Right of GST refund, probe not interlinked: Karnataka HC – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/economy/right-of-gst-refund-probe-not-interlinked-karnataka-hc/article37130262.ece


Asks GST Department to consider refund application

The right of GST refund would be independent to the process of investigation, ruled the Karnataka High Court in a petition filed by Bundl Technology, which operates e-commerce platform Swiggy. Accordingly, it has asked the GST Department to consider refund application.

Seeks refund

The petitioner is seeking refund of ₹27.51 crore, which was collected by coercion during investigation by Directorate General of Goods and Service Tax (Intelligence) relating to alleged wrongful availment of ITC on the invoices without the actual receipt of services. The petitioner contended that it deposited ₹15 crore in first tranche, followed by ₹12.51 crore in second tranche, under coercion to secure the release of its directors who were summoned and locked with threat of arrest.

The petitioner alleged that no show-cause notice has been issued by the Tax Department even after 10 months have passed since investigation was initiated.

The Tax Department argued that voluntary payment by an assessee in a goodwill gesture is to be construed as tax in furtherance of self-ascertainment. Its contention was that the fact investigation is pending itself indicates that contention of self-ascertainment as made by it is an after-thought and put forward as a defence to the petitioner’s assertion that payment of amount has been made involuntarily. The Bench observed that sequence of events relating to investigation and payment sourced demonstrate a nexus between investigation and contemporaneous payment.

Further, the manner in which the investigation has been carried out in late hours of the night and early hours of morning, with gates closed, creates an apprehension in the mind as “the fear of police powers are such that would shake a man irrespective of their position in society”.

The Bench held that that retention of said amounts by the department right from November 2019 till date when the investigation has not concluded “would call upon the department to honour legitimate claims being made for refund of the amount which cannot be grudged. Lack of time and lack of conclusion of investigation has only exacerbated the situation conferring upon the petitioners a right to seek for refund”.

The Bench found Supreme Court’s observations in Dabur India case as aptly applicable to the present case, where it was said: “Filing of return and payment of substantial taxes by the petitioner would clearly warrant for treating such tax payers with certain element of dignity who can only be construed to be bona fide tax payer.”

Commenting on the ruling, Harpreet Singh, Partner, Indirect taxes at KPMG in India, said that such a favourable ruling by the High Court has rightly given weightage to the circumstances under which the money was deposited.

“Rulings such as these would go a long way in re-enforcing the taxpayer’s faith on judiciary, where they believe they have been unjustly treated,” he said.

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