Madras High Court: Dr Anita Sumanth, J., expressed that with the inception of Section 74(5)of GST Act, it is the case of the revenue that the collection of amounts in advance has attained statutory sanction, provided the same are voluntary in Form GST-DR03.
Merely because an assessee has, under stress of investigation, signed a statement admitting tax liability and has also made a few payments as per the statement, cannot lead to self-assessment or self-ascertainment.
In the present matter, mandamus was sought to restrain the first respondent from harassing the petitioner baselessly without addressing its grievance petition and refund claim pending before the respondents.
The petitioner was registered as a Small-Scale Industry under the MSME Act and was an assesseee under the provisions of all the Goods and Service Tax Act, 2017. An investigation was conducted on the premises of the petitioner and various documents and registers were seized. Further, during the investigation, a statement was recorded from one S.A Kumar, who also deposed to the affidavit filed in support of the present petition, to the effect that the petitioner had not discharged its GST liability correctly.
The Managing Director had signed the undertaking and in line with the same, the petitioner remitted a sum of Rs 1 crore.
Petitioner stated that it had no liability to tax, that the MD and Officials were forced to accept liability to tax and the admission was by no means, voluntary.
Further, the petitioner had made serious allegations about the high handedness of the authorities during the conduct of search and the scant regard expressed for the sentiments of the family of the MD and employees of the petitioner.
Whether the collection of any amount during the process of investigation is statutorily permitted?
Whether the products sold are branded or unbranded?
If unbranded then there is no liability to GST.
Whether the petitioner is entitled to the refund of the amounts paid during investigation and the revenue relies upon the provisions of Section 74(5) of the Act?
Section 74 provides for a determination of tax not paid or short paid or erroneously refunded or the wrongful availment or utilization of Input Tax Credit by reason or fraud, willful misstatement or suppression of facts.
The remittance under Section 74(5) is in terms of Rule 142 of the Central Goods and Services Tax Rules, 2017 and has to be made in Form GST DRC-03.
It was noted that the payment was ‘voluntary’ and the same procedure had been followed in regard to the second instalment as well.
“Prior to the inception of the GST Act, instances were rife when officials of DRI and Customs Department were infamous for collecting advance payments of tax from assesses, many a time under coercion, and in the course of investigation itself.”
Thus, according to the revenue, the remittances made by the petitioner during the investigation in terms of Section 74(5) amount to ‘self-ascertainment’. Having remitted two instalments of tax as per is own ascertainment, it cannot pray for a mandamus seeking a refund of the amount.
“No collection can be insisted upon prior to a final determination of liability being made.”
Further, the Bench added that, what Section 74(5) provides is the first opportunity for an assessee to pay tax, interest and penalty liability even prior to the issuance of a show-cause notice and such acceptance will have to be in the form of either self-ascertainment or an ascertainment by the proper officer.
In the present matter, the enquiry and investigation were on-going, personal hearings had been afforded and both the parties were fully geared towards issuing/receiving a show-cause notice and taking matters forward.
Hence, the understanding and application of Section 74(5) was wholly misconceived.
Therefore, the mandamus as sought for by the petitioner was issued and the amount collected of Rs Two Crores shall be refunded to the petitioner within a period of four weeks.[Shri NandhiDhall Mills India (P) Ltd. v. Senior Intelligence Office, WP No. 5192 of 2020, decided on 7-4-2022]
Advocates before the Court:
For Petitioner: Mr.Hari Radhakrishnan
For Respondents: Mr.V.Sundareshwaran (for R1 to R3 & R5)
Senior Panel Counsel R4 – Given up