, the authority could not have
demanded the petitioner to make such payment. In
other words, authority lacked authority to levy and
collect such service tax. In case, the department were
to demand such payments, petitioner could have
challenged it as unconstitutional and without authority
of law. If we look at the conserve, we find mere
payment of amount, would not authorize the
department to regularise such payment. When once
the department had no authority to demand service
tax from the respondent because of its circular dated:
17.09.2004, the payment made by the respondent
company would not partake the character of " Service
tax" liable to be paid by them. Therefore, mere
payment made by the respondent will neither validate
the nature of payment nor the nature of transaction.
In other words, mere payment of amount would not
make it a " service tax" payable by them. When once
there is lack of authority to demand " Service tax"
from the respondent company, the department lacks
authority to levy and collect such amount. Therefore,
it would go beyond their purview to collect such
amount. When once there is lack of authority to
collect such service tax by the appellant, it would not
give them the authority to retain the amount paid by
the petitioner, which was initially not payable by them.
Therefore, mere nomenclature will not be an
embargo on the right of the petitioner to demand
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refund of payment made by them under mistaken
notion"

19. The aforesaid judgment of the Hon'ble Division Bench has
been followed by the Allahabad High Court in the case of
EBIZ.COM Pvt. Ltd. vs. Commissioner of Central Excise,
Customs and Service Tax and Others - 2016(9) TMI 1405, in
order to come to the conclusion that any voluntary payment made
by the petitioner is in the nature of pre-deposit which was liable to
be refunded back to the petitioner. As stated supra, in the facts of
the instant case also that the respondents as regards the recovery
of aforesaid sum of INR 1.5 crores from the petitioner on
15.10.2019 is under protest as stated by the respondents
themselves, there was no order of adjudication nor any other
proceedings or order which initiated by the respondents, which
entitled them to recover the said amount from the petitioner in the
absence of any order of adjudication or any other material in this
regard, the respondents did not have recover the said amount from
the petitioner.

20. Insofar as the contentions urged by the respondents that
the petitioner ought to have made an application under Section 27
of the Customs Act is concerned, this very contention was also
answered against the revenue and in EBIZ.COM's case supra, it is
held as under:-

11. Respondents have filed a counter-affidavit
stating that petitioner paid " Service tax" voluntarily. It
is also said that Section 11B of Act, 1944 would not
be applicable since ' Service Tax' was deposited
voluntarily and not under protest. It is also said that
interest was also deposited by petitioner on his own
since it was his legal obligation. Against
Commissioner's order dated: 29.08.2012, department
reviewed matter and filed appeal before Tribunal
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which is pending. Since petitioner never filed any
application for refund in accordance with Section 11B
(3) of Act, 1944, hence respondents cannot entertain
any claim of refund, and, no refund claim of
petitioner, in law is pending with respondents. No
refund is due, automatically. Moreover, order of
Commissioner (Appeals) dated: 29.08.2012, is not
final since appeal is pending before Tribunal. Board's
Circular dated: 08.12.2014 deals with amount
deposited under Section 35F while in the present
case it is Section 11B which will be applicable. Since
petitioner never filed application as prescribed under
Section 11B, hence no mandamus for refund is
permissible.""

18. The Co-ordinate Bench of this Court in the case of

Kesar Colour Chem Industries vs. Senior Intelligence Officer

and Another -W.P.No.17853/2021 dated 26.09.2024 held as

under:

"19.The legal position regarding self ascertainment in terms of
Section 74(5) of the CGST Act attributed to the petitioner is a
matter that requires consideration.

20.In terms of the Scheme of the CGST Act, it must be noticed
that the assessee has an opportunity even before the service of
notice under Section 74(1) on the basis of "his own ascertainment
of such tax or the tax as ascertained by the proper officer", make
payment and inform the proper officer in writing regarding such
payment as envisaged under Section 74(5).

21.Upon such payment, in terms of Section 74(5) of the CGST
Act, the Proper Officer in terms of Section 74(6) is barred from
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serving any notice under sub-section 74(1), though in terms of
Section 74(7), whether Proper Officer is of the opinion that the
amount paid under Section 74(5) falls short of the amount payable,
he shall proceed to issue notice under Section 74(1).

22. Section 74(7) of the CGST Act states that,

"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.--
xxxx
(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.
(emphasis supplied)

23.In terms of Section 74(8), once the person chargeable with
tax pays tax, interest and penalty "... all proceedings in respect of
the said notice shall be deemed to be concluded."

24.It must be noted that the payments made by the petitioner
of Rs.1.00 crore on 31.07.2021 and further amount of Rs.1.50
crores on 03.08.2021 and even if 'DRC-03 declaration' is taken
note of, it cannot be stated that in the present case, there is self-
ascertainment. For the purpose of self-ascertainment, it is clear
that it amounts to a voluntary determination by the assessee
himself as regards the liability of tax. In light of the stand taken in
the Affidavit dated 10.08.2021 and the averments made in the writ
petition filed on 16.09.2021, this element of voluntariness is absent
and accordingly, the sine qua non of self-ascertainment is not
fulfilled. Though the declaration in Form DRC-03 contains a
declaration that the filing is voluntary, the facts as noticed above
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are sufficient to construe that such declaration was in fact not
voluntary.

25.It is also to be noted that, if the Authority was of the view
that petitioner had made payments as a part of the process of self-
ascertainment under Section 74(5) of the CGST Act, the scheme of
Section 74 contemplates that proceedings would terminate either
on acceptance of self-ascertainment or if the Authorities were of
the view that the self-ascertainment and the amount paid under
Section 74(5) would fall short of the amount actually payable, the
Authority could in terms of Section 74(7) proceed to issue a notice
as provided for under Section 74(1) in respect of such amount
which falls short of the amount actually payable. In the present
case, the show cause notice issued dated 30.11.2022 would
clearly indicate that the notice sought to be issued under Section
74(1) would indicate a fresh and complete adjudication and is not a
notice as regards short fall of actual tax required to be paid as
contemplated under Section 74(7) and accordingly, the State itself
is estopped from contending that there was self-ascertainment.

26.A perusal of the summary of show cause notice and the
show cause notice would indicate that the State itself has not
accepted the self-ascertainment

27.In light of adjudication still to conclude and notice under
Section 74(1) of the CGST Act is already issued, the question of
going back to the stage of 74(5) does not arise, as in terms of
Section 74(5), the self-ascertainment process is to be completed
prior to the issuance of notice under Section 74(1), subject to
issuance of notice under Section 74(7) as regards shortfall.

28 .If that were to be so, the recovery made pending
adjudication in the present factual matrix being one which could be
construed to be a recovery contrary to law and accordingly,
contrary to Article 265 of the Constitution of India, the amount of
Rs.2.50 crores is required to be refunded with interest as would be
applicable in case of refund."
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19. The Division Bench of this Court in The Intelligence

Officer and Another vs. M/s. Kesar Colour Chem Industries

W.A.No.1649/2024 dated 28.01.2025 held as under:

"27. Having heard the learned counsel for the parties and
perused the record, the learned Single Judge has allowed the writ
petition on a finding that the deposit of the amount of
Rs.1,00,00,000/- on 31.07.2021 and Rs.1,50,00,000/- on
03.08.2021 cannot be treated as a self-ascertainment as the
element of voluntariness is absent. According to the learned
Single Judge, 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 31.07.2021 after the Officers of the
appellants visited the office of the respondent at 10:30 a.m. on
29.07.2021 and continued to be in the office till 23:30 p.m. on
30.07.2021 and thereafter, also served summons for appearance
of the proprietor at Bengaluru on 02.08.2024. 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
03.08.2021 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 31.07.2021 and the same
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was after he was issued summons for appearance in Bengaluru on
02.08.2021 (appeared on 03.08.2021). 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 03.08.2021 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.

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
that the same was not voluntary, with which we agree.

31. Having said that, insofar as the affidavit dated 10.08.2021
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 10.08.2024 i.e., one week after the statement
dated 03.08.2024 was made. One week is not a large period to be
considered as fatal/belated. Learned counsel for the respondent is
justified in relying upon the judgment of the Delhi High Court in the
case of Lovelesh Singhal (supra), wherein the Delhi High Court
has, in paragraphs No.21 to 24, 28 to 32, 35 and 36, held as under:
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"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 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 02 : 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
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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.

xx xx xx xx xx xx

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.

29. It is not necessary to examine in detail any
controversy whether such payments were made
voluntarily. Clearly, where a taxpayer turns around
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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.]
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, 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.

xx xx xx xx xx xx

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 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
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.
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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...".

31. 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 is right in coming to a conclusion in paragraphs No.24 and
28 of the impugned order which we have reproduced above that
the payments were recovery and were contrary to law.

32. Insofar as the submission of Sri. Kamath as the writ petition
involved disputed question of facts, the same could not have been
gone into in proceedings under Article 226 of the Constitution of
India is concerned, there is no dispute on the proposition advanced
by Sri. Kamath, but the said proposition may not be applicable in
the case in hand in view of the undisputed facts noted by the
learned Single Judge that payments made were during
investigation both at Mumbai and Bengaluru.

In the facts of the case we are of the view that, writ appeal is
devoid of merits and the same is liable to be dismissed. It is
ordered accordingly."

20. In Vallabh Textiles's case supra , the Division Bench

of the Delhi High Court held as under:
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24. Having heard the learned counsel for the parties, it is quite
evident, that the issue at hand can only be determined, having
regard to the circumstances in which the aforementioned amount
was deposited.

24.1 In this context, one would have to bear in mind, the
safeguards, that the law has put in place.

25. The 2017 Act and the 2017 Rules made therein, do make
provisions for enabling a person chargeable with tax to pay tax,
along with interest, before being served with a notice for payment
of tax, which either has not been paid or short paid or erroneously
refunded or where input tax credit has been wrongly availed or
utilized for any reason.

25.1 Thus, if the person chargeable with tax takes recourse to such
a route, the proper officer is restrained from serving any
notice qua tax or penalty under the provisions of the 2017 Act or
the 2017 Rules framed thereunder, unless the amount which is
self-ascertained by the person chargeable with tax falls short of the
amount payable as per law.

25.2 This leeway is also available, where the person chargeable
with tax is served with a show cause notice and pays the tax, along
with interest, under Section 50 of the 2017 Act within thirty [30]
days of the issue of the show-cause notice. In such eventuality, a
penalty is not leviable, and all proceedings in respect of such
notice are deemed to be concluded.

26. This regime is set out in Section 73 of the 2017 Act.

27. Broadly, this regime also applies, where a notice has been
issued under sub-section (1) of Section 73, and the proper officer
serves a statement containing details of tax not paid or short paid
or erroneously refunded or input tax credit wrongly availed or
utilized for such periods other than those covered under sub-
section (1) of Section 73.
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27.1 The important aspect to be kept in mind, is that the regime
given in Section 73 of the Act operates in cases which do not
involve fraud or wilful-misstatement or suppression of facts to
evade tax.

28. In cases which involve one or more of the aforementioned
ingredients i.e., fraud, wilful misstatement or suppression of facts to
evade tax, para materia provisions are contained in Section 74 of
the 2017 Act, with small variations.

28.1 In these cases as well, latitude has been given to the person
chargeable with tax, to pay monies towards tax, along with interest,
based on self-ascertainment, before issuance of notice under sub-
section (1) of Section 74 of the 2017 Act, with a caveat that fifteen
per cent of such self-ascertained tax is required to be paid by way
of penalty.

28.2 The penalty amount increases if amounts towards tax and
interest are paid by the person chargeable with tax within thirty [30]
days of the notice being issued by the proper officer under sub-
section (1) of Section 74 of the 2017 Act. The person concerned is
required to pay a penalty at the rate of twenty-five per cent within
the aforesaid timeframe i.e., 30 days, upon which all proceedings
in respect of such notice are deemed to be concluded.

29. These provisions have to be read alongside Rule 142, found in
Chapter XVIII of the 2017 CGST Rules.

29.1 The said chapter bears the heading "Demands and
Recovery".

30. Sub-rule (1) of Rule 142 of the 2017 Rules makes a provision
for service of notice for raising a demand for recovery of tax; a
provision which we are not concerned with in this matter, as it is
not the case of the official respondents/revenue that a notice was
served.
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30.1 Besides this, the two sub-rules which are, perhaps, relevant
are sub-rule (1A) and (2) of Rule 142, as they relate to the steps
required to be taken before service of notice on the person
chargeable with tax, interest and penalty under sub-section (1) of
Section 73, or under sub-section (1) of Section 74 of the 2017 Act.

31. Under sub-rule (1A) of Rule 142 of the 2017 Rules, where a
proper officer, before service of notice under section 73(1) or
Section 74(1) of the 2017 Rules seeks to communicate details of
tax, interest or penalty, he is required to do so in the prescribed
form i.e., via Part A of Form GST DRC-01A.

31.1 Where, however, before service of notice or statement, the
person chargeable with tax, based on self-ascertainment, seeks to
make payment of tax and interest, in consonance with the leeway
given under sub-section (5) of Section 73 [which relates to cases
not involving fraud, wilful misstatement or suppression of facts to
evade tax] or as the case may be, the payment of tax, interest and
penalty under sub-section (5) of Section 74 [which relates to cases
involving fraud, wilful misstatement or suppression of facts to
evade tax], he is required to inform the proper officer of such
payment made in the prescribed form i.e., GST DRC-03.

31.2 The proper officer thereafter, is required to issue an
acknowledgement, accepting the payment made by the person,
also in the prescribed form i.e., GST DRC-04.

31.3 This is also required to be done [i.e., the acknowledgement of
acceptance of payment] where tax, interest and penalty are
ascertained by the proper officer, under Rule 142(1A).

32. Clearly, the facts which have emerged, disclose that although
payments were made in the prescribed form i.e., GST DRC-03, no
document has been placed on record by the official
respondents/revenue, demonstrating acknowledgement of having
accepted the payment.
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32.1 Therefore, the stand taken before us by the official
respondents/revenue, that this was a voluntary payment, based on
self-ascertainment of tax, interest and penalty, is not established,
as the regime incorporated under the provisions of Section 73/74 of
the 2017 Act and the 2017 Rules, adverted to hereinabove, has not
been adhered to.

33. Besides this, the following circumstances reveal, that the
amounts deposited [the cumulative sum being Rs. 1,80,10,000/-]
did not have an element of voluntariness attached to it.

33.1 There is no dispute, that Rs. 1,80,10,000/- was deposited in
four (4) tranches in the prescribed format i.e., GST DRC-03, on the
dates and at the time set forth hereinbelow:

-- Rs. 35,00,000/- vide Form GST DRC-03 dated 17-2-2022 at
01:28 AM

-- Rs. 1,00,00,000 vide Form GST DRC-03 dated 17-2-2022 at
02:15 AM

-- Rs. 20,25,000/- vide Form GST DRC-03 dated 17-2-2022 at
05:04 AM

-- Rs. 24,85,000/- vide Form GST DRC-03 dated 17-2-2022 at
07:03 AM

34. It is also not in dispute, that the search proceedings
commenced on 16-2-2022 at about 03:30 PM and were concluded
on the following day i.e., 17-2-2022 at 09:30 A.M.

35. The fact, that deposits were made [during the early hours of 17-
2-2022] when the search had not concluded, would show that the
payments were not voluntary. The deposits made were not aligned
with provisions of sub-section (5) of Section 73 or sub-section (5)
of Section 74.

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

36.1 The official respondents/revenue, in our opinion, have not
been able to discharge this burden.

37. The malaise of officials seeking to recover tax dues (in contrast
to voluntary payments being made by assesses towards tax dues)
during search, inspection or investigation was sought to be
addressed by the GST- Investigation, CBIC via Instruction No.
01/2022-2023 dated 25-5-2022. For the sake of convenience, the
said instruction is extracted hereafter:

"Date:25th May, 2022

Instruction No. 01/2022-23 [GST - Investigation]
Subject: Deposit of tax during the course of search,
inspection or investigation- reg.

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logging into the GST portal using its login id and
password. Voluntary payment of tax before issuance
of show cause notice is permissible in terms of
provisions of Section 73(5) and Section 74 (5) of the
CGST Act, 2017. This helps the taxpayers in
discharging their admitted liability, self-ascertained or
as ascertained by the tax officer, without having to
bear the burden of interest under section 50 of CGST
Act, 2017 for delayed payment of tax and may also
save him from higher penalty imposable on him
subsequent to issuance of show cause notice under
section 73 or Section 74, as the case may be.

3. It is further observed that recovery of taxes not
paid or short paid, can be made under the provisions
of Section 79 of CGST Act, 2017 only after following
due legal process of issuance of notice and
subsequent confirmation of demand by issuance of
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
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
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regarding the provisions of voluntary tax payments
through DRC-03.

5. Pr. Chief Commissioners/Chief Commissioners,
CGST Zones and Pr. Director General, DGGI are
advised that in case, any complaint is received from a
taxpayer regarding use of force or coercion by any of
their officers for getting the amount deposited during
search or inspection or investigation, the same may
be enquired at the earliest and in case of any
wrongdoing on the part of any tax officer, strict
disciplinary action as per law may be taken against
the defaulting officers.

(Vijay Mohan Jain)
Commissioner (GST-Inv.), CBIC"

38. It appears that this Instruction was issued by the GST-
Investigation Wing, CBIC, in the backdrop of an order dated 16-2-
2021, passed by the Gujarat High Court in the matter of Bhumi
Associate v. Union of India [2021] 124 taxmann.com 429/46 GSTL
36/84 GST 634, whereby the following wholesome directions were
issued-

"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:

(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.
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(3) Facility of filing [a] 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."

38.1 It is important to note, that while in line with the directions
contained in Bhumi Associate, (supra) the aforementioned
Instruction i.e., Instruction No. 01/2022-2023 dated 25-5-2022 inter
alia, provides, as noticed above, that no recovery of tax should be
made during search, inspection or investigation unless it is
voluntary- it does not elaborate on various modes for collection
adopted in such circumstances, for example via cheque, cash, e-
payment or even via adjustment of input tax credit.

39. Furthermore, the Instruction falls short, inasmuch as it
sidesteps direction number two (2) contained in Bhumi
Associate (supra) 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 16-2-2021, 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.
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40. In this case, the argument of Mr Kumar, that the objection
concerning the amounts deposited was raised only after the
summon dated 13-4-2022 was issued, in our opinion, would not
help the cause of the official respondents/revenue. The reason is,
that if a procedure is prescribed under a statute or by law, that is,
via dicta contained in a judgment, it has to be followed to the tee.

40.1 Failure to follow the prescribed procedure will, as in this case,
have us conclude that the deposit of tax, interest and penalty was
not voluntary.

41.1 Undoubtedly, in this case, no such elbowroom was made
available.

Conclusion:

42. Therefore, as alluded to hereinabove, we are persuaded to
hold, that the aforementioned amounts which were deposited on
behalf of the petitioner-concern, lacked an element of
voluntariness.

43. Given this position, we are inclined to direct the official
respondents/revenue to return Rs. 1,80,10,000/- to the petitioner-
concern, along with interest at the rate of 6% (simple) per annum.

44. The interest will run from 17-2-2022 till the date of payment.

45. The amount will be remitted to the petitioner-concern within ten
[10] days of receipt of copy of the judgment.

46. Since we are in respectful agreement with the directions
contained in Bhumi Associate (supra) we direct the CBIC to align
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Instruction No. 01/2022-2023 dated 25-5-2022 with the directions
issued by the Gujarat High Court in Bhumi Associate (supra)."

21. In Lovlesh Singhal's case supra, the Division Bench of

the Delhi High Court held as under:

"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 am on 8-10-2022.

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 pm on 7-10-2022.
The respondents state 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 AM." According to the respondents, the survey
and inspection at the principal place of business began after 12:30
am and was concluded at 02:30 am on 8-10-2022.

23. Admittedly, the petitioner had deposited a sum of Rs.
18,72,000/- at 2:06 am by debiting the ECL. Concededly, the
search and inspection proceedings were continuing at the material
time.
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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 accounts. 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 1-
4-2022 to 7-10-2022; Cash Book for the period 1-10-2022 to 7-10-
2022; Stock group summary as on 7-10-2022; copies of the last
purchase and sale bills; profit and loss account for the period 1-4-
2021 to 31-3-2022; and parties ledger.

25. It is important to note that the said statement does not indicate
that there was any admission that the petitioner had wrongfully
availed ITC.

26. Undisputedly, a taxpayer has an option to voluntarily pay tax on
a self-ascertainment basis prior to issuance of a show cause
notice. In terms of section 73(5) of the CGST Act, a person
chargeable to tax may before service of a notice under section
73(1) of the CGST Act or prior to the statement under section 73(3)
of the CGST Act, pay an amount of tax along with interest payable
thereon under section 50 of the CGST Act and inform the proper
officer of such payment in writing. In such eventuality, in terms of
Section 73(6) of the CGST Act, no notice is required under section
73(1) of the CGST Act to be served by the proper officer in respect
of the tax paid or any penalty payable under the provisions of the
CGST Act. However, in terms of Section 73(7) of the CGST Act, if
the tax paid falls short of the tax payable, the proper officer can
issue the show cause notice in respect of the shortfall. Sub-
sections (5), (6) and (7) of Section 73 of the CGST Act are set out
below:
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"73. Determination of tax not paid or short paid or
erroneously refunded or ITC wrongly availed or
utilised for any reason other than fraud or any willful-
misstatement or suppression of facts.--

** ** **
(5) The person chargeable with tax may, before
service of notice under sub-section (1) or, as the case
may be, the statement under sub-section (3), pay the
amount of tax along with interest payable thereon
under section 50 on the basis of his own
ascertainment of such tax or the tax as ascertained
by the proper officer and inform the proper officer in
writing of such payment.

(6) The proper officer, on receipt of such information,
shall not serve any notice under sub-section (1) or, as
the case may be, the statement under sub-section
(3), in respect of the tax so paid or any penalty
payable under the provisions of this Act or the CGST
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"

27. It is clear from the above that the provisions of Sub-sections (5)
and (6) of Section 73 of the CGST Act are for the benefit of a
taxpayer who voluntarily pays tax on his own ascertainment prior to
issuance of any show cause notice and thus, absolves himself of
liability to pay penalty in respect of the tax paid. Sub-section (5) of
Section 74 of the CGST Act is in somewhat similar terms except
that the taxpayer is also required to pay penalty equivalent to 15%
along with tax deposited on the basis of his own ascertainment.
The provisions of Sub-sections 73(5) and 74(5) of the CGST Act
are not provisions under which the Department can compel a
taxpayer to deposit tax.
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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% 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.

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 (supra), a Coordinate Bench had held that failure to follow
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the prescribed procedure would also lead to the conclusion that the
deposit made by the taxpayer was not voluntary.

33. In Bhumi Associate (supra), the Gujarat High Court had issued
a following directions to obviate any complaints of officers coercing
taxpayers to deposit tax during search proceedings:

"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:

(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."

34. In terms of the aforesaid directions, the concerned officers
were required to advise the taxpayer, who come forward to deposit
tax during the course of search proceedings, that he should do so
on the next day after the proceedings have been concluded.
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35. However, it appears that the said directions have not been
implemented. In Vallabh Textiles (supra), a Coordinate 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 25-5-2022 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 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
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......".

37. It is clear from the above, that it is impermissible for the officers
to pressurize the taxpayers to pay tax without following the
requisite procedure, notwithstanding that it may be apparent that
such tax is due and payable.

38. The reliance placed on behalf of the respondents on the
decision of the Kerala High Court in Suresh Kumar P.P. (supra) is
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of little assistance to the respondents as in that case, the Court had
concluded that the cheque issued by the taxpayer was voluntary
and was sanctioned by the statute and the CGST Rules made
thereunder.

39. It was contended on behalf of the respondents that since the
petitioner had not retracted his statement, it was not open for the
petitioner to claim that the payments made were not voluntary.
There is no factual foundation for the said contention. A plain
reading of the statement of the petitioner as recorded on 7-10-2022
does not indicate that he had acknowledged the liability to pay any
tax or that he had availed ITC contrary to law. On the contrary, the
petitioner had disputed that there was any mismatch in the returns
filed for the period 2017-18 and 2022-23. The respondents rely on
paragraph 14 of the said statement, which reads as under:

"14. That the visiting team has informed that the
following inward supply dealers have been cancelled
suomoto from the date of registration:

1. M/s. Samridhi exports (07AFGPY9258P2Z7) ITC
Rs. 18,72,000/-"

40. The above statement cannot be read as acknowledgment of
any liability to pay ITC. It merely records that the visiting team had
informed the petitioner that the registration of the supplier, M/s
Samridhi Exports had been cancelled. The same cannot be read
as the petitioner acknowledging that he was liable to reverse the
ITC in respect of purchases made from the said dealer.

41. In view of the above, the reliance placed by the respondents on
the decision of this Court in M/s RCI Industries and Technologies
and Technologies Ltd. Through its Director Rajeev Gupta (supra) is
also misplaced. In that case, the assessee's claim that he was
coerced to make the statement was doubted on the ground that the
petitioner had not retracted the same. The said decision has no
relevance in the facts of this case.
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42. The decision of the Gujarat High Court in S.S.
Industries (supra) is also of little assistance to the respondents. In
that case, there were serious allegations against the petitioner,
which were set out in the counter affidavit. The Court had set out
the said allegations and in paragraph 71 of the said decision, noted
that none of the said averments made in the counter affidavit, were
refuted. As stated hereinbefore, in the present case, there is no
acknowledgement by the petitioner that he had wrongfully availed
of the ITC.

43. In view of the above, we direct the respondents to reverse the
ITC of Rs. 18,72,000/- deposited by the petitioner on 8-10-2022
and forthwith credit the same in his ECL."

22. In Mahaveer Singh's case supra, the Division Bench

of the Delhi High Court held as under:

"5. As per the Petitioner, pre-typed statement were printed by the
officers of the Respondents from the Petitioner's computer and
Petitioner was coerced to sign the same. Thereafter Petitioner was
made to deposit an amount of Rs. 35,00,000/- (Rupees Thirty Five
Lakhs only) by way of reversal of Input Tax Credit before the
search team left the premises of the Petitioner. The said amount
was paid vide FORM GST DRC-03.

6. Learned counsel for the petitioner relies upon the decision dated
20.12.2022 in W.P.(C) 9834/2022/Vallabh Textiles v. Senior
Intelligence Officer [2022] 145 taxmann.com 596/95 GST 751/70
GSTL 3 (Delhi) titled wherein it was held that if the petitioner is
coerced to make a deposit in an involuntary manner then the
Petitioner is entitled to refund the said amount along with interest.

7. Learned counsel for petitioner submits that the deposit being
made during course of search in the presence of the official, could
not be termed a voluntarily deposit. He further submits that the
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petitioner was not given an opportunity to explain about the
transactions and the stock position in question.

8. Per contra learned counsel for respondents submits that there
was no coercion, and the amount was voluntarily deposited by the
petitioner. He further submits that recovery proceedings under
Section 73 of the Central Goods and Services Tax Act 2017 have
been initiated by issuance of a Show Cause Notice and
proceedings are underway.

9. It would be apposite herein to quote the decision in the case of
Vallabh Textiles v. Senior Intelligence Officer (supra). A Co-
ordinate bench of this court held as under:

"51. The 2017 Act and the 2017 Rules made therein,
do make provisions for enabling a person chargeable
with tax to pay tax, along with interest, before being
served with a notice for payment of tax, which either
has not been paid or short paid or erroneously
refunded or where input tax credit has been wrongly
availed or utilized for any reason.

52. Thus, if the person chargeable with tax takes
recourse to such a route, the proper officer is
restrained from serving any notice qua tax or penalty
under the provisions of the 2017 Act or the 2017
Rules framed thereunder, unless the amount which is
selfascertained by the person chargeable with tax
falls short of the amount payable as per law.

53. This leeway is also available, where the person
chargeable with tax is served with a show cause
notice and pays the tax, along with interest, under
Section 50 of the 2017 Act within thirty [30] days of
the issue of the show-cause notice. In such
eventuality, a penalty is not leviable, and all
proceedings in respect of such notice are deemed to
be concluded.

54. This regime is set out in Section 73 of the 2017
Act.
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55. Broadly, this regime also applies, where a notice
has been issued under sub-section (1) of Section 73,
and the proper officer serves a statement containing
details of tax not paid or short paid or erroneously
refunded or input tax credit wrongly availed or utilized
for such periods other than those covered under
subsection (1) of Section 73.

56. The important aspect to be kept in mind, is that
the regime given in Section 73 of the Act operates in
cases which do not involve fraud or wilful
misstatement or suppression of facts to evade tax.

57. In cases which involve one or more of the
aforementioned ingredients i.e., fraud, wilful
misstatement or suppression of facts to evade tax,
parimateria provisions are contained in Section 74 of
the 2017 Act, with small variations.

58. In these cases as well, latitude has been given to
the person chargeable with tax, to pay monies
towards tax, along with interest, based on self-
ascertainment, before issuance of notice under
subsection (1) of Section 74 of the 2017 Act, with a
caveat that fifteen per cent of such self-ascertained
tax is required to be paid by way of penalty.

59. The penalty amount increases if amounts towards
tax and interest are paid by the person chargeable
with tax within thirty [30] days of the notice being
issued by the proper officer under sub-section (1) of
Section 74 of the 2017 Act. The person concerned is
required to pay a penalty at the rate of twenty-five per
cent within the aforesaid timeframe i.e., 30 days,
upon which all proceedings in respect of such notice
are deemed to be concluded.

60. These provisions have to be read alongside Rule
142, found in Chapter XVIII of the 2017 CGST Rules.

61. The said chapter bears the heading "Demands
and Recovery".
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62. Sub-rule (1) of Rule 142 of the 2017 Rules makes
a provision for service of notice for raising a demand
for recovery of tax; a provision which we are not
concerned with in this matter, as it is not the case of
the official respondents/revenue that a notice was
served.

63. Besides this, the two sub-rules which are,
perhaps, relevant are sub-rule (1A) and (2) of Rule
142, as they relate to the steps required to be taken
before service of notice on the person chargeable
with tax, interest and penalty under sub-section (1) of
Section 73, or under subsection (1) of Section 74 of
the 2017 Act.

64. Under sub-rule (1A) of Rule 142 of the 2017
Rules, where a proper officer, before service of notice
under Section 73(1) or Section 74(1) of the 2017
Rules seeks to communicate details of tax, interest or
penalty, he is required to do so in the prescribed
form i.e., via Part A of Form GST DRC-01A.

65. Where, however, before service of notice or
statement, the person chargeable with tax, based on
self-ascertainment, seeks to make payment of tax
and interest, in consonance with the leeway given
under sub-section (5) of Section 73 [which relates to
cases not involving fraud, wilful misstatement or
suppression of facts to evade tax] or as the case may
be, the payment of tax, interest and penalty under
sub-section (5) of Section 74 [which relates to cases
involving fraud, wilful misstatement or suppression of
facts to evade tax], he is required to inform the proper
officer of such payment made in the prescribed
form i.e., GST DRC-03.

66. The proper officer thereafter, is required to issue
an acknowledgement, accepting the payment made
by the person, also in the prescribed form i.e., GST
DRC-04.

67. This is also required to be done [i.e., the
acknowledgement of acceptance of payment] where
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tax, interest and penalty are ascertained by the
proper officer, under Rule 142(1A).

*****

76. The malaise of officials seeking to recover tax
dues (in contrast to voluntary payments being made
by assesses towards tax dues) during search,
inspection or investigation was sought to be
addressed by the GST-Investigation, CBIC via
Instruction No. 01/2022-2023 dated 25.05.2022. For
the sake of convenience, the said instruction is
extracted hereafter:

"Date : 25 May, 2022
Instruction No. 01/2022-2023 [GST - Investigation]
Subject : Deposit of tax during the course of search,
inspection or investigation-reg.

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tax before issuance of show cause notice
is permissible in terms of provisions of
Section 73 (5) and Section 74(5) of the
CGST Act, 2017. This helps he taxpayers
in discharging their admitted liability, self
ascertained or as ascertained by the tax
officer, without having to bear the burden
of interest under Section 50 of CGST Act,
2017 for delayed payment of tax and may
also save him from higher penalty
imposable on him subsequent to issuance
of show cause notice under Section 73 or
Section 74, as the case may be.

3. It is further observed that recovery of
taxes not paid or short paid, can be made
under the provisions of Section 79 of
CGST Act, 2017 only after following due
legal process of issuance of notice and
subsequent confirmation of demand by
issuance of 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 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 nonpayment/ 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
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through DRC-03.

5. Pr. Chief Commissioners/Chief
Commissioners, CGST Zones and Pr.
Director General, DGGI are advised that
in case, any complaint is received from a
taxpayer regarding use of force or
coercion by any of their officers for getting
the amount deposited during search or
inspection or investigation, the same may
be enquired at the earliest and in case of
any wrongdoing on the part of any tax
officer, strict disciplinary action as per law
may be taken against the defaulting
officers.

(Vijay Mohan Jain)
Commissioner (GST-Inv.), CBIC"

77. It appears that this Instruction was issued by the GST
Investigation Wing, CBIC, in the backdrop of an order dated
16.02.2021, passed by the Gujarat High Court in the matter
of Bhumi Associate v. Union of India, SCA No. 3196 of 2021,
order dated 16-2- 2021 (Guj), whereby the following
wholesome directions were issued-

"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,
epayment 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 [a] complaint/grievance after
the end of search proceedings should be
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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."
*****

80. Clearly, the aforementioned direction, issued by the
Gujarat High Court as far back as on 16.02.2021, is binding
on the official respondents/revenue, which was not followed
in the instant case.

81. 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.

*****

83. Failure to follow the prescribed procedure will, as in this
case, have us conclude that the deposit of tax, interest and
penalty was not voluntary."

10. In the instant case, the deposit made by the Petitioner before
the search ended and the officers left, shows that the deposit was
not voluntary and contrary to the CBIC Instruction No. 01/2022-
2023 dated 25.05.2022.

11. We are unable to the accept the contention of learned counsel
for the respondent that the deposit was voluntary for the reason
that there is no material placed on record by respondent to show
as to why petitioner would voluntarily deposit the said amount
when there was no claim made against the petitioner as on the
date of deposit.
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12. Therefore, the amounts that were deposited on behalf of
petitioner lacked voluntariness. Accordingly, said amount are liable
to be returned with interest.

13. In view of the above, Respondents are directed to, within four
weeks, refund the amount of Rs.35,00,000/- to the Petitioner
alongwith statutory interest @ 6% p.a. from date of deposit till
repayment.

14. It is clarified that the refund would be without prejudice to the
proceedings initiated by the respondents under Section 73 of the
Act and the defense of the petitioner thereto."

23. In Parsvnath Traders's case supra, the Division Bench

of the Punjab and Haryana High Court held as under:

"11. The grievance of the petitioner is that the respondents without
issuing any show cause notice as required under section 74(1) of
the Act, straightaway recovered an amount of Rs.50.70 lacs from it
thereby, without following the adopted procedure and this action
amounted to recovery without authority of law. Whereas, according
to the respondents, the deposit had been made voluntarily vide
GST DRC-03 on two different dates during the course of
investigation which amounted to 'self-ascertainment' in terms of
section 74 and it was hence urged that the petitioner could not
make any prayer for issuing a mandamus seeking refund of that
amount. The legal issue raised before us is as to whether the
petitioner is entitled to refund of the amount paid during the
investigation. For this purpose, in our opinion it would be relevant
to understand the scheme of assessment as set out under section
74 of the Act. A bare reading of provisions of section 74(1) of the
Act makes it clear that it provides for determination of tax not paid,
shortly paid or erroneously refunded or wrongful availment of ITC
by reason of fraud, willful misstatement or suppression of facts etc.
The sub-section 5 of section 74 on the other hand, provides an
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opportunity to an assessee for amicable settlement of an
assessment before the authorities prior to receipt of show cause
notice and the assessee may pay at that stage the tax along with
interest and penalty on the basis of 'self ascertainment' or on
ascertainment by the proper officer. It is, however, well settled
proposition of law that section 74(5) of the Act cannot be
considered as a statutory sanction for advance tax payment,
pending final determination in the assessment because that would
certainly be contrary to scheme of assessment as set out under
section 74. Sub-section 6 of this section further provides that no
show cause notice shall be served upon the assessee on deposit
by way of such ascertainment. These provisions clearly provide an
opportunity for the assessee and/or to the revenue to ascertain the
proper amount of tax, interest and penalty and even in cases
where there might have been a shadow of wrong declaration,
wrong availment or utilisation of ITC, or short payment of tax, there
can be a closure of the proceedings at that stage itself on the basis
of either a 'self ascertainment' by an assessee and acceptance of
the same by the revenue or vice-a-versa.

12. Further, it is also the well established that no collection of tax
from an assessee can be insisted upon prior to final determination
of liability being made. According to the revenue, with the inception
of section 74(5), the collection of amounts in advance has attained
statutory sanction, provided the same are voluntary in form GST
DRC-03. Now it is to be considered as to whether the deposit of
sum Rs.50.70 lacs which was made by the petitioner during the
course of investigation, is to be considered as voluntary deposit of
amount which had allegedly been claimed by it by way of ITC on
the basis of purchases made by it from M/S Royal which are
alleged to be false purchases? According to the petitioner, since
there was no assessment and even demand by way of issuance of
show cause notice, the amount deposited by it could not be
appropriated especially when it was not voluntary deposit.
Interestingly, this petition is pending since the year 2021,
admittedly no show cause notice has been issued against the
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petitioner in accordance with Section 74(1) of the Act till date. As
asserted by the revenue, the payments of Rs.50.70 lacs (Rs.20
lacs+Rs.30.70 lacs) as made by the petitioner on two different
dates constituted 'self ascertainment' and triggered the provisions
of section 74(5) of the Act and were voluntary deposits. However,
we are unable to accept this contention for the reasons that if that
would have been actually the position, then the respondents must
have contained material on record to show that the petitioner had
in fact, accepted the ascertainment made by it and the revenue
had applied its mind and arrived at the conclusion that 'self
ascertainment' by the assessee was adequate/inadequate. The
petitioner on the contrary is shown to have consistently contested
its liability to make payment of the tax. The deposit of the
aforementioned amount on the day of search and shortly thereof,
when the proprietor of the petitioner was naturally under the stress
of search/investigation does not amount to lead to 'self
assessment' or 'self ascertainment'. The 'self ascertainment' which
is contemplated under section 74(5) of the Act, 2017 is in the
nature of ' self assessment' and amounts to a determination by it
which is unconditional and not as in the present case when shortly
after depositing the amount Rs.50.70 lacs, the petitioner
approached the revenue for refund of the same. Such recovery is
not permissible. In this regard, reliance can be placed upon in M/s
Bhumi Associate's case (supra) wherein, it was observed that at
the time of search/inspection proceedings under the provisions of
Central/Gujarat Goods and Services Tax Act, 2017, no recovery in
any mode by cheque, cash, e-payments or adjustment of ITC
should be made.

13. Further, no crystalised liability was shown to be existing against
the petitioner and no show cause notice had been issued to it
either at that time or even till now and the amount of Rs.50.70 lacs
was recovered from it during investigation and has been retained
by it. In similar circumstances in Century Knitters (India) Ltd.'s case
(supra), a Bench of this Court had observed that unless and until
demand was finalised and existing, no crystalised liability was
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existing against the petitioner and the revenue could not retain any
amount in absence of specific statutory provisions and the refund
of the amount so recovered was ordered. Similarly, in Concepts
Global Impex's case (supra), a Co-ordinate Bench of this Court
was dealing with a case wherein, at the time of import of goods, the
duty leviable thereon, was paid but the Directorate of Revenue
Intelligence has pressurized the petitioner to pay another sum of
Rs.42 lacs while detaining the goods in transit. The petitioner
submitted that the same had been paid without there being any
show cause notice or order confirming the demand and the same
was in violation of article 265 of the Constitution of India as it was
paid under the pressure of DRI officials. It was held that since there
was no show cause notice or demand, the revenue could not retain
the deposited amount and the refund thereof, was allowed.

14. Reference can also be made to Century Metal Recycling (P.)
Ltd.'s case (supra) wherein, a Co-ordinate Bench of this Court had
observed that unless there was an assessment and demand, the
amount deposited by the petitioners could not be appropriated. It
was observed as under:-

"13. As far as the amount deposited by the petitioners
is concerned, case of the petitioners is that the same
was deposited under coercion. Case of the
respondents was that the same was deposited
voluntarily. Whatever be the position, unless there is
assessment and demand, the amount deposited by
the petitioners cannot be appropriated. No
justification has been shown for retaining the amount
deposited, except saying that it was voluntarily
deposited. In view of this admitted position, the
petitioners are entitled to be returned the amount
paid."

15. It is also relevant to mention also that this Bench has dealt with
similar question in CWP-733-2021 titled as William E Connor
Associates & Sourcing (P.) Ltd v. Union of India , [2023]
152 taxmann.com 174 (Punj. & Har.) decided on 04.05.2023, in
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CWP-23788-2021 titled as Diwakar Enterprises (P.)
Ltd v. Commissioner of CGST , [2023] 149 taxmann.com 419/2023
(74) GSTL 202/98 GST 322 (Punj. & Har.), decided on 14.03.2023
and in CWP-8035-2021 titled as Modern Insecticides
Ltd v. Commissioner, Central Goods and Service Tax , decided on
19.04.2023 by this Court, and it has been held that the amount
deposited during search cannot be retained by the Department if
proceedings under Section 74(1) of the Act are not initiated.

16. In the present case, the petitioner shortly after depositing the
amount of Rs.50.70 lacs had approached the revenue for refund of
the same therefore, the ascertainment contemplated under section
74(5) of the Act which amounts to an unconditional determination
and in the nature of 'self assessment' by the assessee is not
attracted and hence, the said deposit could not be stated to be
voluntary deposit by any stretch of imagination, irrespective of the
fact that deposits were made in the form of GST DRC-03. In view
of the discussion as made above, we are of the opinion that the
petitioner deserves the relief as claimed by it and accordingly,
mandamus as sought by the petitioner, is granted and it is ordered
that the sum of Rs.50.70 lacs, which was collected from the
petitioner-M/S Parsvnath Traders during the course of search, shall
be refunded to it within a period of 6 weeks from today. The
petitioner shall also be entitled to interest @ 6% per annum from
the date of deposit till the refund amount is released in its favour."

24. In Samyak Metals Pvt. Ltd's case supra, the Division

Bench of the Punjab and Haryana High Court held as under:

"6. Reference can now be made to a judgment passed by this
Court in Modern Insecticides Ltd. v. Commissioner, Central Goods
and Service Tax CWP No.8035 of 2021, wherein a similar issue
was examined by this Court. In that case also, officials of the
department had conducted a search in the factory premises of the
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petitioner (therein) and resumed the entire record lying there. On
07.03.2020, they got deposited a sum of Rs.39,15,583/-. Another
search was conducted on 15.01.2021 and at that time, the officials
of the department took away Director and Chartered Accountant of
the petitioner-company to their office at Rishi Nagar, Ludhiana. No
notice under section 74 (1) of the CGST Act was served even after
expiry of two years. The Govt. instructions dated 25.05.2021
issued by the CBIC with respect to the GST investigation were also
examined, which had been issued keeping in view the observations
made by the Gujarat High Court in Bhumi Associate v. Union of
India, [2021] 124 taxmann.com 429/46 GSTL 36/84 GST 634/SCA
No.3196 of 2021 (decided on 16.02.2021). As per the said
instructions, no recovery of tax should be made during search,
inspection or investigation unless, it is voluntary. In order to avoid
harassment to the person, whose premises has been conducted,
the voluntary payment in prescribed form i.e. GST DRC-03 can be
made after the day of the search. The above instructions have
been issued to avoid unnecessary harassment caused to the
assessee. The Delhi High Court followed the aforesaid judgment
while allowing a petition in Vallabh Textiles v. Senior Intelligence
Officer [2022] 145 taxmann.com 596/[2023] 95 GST 751/70 GSTL
3/2022 SCC OnLine Del 4508. In that case, the Delhi High Court
examined the provisions of section 74 of the CGST Act and held
that deposit of tax made by the assessee during search was not
voluntary and the amount cannot be retained, if no summons had
been issued under section 74 (1) of the CGST Act. Notice under
section 74 (1) of the Act has to be issued within a period of
limitation.

7. In the facts of the present case, after the search was conducted
on 25.02.2021, amount of Rs.35,73,147/- (Tax of Rs.29,48,601/-,
interest of Rs. 1,82,255/- and penalty of Rs.4,42,291/-) was
deposited by the petitioner under section 74 (5) of CGST Act,
2017. As per Rule 142 (2) of the CGST Rules, when a payment is
made in FORM GST DRC-03, the proper officer has to issue
acknowledgment, accepting the payment made by the said person
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in FORM GST DRC-04. In the present case, the said payment was
made way back on 26.02.2021. Till date, neither they have issued
FORM GST DRC-04 nor issued any notice under section 74 (1) of
the CGST Act. The respondents have not followed the Govt.
instruction No.01/2022-23 dated 25.05.2022 (Annexure P-10)
issued by the CBIC. In these instructions, it is clarified that there is
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. It is
the duty of the officer to inform the taxpayers regarding the
provisions of voluntary tax payment through DRC-03. However, in
the present case, as per these instructions, the petitioner has
deposited the amount of Rs.35,73,147/-, but the officer has not
issued DRC-03 till date. Neither the department has followed the
provisions of Rule 142 (2) of the CGST Rules nor has issued any
notice under section 74 (1) of the CGST Act."

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
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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 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
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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
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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 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
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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-
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ascertainment had been seized from the petitioner by the

respondents; it follows therefrom that at the time of payment, there

could not have been any material, accounts, etc., available with the

petitioner that would enable him to proceed with self-ascertainment

and accordingly, voluntarily make payment of Rs.10 crores to the

respondents; in other words, in the light of the undisputed fact that

all necessary material, account etc., which was the basis for self-

ascertainment having been seized by the respondents, it is highly

improbable that the petitioner was in a position to carryout self-

ascertainment and make payment which is yet another

circumstance to establish that the said payment was not voluntary

as falsely contended by the respondents, whose contention is liable

to be rejected on this score also.

(viii) As stated supra, except conducting search, inspection

and seizure proceedings, no other 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
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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
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rate of interest and penalty, all of which is highly improbable and

physically / humanly impossible to be done by a tax payer /

assessee who is already under immense pressure on account of

search, inspection and seizure operation being conducted,

particularly when all equipment which would be required /

necessary for such self-ascertainment was not available with the

petitioner and as such, even on this ground also, I am of the view

that the payment made by the petitioner was clearly not voluntary

and at the behest / instance of the respondents during the course

of their proceedings.

(x) A perusal of the payment made by the petitioner in Form

GST DRC-03 will indicate that the same is made under Section

74(5) of the CGST Act which mandates that such voluntary

payment of tax should have been made by the petitioner along with

interest under Section 50 of the CGST Act and penalty; in this

context, the said payment in Form GST DRC-03 will indicate that

no payment is made by the petitioner towards interest or penalty

and the relevant columns in this regard are shown as 'Nil' which is

yet another circumstance to indicate that the payment was not

made by the petitioner voluntarily in terms of Section 74(5) of the
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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.

26. In view of the aforesaid facts and circumstances and the

principles enunciated in the aforesaid judgments, I am of the view

that the obtainment / collection / receipt of a sum of Rs.10 crores

by the respondents from the petitioner at the time of search,

inspection and seizure operations is not voluntary or by way of self-

ascertainment and the same is wholly illegal, arbitrary and contrary

to law and the provisions of the CGST Act and also without

jurisdiction or authority of law and the said amount deserves to be
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refunded back to the petitioner together with interest at the rate of

6% p.a. within a stipulated timeframe.

27. In the result, I pass the following:-

ORDER

(i) Petition is hereby allowed.

(ii) The petitioner is declared to be entitled to refund of Rs.10

crores together with interest @ 6% p.a. from 24.03.2023 till the date

of payment.

(iii) The respondents are directed to refund the aforesaid

amount of Rs.10 crores together with interest @ 6% p.a. from

24.03.2023 till the date of payment to the petitioner within a period

of two months from the date of receipt of a copy of this order.

(iv) All rival contentions between the parties pursuant to the

show cause notice and adjudication proceedings of the

respondents are kept open and no opinion is expressed on the

same.

Sd/-

(S.R.KRISHNA KUMAR) JUDGE

Srl.

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