The Karnataka High Court held that recovery proceedings initiated under Central Goods and Service Tax (CGST Act) during pendency of investigation stating ‘Self Ascertainment of Tax’ is violative of Article 265. It was clarified that when notice sought to be issued under section 74(1) indicate a fresh and complete adjudication and does not refer to short fall of actual tax required to be paid as contemplated under section 74(7), the State itself is estopped from contending that there was self-ascertainment by the assessee.
During investigation of the firm Raj Chemicals, the statements of one of its partner Vijay Kumar Gupta was recorded under section 70 of CGST Act, in which he referred to supplies made by the firm to entities including that of the Kesar Colour Chem Industries, petitioner/ assessee related to invoices raised without actual supply of goods. Upon analysis of e-way bills & the Fastag data, the respondent/ Department found that the vehicles had not moved. The petitioner sought for refund of the amounts paid under duress, and contended that self-ascertainment of tax was not established and the recovery made during investigation was in violation of legal mandate of Article 265 of the Constitution.
Get a Copy of GST Ready Reckoner, Click here
The petitioner challenged the legality of investigation carried out under section 67 of CGST Act and sought for declaration that the recoveries to the tune of Rs.2.50 crores ‘extracted coercively’ in Form GST PMT–06 Payment Challan. The petitioner also contended that recovery at the office of respondent, pending investigation, while responding to the summons under section 70 of CGST Act, was an abuse of power.
A Single Bench of Justice Sunil Dutt Yadav observed that if the Authority was of the view that petitioner had made payments as a part of the process of self-ascertainment under section 74(5) of the CGST Act, the proceedings would terminate.
The bench added that if the Authorities were of the view that the self-ascertainment and the amount paid under section 74(5) would fall short of the amount actually payable, the Authority could in terms of Section 74(7) proceed to issue a notice as provided for under section 74(1) in respect of such amount which falls short of the amount actually payable.
Get a Copy of GST Ready Reckoner, Click here
The High Court directed the Department to refund the amount of Rs.2.50 crores along with interest, which was alleged to be recovered by the Department in the garb of ‘self-ascertainment’ and partly allowed the Assessee’s petition.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
