Introduction:

In a significant ruling, the High Court of Punjab and Haryana has directed the Union of India and others to refund an amount illegally recovered from M/s Samyak Metals Pvt Ltd through GST Form DRC-03. The court found that the recovery was made without issuing any show cause notice or passing any order under Section 74 of the Central GST Act and Haryana GST Act, 2017. The judgment, delivered on May 24, 2023, by Justices Ritu Bahri and Kuldeep Tiwari, sheds light on the importance of following due process and the rights of taxpayers in the context of GST.

 Background:

M/s Samyak Metals Pvt Ltd, engaged in the manufacturing of aluminium ingots, is a registered entity under the Central GST Act and Haryana GST Act. During a search conducted by the Central GST Commissionerate, Faridabad, including respondent No. 3, at the petitioner's business premises on February 25, 2021, certain inquiries were made regarding purchases from M/s D.G. Enterprises, Faridabad. No documents were seized during the search, and an acknowledgment for the payment made by the petitioner in Form GST DRC-04 was not issued. The petitioner claimed that they had voluntarily paid an amount of Rs. 35,73,147, including tax, interest, and penalty, under Section 74(5) of the CGST Act, 2017, but no further proceedings were initiated by the respondents.

Court's Findings:

The court examined the provisions of Rule 142(2) of the CGST Rules, which require the proper officer to issue an acknowledgment in Form GST DRC-04 when a payment is made in Form GST DRC-03. In this case, the payment was made on February 26, 2021, and no acknowledgment or notice under Section 74(1) of the CGST Act was issued. The court also noted that the respondents had not followed CBIC instruction No. 01/2022-23 dated May 25, 2022, which clarifies that taxpayers can voluntarily make payments based on their liability and that the officers have a duty to inform taxpayers about voluntary tax payment through DRC-03. Despite the petitioner depositing the amount, neither Form GST DRC-04 was issued nor any notice under Section 74(1) of the CGST Act was served.

Court's Decision:

Based on the facts and legal provisions examined, the court held that the recovery made by the respondents without issuing any notice or following the prescribed procedure was unlawful. Consequently, the court directed the respondents to refund the amount in question, totalling Rs. 35,73,147, along with simple interest at a rate of 6% per annum from the date of deposit until the payment is made. The respondents were instructed to refund the amount within two weeks from the date of receiving the certified copy of the judgment.

Significance of the Judgment:

The judgment serves as a landmark decision highlighting the importance of adhering to due process and protecting the rights of taxpayers under the GST regime. It emphasizes the need for proper issuance of acknowledgments, timely notices, and adherence to CBIC instructions to prevent undue harassment of taxpayers. The court's ruling reinforces the principle that recovery without following the prescribed procedure is unjust and calls for the restitution of the unlawfully recovered amount.