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Santosh Kumar Gupta Prop. Mahan Polymers vs. Commissioner - (High Court of Delhi) (05 Dec 2023)

Where the payment made during search is not voluntary, the taxpayer is required to be refunded said deposits


Goods and Services Tax

The Petitioner has filed the present petition principally challenging the search / inspection conducted at his business premises under Section 67(1) of the Delhi Goods and Services Tax Act, 2017 ('the DGST Act'). The Petitioner claims that during the course of the search/inspection, he was compelled to reverse the Input Tax Credit ('ITC') amounting to ₹22,14,226 on account of inadmissible ITC and shortage of cash.

Rule 139(1) of the Central Goods and Services Tax Rules, 2017 ('the CGST Rules') expressly requires that the authorization for conducting a search be issued in FORM GST INS-01. In the present case, Respondent no.3 had issued the authorization dated 18.10.2022 by selecting all reasons (except that the taxpayer had availed of a refund) as set out in Clause 'A' of the said form. The reasons, also exhaustively comprise of reasons for issuing such authorization as set out in Section 67(1)(a) of the DGST Act. Therefore, it does not appear that the authorization was issued without specifically noting the relevant reason for such search.

The authorization in FORM GST INS-01 does not require the concerned officer to give any reasons in detail. It merely requires that the reason for which the search / inspection is to be conducted under the statute, be mentioned. The detailed reasons are not required to be shared with the taxpayer prior to the search / inspection. However, the taxpayer is at liberty to apply for the same and absent any reason to deny the request, the same ought to be provided to the taxpayer.

If the tax is not paid on self-ascertainment basis, the assessee cannot be extended the benefit of Section 73(6) of the DGST Act or Section 74(6) of the DGST Act. In the present case, the petitioner has stoutly disputed that the reversal of ITC was voluntary. In cases where the payment made during search is not voluntary, the taxpayer is required to be refunded the said deposit while reserving the right of the GST authorities to proceed against the said taxpayer to the full extent in accordance with law. The Respondents are directed to reverse the ITC amounting to ₹22,14,226 in the Petitioner's ECL. Petition disposed of.


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