The Punjab and Haryana High Court has recently held that collecting the tax without legal authority amounts to depriving a person of his property rights under Article 300 A of the Indian Constitution.
A division bench of Justice Ritu Bahri and Justice Manisha Batra observed that the proper officer did not issue a receipt after accepting the amount.
The amount deposited by the petitioner under protest was refundable because the petitioner was denied his right.
The petitioner, Diwakar Enterprises Pvt. Ltd, is in the business of producing lead and lead-related products. The department/respondent blocked input tax credits totaling Rs. 24,18,516 that were in the petitioner’s electronic ledger when it filed its objections.
The department searched the petitioner’s home and questioned the director throughout the search. The director was dragged into their office and detained for two days. He was pressured to deposit the amount, and due to this, he deposited Rs. 1,99,90,000.
The petitioner filed a complaint about the deposit. The department searched the petitioner’s home and took another Rs. 25 lakhs from him forcibly.
The department contended that the petitioner voluntarily deposited the amount, as evidenced by Form GST DRC-03 (P-4), on which the petitioner stated voluntary under Sr. No. 3-Cause of Payment.
The bench rejected the department’s argument that the amount under deposit be made contingent on the outcome of the ongoing investigation. Section 74(5) of the Act, which is not attracted, is the only provision that allows a deposit during the pendency of an investigation. Articles 265 and 300A of the Constitution are violated by the amount collected from the company.
The division bench ordered the department to refund Rs. 1,99,90,000 along with 6% interest.
