No recovery under GST during pendency of adjudication - It is against the Article 265 of the constitution
Published In : EvoBreyta Download
Author : Navneet Singal
No recovery under GST during pendency of adjudication - It is against the Article 265 of the constitution
In the case of M/S. Kesar Colour Chem Industries V/S The Intelligence Officer, Writ Petition No.17853 Of 2021 (T-Res), dated: 26.09.2024, the Hon’ble Karnataka High Court has held that the recovery during pending adjudication is 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.
(The decision of the HC is enclosed with this blog)
Facts of the case
The petitioner/assessee has questioned the correctness and legality of, Investigation carried out under Section 67 of the Central Goods and Services Tax Act, 2017. The validity of the summons to the witness dated 31.07.2021. The assessee sought the relief in respect of the refund of the amount of Rs.2.50 crores collected, while keeping open the other contentions in light of pending adjudication initiated by issuance of show cause notice.
Contention of the Assessee
The assessee contended that the department do not have power to recover amounts during the pendency of investigation that has commenced even prior to issuance of show cause notice at the stage of Sections 67 and 70 and hence have sought for refund of amount paid.
The assessee contended that self-ascertainment of tax was not established and that recovery made during investigation was in violation of legal mandate contained in Article 265 of the Constitution of India. The supplies from M/s. Raj Chemicals have been long standing transactions and such supply is evidenced by e-way bills, issue of invoices and proof of transport.
The assessee argued that the show cause notice does not exclude payment of Rs. 2.50 crores which also strengthens the assertion that the amount paid was not towards self-ascertainment.
Contention of the Department
The department contended that the payment made under Section 74(5) read with Rule 142(2) of the GST Rules would be dealt with or adjusted by the department in accordance with Section 74 of the CGST Act. The DRC-03 specifically indicates nature of payment being ‘voluntary’ and has accordingly sought for dismissal of the petition.
Conclusion
The court held that the petition is allowed in part and while declaring that the recovery of tax made from the petitioner which though Revenue contends is deposit made by way of self-ascertainment under Section 74(5) of the CGST Act, is declared to be illegal and directed to be refunded within a period of four weeks from the date of receipt of certified copy of the order, with interest as is applicable. The Hon’ble HC held that it is contrary to Article 265 of the Constitution of India.
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