A Division Bench of the Gujarat High Court has recently quashed and set aside the forced generation of Input Tax Credit (ITC) while directing the revenue to recredit the reversed ITC with interest to the electronic credit ledger of the assessee.
The petitioner sought to invoke extraordinary jurisdiction of the Gujarat High Court under Article 226 of the Constitution of India seeking the direction to the respondent authorities to immediately refund Rs.37.68 Crores of reversal of the Input Tax Credit reversed under threat, coercion and without the will of the petitioner.
On 11th February, 2022, a search and seizure operation was carried out by the team of the CGST officials. On 12th February, 2022 at about 01.00 AM, The respondent No.1 reversed the ITC in the electronic credit ledger and corrosively and illegally filed Form DRC03 under Section 74(5), although it was not voluntary, as per the contentions of the petitioner.
According to the petitioner, there is no tax evasion on the part of the petitioner firm and there arises no question of admitting any wrongdoing.
It was alleged that the Superintendent, Office of the GST Commissioner had forcibly reversed the ITC of GST & CGST lying in the electronic credit ledger to the tune of Rs, 18.84 Lakh twice after reversing the credit of ITC.
The petitioner contended that no assessment has been framed so far nor any demand has been raised in absence of any assessment, the quantum of demand cannot be determined hence, the action of coercive recovery to the tune of Rs. 37,68,300/- by reversing the ITC in electronic credit ledger was bad in law.
The petitioner also pointed to the directions issued by the Delhi High Court in the case of M/s. Vallabh Textiles Vs. Senior Intelligence Officer and Ors.[2022 TAXSCAN (HC) 1047] the department has issued the instruction No.01/2022-23 on 25th May, 2022, which had not been followed in this matter.
The Division Bench of Justices Sonia Gokani and Sandeep N Bhatt noticed that this conduct is also contrary to the instructions issued by the Board (CBIC) and therefore, the action of the petitioner which is termed to be voluntary and not have any element of voluntariness.
Resultantly, the respondent-revenue was directed to refund the amount along with 6% interest per annum.
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