The Karnataka High Court has directed the refund of a Rs 10 crore “voluntary” GST payment made by a businessman, ruling that the payment was not actually voluntary in nature. The order was passed on October 13 by a bench consisting of Justice S R Krishna Kumar and was made public this week.
In this case, a businessman trading in electronics and footwear had been filing Goods and Services Tax (GST) returns from 2017. In March 2023, personnel of the GST West Commissionerate under the Inspector of Central Tax raided his Bengaluru home and confiscated a laptop and some other articles that were returned a few days later. He alleged that during the search and seizure operations, he had transferred Rs 10 crore, which was later claimed to be ‘voluntary’, but was actually coerced through the threat of arrest.
It was also argued by the petitioner that if it was a voluntary payment, there should have been an acknowledgement through a prescribed form known as GST DRC-04. On the other hand, the Directorate General of GST Intelligence argued that this was a voluntary payment based on a self-assessed tax amount.
The bench noted that the material on record did not indicate this to be a voluntary payment. The court pointed out that there had not been any notice prior to the raid or any proceedings to ascertain the tax amount payable, aside from the acknowledgement that had to be issued under the aforementioned form.
The court observed, “On 24.03.2023, the respondents seized various movable, articles comprising of account books, desktops, server disks, mobile phones, hard disks, laptop etc., from the business premises it follows therefrom that at the time of payment, there could not have been any material, accounts, etc., available with the petitioner that would enable him to proceed with self-ascertainment… it is highly improbable that the petitioner was in a position to carry out self-ascertainment and make payment which is yet another circumstance to establish that the said payment was not voluntary.”
Having made a further examination of legal precedents and several points of the relevant laws, the court went on to direct the return of the Rs 10 crore sum along with interest calculated at 6 per cent.