📰 𝗣𝘂𝗻𝗷𝗮𝗯 𝗮𝗻𝗱 𝗛𝗮𝗿𝘆𝗮𝗻𝗮 𝗛𝗶𝗴𝗵 𝗖𝗼𝘂𝗿𝘁 𝗥𝘂𝗹𝗶𝗻𝗴: Pesticide Manufacturer Wins Rs. 2.54 Crore Refund After Illegal Collection During Search

📢 In a significant victory for the petitioner, the Punjab and Haryana High Court ruled in favor of Modern Insecticides Ltd, directing the GST department to refund Rs. 2.54 crore that had been forcibly collected during a search operation without issuing a proper show cause notice under Section 74 of the CGST Act.

🔍 𝗙𝗮𝗰𝘁𝘀: 𝗖𝗮𝘀𝗲 𝗧𝗶𝘁𝗹𝗲: Modern Insecticides Ltd vs Commissioner, Central Goods and Service Tax 𝗖𝗮𝘀𝗲 𝗡𝘂𝗺𝗯𝗲𝗿: CWP No. 8035 of 2021 𝗗𝗮𝘁𝗲: 19-Apr-2023

𝗧𝗶𝗺𝗲𝗹𝗶𝗻𝗲: • 05.03.2020: The petitioner's factory premises were searched, documents seized, and Rs. 39,15,583 deposited towards GST. • 15.01.2021: A second search was conducted, and the Director (78-year-old Mr. Avtar Singh) and Chartered Accountant were detained until 1:00 A.M. The GST department forcibly obtained a deposit of Rs. 2.15 crore by reversing Input Tax Credit (ITC) and surrendering a pending refund. • 16.01.2021: Rs. 1 crore was deposited, and a typed statement from the Director was obtained under duress. • 17.01.2021: The petitioner’s refund application was rejected. • 23.02.2023: Affidavit filed explaining why DRC-04 was not issued by the department.

𝗜𝘀𝘀𝘂𝗲: The central issue was whether the GST department could retain the amount deposited by the petitioner during the search operation without issuing a show cause notice under Section 74(1) of the CGST Act.

𝗣𝗿𝗼𝗰𝗲𝗲𝗱𝗶𝗻𝗴𝘀: The petitioner argued that the payments were not voluntary and were extracted during the search without any formal proceedings or adjudication. They also highlighted that the department never issued a show cause notice or initiated proceedings as required by law.

⚖ 𝗝𝘂𝗱𝗴𝗲𝗺𝗲𝗻𝘁: The Punjab and Haryana High Court ruled that: • The amounts deposited during the search were not voluntary, as claimed by the department. • Since no proceedings under Section 74(1) of the CGST Act were initiated, the department had no right to retain the money. • The department failed to issue a Form GST DRC-01A, as required under Rule 142(1A), within two years, further invalidating their retention of the funds. • The court ordered the department to refund the Rs. 2.54 crore collected during the search operation, along with 6% interest per annum from the date of deposit until payment is made.

📜 This ruling underscores the importance of proper procedure in tax enforcement actions and sets a precedent for protecting businesses from unjustified retention of funds by tax authorities during searches. Team GSTpanacea 7503031378