Shree Ganesh Molasses Trading Co. vs. Superintendent, Office of the Commissioner

1. By way of present petition, the petitioner seeks to invoke extra-ordinaryjurisdiction of this Court under Article 226 of the Constitution of India seekingthe direction to the respondent authorities to immediately refund Rs. 37,68,300/ -of reversal of the Input Tax Credit (for short “ITC”) reversed under threat,coercion and without the Will of the petitioner. 

2. Petitioner – firm is engaged in the business of trading of industrial chemicals,soda ash, silica bicarbonates etc. and its registered from 2012, with CommercialTax Department, Gujarat and thereafter with GST Department bearingregistration No. 24AARFS7953BIZX. 

3. On 11th February, 2022, a search and seizure operation was carried out by theteam of the CGST officials. On 12th February, 2022 at about 1.00 a.m.respondent No.1 reversed the ITC in the electronic credit ledge and corrosivelyand illegally filed Form DRC- 03 under Section 74 (5), although it was notvoluntary. According to the petitioner, there is no tax evasion on the part of thepetitioner-firm and there arises no question of admitting any wrong doing. 

4. Retraction affidavit had been filed on 18th February, 2022 by the petitionerand the representations have been made for the refund of amount of ITC. According to the petitioner, he purchased Molasses from sugar factories andreceived invoices permit an E-way bills and the same is sold to various Dairiesafter getting permission from the Prohibition Department along with bill and E-way bill generated by the petitioner’s firm. The transportation is being done byM/s. Aarya Transport Company. Petitioner’s firm had provided access to allrecords during the course of search. The summons was served upon one of thepartners under Section 17 which mentioned the time 10.35 pm. The explanationsince was not satisfactory as per the officers at around 1’00 O’clock in the nighton 12th February, 2022. The officers forced the petitioner to login to GST portalusing the personal laptop. The logins was registered with mobile number of sonof the partner who was at Mumbai. 

5. It is alleged that respondent No.1 had forcibly reversed the ITC of GST &CGST lying in the electronic credit ledger to the tune of Rs. 18,84,150/- andRs.18,84,150/- after reversing the credit of ITC. It proceeded to file Form DRC-03 for which it had needed OTP which are sent to the partner’s son. 

6. According to the petitioner, he had not volunteered that & in fact was forcedto reverses after reversing the credit ledger at 1.09 a.m. The From GST DRC-03on 12th February, 2022 was filled-in. The petitioner has heavily relied upon thegroup of petitions being Special Civil Application No. 2426, 2515, 2618 and3196 of 2021 decided on February, 18, 2021 where, the Court came downheavily on the practice of making coercive recovery during the course of searchand without making any assessment or adjudication. 

7. It is case of the petitioner that no assessment has been framed so far nor anydemand has been raised in absence of any assessment, the quantum of demandcannot be determined hence, the action of coercive recovery to the tune of Rs.37,68,300/- by reversing the ITC in electronic credit ledger is bad in law. 

8. The affidavit-in-reply is filed on behalf of respondent No.1 where, it is deniedall the averments, statements and submissions made in the petition. It is deniedthat the team of officers had violated any provisions of law while inspecting thepremises declared by the petitioner as “Principle Place of Business”. It is say ofthe petitioner that some information was received for the officer to report backafter completion of inquiry and its outcome. The officer was authorized by thecompetent authority under Section 67(1) of the CGST Act, 2017. This ispermissible when a taxable person has suppressed any transaction relating tosupply of goods or services or both. 

9. The officers visited the declared “principal place of business” to inspect andretrieve/obtain records of the petitioner’s purchases and supplies. When theofficers reached the place neither authorized person of the petitioner nor anystatutory records were available, it was an empty godown without any office, awatchman and driver were available who was asked to call the authorizedperson. The petitioner was contacted over the phone and he was in Ahmedabadand sought time for arriving at the “Principal Place of Business”. He reached theplace with the Chartered Accountant at about 6.00 p.m. He also did not producethe statutory records in clear violation of the provision of Section 35 of theCGST Act. The documents supplied also did not disclose the detail of suppliers,sellers and the purchases. In fact, in his statement dated 11/12.02.2022, heensured to submit the requisite documents within 04-05 days which did notreceive after about months’ time. Section 35 of the CGST Act is pressed intoservice to urge that at the principal place of business, every registered person isrequired to keep the goods in particular manner and also maintain the record. There being violation of provision of CGST Act and there would be liability forpayment of huge amount of tax, in absence of any requisite documents since itwas not possible to ascertain the tax evasion. Rule 142(2) of the CGST Rules,2017 is pressed into service where any person makes any payment of tax,interest, penalty, whether on his own ascertainment or as communicated by theproper officer under sub-rule (1A), he shall inform the proper officer of suchpayment in FORM GST DRC 03 and the proper officer shall issue anacknowledgment, accepting the payment made by the said person in Form GSTDRC 04. 

10. It is denied that any pressure was put on the petitioner to pay any kind ofdeposit. The statement of one of the partners on 11/12.2.2022 had been recordedand he had signed on each page and thus, it cannot be said that he wasthreatened or force. 

11. The right of Show Cause Notice is envisaged under Section 73 and 74 of theCGST Act have been contemplated the manner in which the payment of lessor interest or can resultant into the penalty is also reflected. To urge eventually thatpetition being bereft of any merits deserves no entertainment. 

12. In affidavit-in-rejoinder it is urged that the respondent is lying that thepetitioner was not coerced to pay the tax. There was no question of reversing theITC out of his own volition. The petitioner had asked the Chartered Accountantto reverse the credit which was denied by the Chartered Accountant. Respondenttook the laptop of his Chartered Accountant and pressed a call to his son forgetting the one time password which is required to file Form GST DRC-03 andthat call recorded by an automatic feature in smartphone of his son and entiretranscript of the call had been placed on record of intervening night of 11.2.2022and 12.2.2022, which according to the petitioner, makes it clear that respondentcalled for the OTP and filed the Form DRC-03. Annexure “1” is producedreflecting the conversation of the respondent and son of the partner. 

13. Rejoinder affidavit and sur-rejoinder affidavit have been filed today byemphasizing that there is no threat or coercion made by the visiting officer to thepetitioner for making payment of GST or for rest. It is also said that afterobservation made by this Court in Special Civil Application No. 3196 of 2021,the CBIC has issued instruction whereto the voluntary payment made by anyassessee is allowed by the CBIC as per statutory provisions under GST Act andrule made thereunder. 

14. Observations of Gujarat High Court in Special Civil Application No. 3196 of2021 according to the respondent are not applicable because the facts involvedin the instant case are different. 

15. We have heard Mr. H.J. Trivedi, learned advocate for the petitioner whoalong the line of avements of the petitioner had argued before this Court andemphasized that the reversal of ITC to the tune of Rs.37,68,000/-(round off) wassurely by compulsion and in violation of the order of this Court passed inSpecial Civil Application No. 3196 of 2021. He has also further urged thatpursuant to the directions issued by the Delhi High Court in the case of M/s.Vallabh Textiles Vs. Senior Intelligence Officer and Ors. [2022 (12) TMI1038 Delhi High Court , the department has issued the instruction No.01/2022-23 on 25th May, 2022, for the officers seeks to recover the tax dues during thesearch, inspection and investigation. 

16. The Delhi High Court found that while in the line with the directionscontained in Bhumi Associate, Instruction provides that no recovery of taxshould be made during search, inspection or investigation unless it is voluntary-it does not elaborate on various modes for collection adopted in suchcircumstances, via cheque, cash, e-payment or even via adjustment of input taxcredit. It also found the Instruction falls short, inasmuch as it sidesteps directionnumber two (2) contained in Bhumi Associate, which states that even if theassessee comes forward to make voluntary payment in the prescribed form i.e.,GST DRC-03, he/she should be advised to file the same the day after the searchhas ended and the concerned officers have left the premises of the assessee.According to the Delhi High Court, these directions issued by the Gujarat HighCourt on 16.2.2021are binding the officer respondent revenue which have notbeen followed in the instant case. 

17. Learned Senior Standing Counsel Mr. Utkarsh Sharma has strongly resistedthis on the ground that there had been no threat or coercion on the part of therespondent. He however, on instructions has urged that there is technical glitchin reversing the input tax of Rs.37,68,000/-. The said proposal was notacceptable to the petitioner. 

18. On 31st January, 2023 after both the sides had concluded the hearing, thedepartment has shown the willingness to reverse this. The difficulties faced bythe portal since was the reason he made a request not to pass an order. Today, therequest is being made by learned Sr.Standing Counsel for the petitioner to fill upthe form for refund of ITC which the department would consider within 60 days.

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