Rajasthan HC directs GST Authority not to force Taxpayer to deposit GST or take Coercive Measures without adhering to procedure provided under Section 74 of CGST Act [Read Order]

The Rajasthan High court has directed the Goods and Service Tax Authority (GST) department not to Force Taxpayers to deposit GST or take Coercive Measures without adhering to the procedure provided under Section 74 of the CGST Act.

The petitioner, M/s. Dhariwal Products seeks to assail the action of the respondent GST Department and its officials in conducting search and seizure of the petitioner’s premises, coercing the petitioner to deposit a huge sum of Rs.11.5 crores during the course of search operations held on 05- 06.01.2022 as being in gross contravention of the mandatory requirement of Section 74 of the CGST Act.

Mr. Vikas Balia, Senior Advocate urged that the procedure adopted by the respondent officials while undertaking search operations in the petitioner’s premises without prior intimation is totally illegal, unjust, and highhanded. The GST Intelligence Officer, though present at the residence of the petitioner, gave a sham notice to the petitioner’s representative for appearance in the factory premises and thereafter forcibly extracted a confession from him. The petitioner was forced to deposit a sum of Rs.11.5 crores towards alleged GST evasion even though there is no evidence of such short payment/evasion. 

The division bench of Vinod Kumar Bharwani and Sandeep Mehta said that prima facie, it appears that the impugned action has been resorted to without adhering to the procedure provided under Section 74 of the CGST Act. As the petitioner’s representative claims to have retracted from the confession, the voluntary nature of deposit of GST pursuant to the search proceedings is seriously disputed, there is merit in the contention of Mr. Balia that the procedure provided under Section 74 of the CGST Act would have to be followed. Once this procedure is adopted, the respondent authorities would not be able to procure allegedly short paid GST amounts by branding it to be a voluntary deposit and that is why a dubitable procedure of issuing summons to petitioner under Section 70 of the CGST Act is being adopted even though the petitioner’s/representative’s statement had already been recorded on the date of inspection/search itself.

“No coercive steps shall be taken against the petitioner/its representatives in furtherance of the search/seizure operations dated 05.01.2022/ 06.01.2022 and the summons issued in pursuance thereof,” the court said.

“The petitioner shall not be forced to deposit any amount towards GST without adhering to the procedure provided under Section 74 of the CGST Act,” the court while listing the matter on March 10, 2022, said.

Senior Advocate Vikas Balia assisted by Mr. Sharad Kothari, Mr. Mayank Taparia and Mr. Priyansh Arora appeared for the petitioners.

M/s. Dhariwal Products, E-106, B-1, Marudhar Industrial Area, Basni 2nd Phase, Jodhpur vs Union Of India

CITATION: 2022 TAXSCAN (HC) 189

To Read the full text of the Order CLICK HERE

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