GST UPDATE NO. 94TH ON KARNATAKA HC GRANTING REFUND OF AMOUNT DEPOSITED DURING INVESTIGATION

The extent of pressure and coercion faced by the assessees during interrogation by the DGGI officers cannot be imagined and it is often observed that the assessees are fastened with confessional statements and tax payments against their will. We all know that claiming refund of the amount deposited during the course of investigation, particularly when the investigation has not been concluded is near to impossible task. However, recently, Karnataka High Court has delivered a favourable decision in the case of M/s BUNDL TECHNOLOGIES PRIVATE LIMITED [WRIT PETITION NO. 4467/2021] as regards filing of refund claim for the amount deposited during investigation under protest when no show cause notice has been issued since 10 months. The reasoning adopted by the High Court is the subject matter of discussion of our present update. The petitioner operates an ecommerce platform under the name 'Swiggy' and is registered under the Central Goods and Services Tax Act, 2017. The delivery of food is done through delivery partners that include electronic pick-up by those who are engaged by the petitioner. During holidays and festive season owing to spike in food orders, the third-party service providers are engaged by the petitioner. It is stated that the third-party service providers charge consideration for delivery and supply of food along-with GST and the GST paid by the petitioner to third party service providers is availed as Input Tax Credit (ITC) by the petitioner. It has been alleged by DGGI that the third-party service provider, ‘Greenfinch’ engaged by the petitioner was a non-existent entity and so the ITC availed by the petitioner was improper and fraudulent. During the course of investigation, the petitioner was forced to make payment of Rs. 15 Crores under the threat of arrest of its directors on 30.11.2019 and another payment of Rs. 12,51,44,157/- totalling to Rs. 27,51,44,157/-. The petitioner contended that as no show cause notice was issued by the department after 10 months of initiation of investigation, they are eligible to seek refund of the amount deposited during investigation. The petitioner pointed their credibility by stating that they have regularly filed returns and are ready to comply with the lawful demand and would cooperate with the adjudication process. The counsel for the department asserted that investigation has been hampered due to COVID-19 pandemic and the investigation is still in progress is inconclusive. It was also pleaded that the present writ petition is not maintainable on account of availability of alternate remedy. The departmental representative also stated that petitioner has voluntary made payment during investigation. The High Court relied upon the Apex Court decision in the case of M/s Godavari Sugar Mills Ltd. Vs State of Maharashtra and Others [2011 (2) SCC 439] to state that High Court has power to issue appropriate direction directing refund either where assessment was without jurisdiction or where tax was collected without authority of law. Hence, the pleading of admissibility of alternate remedy is not acceptable. As regards the contention of the department that the amount paid by the petitioner was voluntary under self-assessment, it was held that mere payment of tax cannot be construed to be a payment towards self-assessment as contemplated under section 74(5) of the CGST Act. Moreover, the letter of petitioner clearly indicates that the amount has been paid as a goodwill gesture which should not be considered as admission and acceptance of liability. The high court also delved upon the fact whether the amount paid by the petitioner was under coercion or not. It was concluded that considering the time at which the amount was deposited in the cash ledger and the date of deposit, it indicates that the amount were paid during times when there was no legal obligation to make payment. Moreover, the manner in which investigation was carried out in late hours of the night and the early hours of the morning with physical closing of the gates during the investigation would reasonably create an apprehension in the mind of any person regarding threat of arrest including the persons of the standing of Directors of the Assessee Company and its officers. The fear of police powers are such that would shake a man irrespective of their position in society and so it fairly appears that the amount deposited by the petitioner was under pressure and coercion. The Hon’ble High Court placed reliance on the decision rendered by the Supreme Court in the case of Dabur India Limited and Another Vs State of Uttar Pradesh and Others [1990 (4) SCC 113] to hold that it is right of bonafide taxpayer to be treated with dignity as in the present case, the petitioner has been paying crores of rupees as tax under self-assessment basis. The hon’ble high court also mentioned decision of Apex Court rendered in the case of Paramvir Singh Saini Vs Baljit Singh and Others [2021 (1) SCC 184] wherein a legal mandate has been issued for installation of CCTV in all offices where interrogation is being carried out. The high court also refused to consider the request of the departmental counsel for prescribing time limit for completion of investigation and consideration of refund claim of the petitioner in case of failure of the authorities to complete investigation within the stipulated time period. It was held that the consideration of the right of refund in the present factual matrix would be independent of the process of investigation and two cannot be linked together. Hence, high court directed to pass suitable orders for refund applications within a period of four weeks from the date of order. The above decision is a remarkable judgment for the assessees for claiming refund of amount paid under protest even when the investigation has not been concluded by way of issuance of show cause notice. This decision will definitely safeguard assessees against abeyance of investigation proceedings by the departmental authorities for no justifiable reason and will compel the authorities to conclude the investigation proceedings within a reasonable period of time.

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GST UPDATE NO. 94TH ON KARNATAKA HC GRANTING REFUND OF AMOUNT DEPOSITED DURING INVESTIGATION

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