Order Date – 05 December 2023

Parites: Santhosh Kumar Gupta Prop. Mahan Polymers Vs Commissioner, Delhi Goods and Services Tax Act & Ors.

Facts –

• The Petitioner, Santhosh Kumar Gupta Prop. Mahan Polymers, was compelled to agree to reverse the ITC in respect of certain suppliers whose registration were stated to be cancelled during a searched conducted.
• It was contented that although the petitioner had filed FORM GST DRC-03, there was no acknowledgement of receipt by the Department by issuing FORM GST DRC-04. Further claims that the inspection conducted on 18.10.2022 was illegal as the authorization for the same [(FORM GSTINS-01 dated 18.10.2022)] was issued without mentioning any specific reason for the same.

Issue –

• Whether the inspection conducted was illegal for want of proper authorization and whether the petitioner is entitled to refund of ITC?

Order –

• The Divisional Bench of Hon’ble High Court observed that in the present case, respondent no.3 had issued the authorization dated 18.10.2022 by selecting all reasons (except that the taxpayer had availed of a refund) as set out in Clause ‘A’ of the said form. The reasons, as stated, also exhaustively comprise of reasons for issuing such authorization as set out in Section 67(1)(a) of the DGST Act. Therefore, it does not appear that the authorization was issued without specifically noting the relevant reason for such search.
• If the tax is not paid on self-ascertainment basis, the assessee cannot be extended the benefit of Section 73(6) of the DGST Act or Section 74(6) of the DGST Act. In the present case, the petitioner has stoutly disputed that the reversal of ITC was voluntary. In cases where the payment made during search is not voluntary, the taxpayer is required to be refunded the said deposit while reserving the right of the GST authorities to proceed against the said taxpayer to the full extent in accordance with law.
• It is also material to note that the respondents have not issued an acknowledgment in FORM GST DRC-04. Thus, the procedure under Rule 142 of Delhi Goods & Services Tax Rules, 2017 has not been followed.
• In the present case, the petitioner has stoutly disputed that the reversal of ITC was voluntary. Undisputedly, the same has been made while the petitioner’s premises were being searched and he was being subjected to questioning / enquiries. Hence it is unable to accept that the reversal of ITC was made voluntarily without any suggestion or encouragement by the officers. But for the search continuing till late at night, there were no circumstances which would, in normal course, lead the petitioner to reverse the ITC late at night.
• In the circumstances, respondents are directed to reverse the ITC in the petitioner’s ECL. The writ petition disposed off.