Case Note & Summary
The petitioner, a partnership firm, challenged the recovery of Rs.2,35,23,506 allegedly made during search and seizure proceedings under the Central Goods and Services Tax Act, 2017 by the Directorate General of GST Intelligence. The writ petition sought a refund of the amount with interest at 12% per annum, alleging that the payment was involuntarily made through Form GST DRC-03 towards reversal of Input Tax Credit during search operations conducted on 11.07.2025 at the business premises of the firm and the residential premises of its partners. On the same day, summons under Section 70 were issued to the partner, and the petitioner deposited the amount comprising ITC reversal of Rs.1,08,39,276 and cash payment of Rs.1,26,84,240, including utilisation of TDS and cash balance. The petitioner subsequently sent letters dated 17.07.2025 and 27.08.2025, stating that the statement was recorded under pressure and that the payment was made under protest due to departmental pressure. No show cause notice or Form GST DRC-04 acknowledging voluntary payment was issued, and no adjudication had been completed. The petitioner argued that the search was conducted without Form GST INS-01, that the timing of deposit and closure of search indicated coercion, and that recovery during search without adjudication is impermissible, relying on decisions of Karnataka, Delhi, Punjab and Haryana, and Gujarat High Courts. The respondents countered that the search was duly authorized under Section 67(2), video-graphed, and the petitioner voluntarily filed Form GST DRC-03 with remarks admitting wrongful availment of ITC from M/s Keshav Cement Agency. They argued that Section 74(5) permits voluntary payment before show cause notice, that the petitioner used its own GST portal credentials and banking channels, and that the absence of show cause notice at that stage did not render proceedings illegal. The court examined the rival contentions, the sequence of events, and the cited precedents. The extracted judgment text does not include the final decision or operative directions.
Headnote
A) Goods and Services Tax - Search and Seizure - Voluntary Payment vs Coercion - Central Goods and Services Tax Act, 2017, Sections 67(2), 70, 74(5); Central Goods and Services Tax Rules, 2017, Rules 139, 142 - The petitioner alleged that Rs.2,35,23,506 was deposited under coercion during search; no show cause notice or DRC-04 was issued; the respondents contended the payment was voluntary under Section 74(5) as recorded in DRC-03 Column 8. The court examined the rival contentions and the sequence of events, including timing of deposit and closure of search, to determine voluntariness. (Paras 2.2, 2.3, 3(i)-(vii), 4(i)-(iii)). No final holding available in extracted text. B) Goods and Services Tax - Procedural Compliance - Search Authorization and Acknowledgement - Central Goods and Services Tax Rules, 2017, Rules 139, 142 - The petitioner argued search was conducted without Form GST INS-01 and no Form GST DRC-04 was issued, indicating non-voluntary payment; respondents maintained search was duly authorized under Section 67(2) and DRC-03 filed by petitioner using own credentials. The court considered whether non-issuance of DRC-04 affected legality of recovery. (Paras 3(i), 3(ii), 3(iv), 4(i)-(iii)). No final holding available. C) Goods and Services Tax - Precedent - Recovery during search without adjudication deprecated - Central Goods and Services Tax Act, 2017, Sections 67, 74(5) - The petitioner relied on Sri J. Ramesh Chand, Neeraj Paper, Vallabh Textiles, Samyak Metals, Shree Ganesh Molasses to argue that power of search does not include power of recovery; the respondents distinguished on facts. The court noted the consistent view emerging from these judgments. (Paras 3(iv)-(vi)). No final holding available.
Issue of Consideration
Whether payment of Rs.2,35,23,506 via Form GST DRC-03 during search without show cause notice is voluntary or coerced, and whether refund is due; whether search proceedings complied with Rule 139; whether absence of Form GST DRC-04 invalidates recovery; whether Section 74(5) permits voluntary payment before show cause notice.
Law Points
- No recovery during search without adjudication
- voluntary payment under Section 74(5) of CGST Act
- need for Form GST DRC-04
- search procedure under Rule 139
- Instruction No.1/2022-23
