Important judgment on indiscriminate recovery during search

Sales Tax-Soham Mashruwala

Under the GST Act, powers of investigation have been given to the authorities. Many times the officer insists on paying the amount while doing spot checks. Earlier even under the Gujarat Value Added Tax Act, when the investigation was conducted, a check of the relevant amount was taken from the trader and the investigation was completed and a lot of time was passed before the assessment order was passed accordingly. The Government, which has repeatedly argued before the High Court for non-recovery without a specific order, has always maintained that no amount shall be recovered at the time of inspection without any coercion or consent from the trader but with the willing consent of the trader/supplier. Ganesh Molasses Trading Co. was recently ordered by the Gujarat High Court during the site investigation where the amount was recovered without passing the order. Vs. A very interesting judgment has been given in the case of Superintendent CGST Commissioner (SCA No. 4026 of 2022 dated 18.1.2023) which is discussed in today's article.

The facts of the case

The petitioner was visited by the officials of CGST at the time when the search and seizure proceedings were conducted and the officials demanded the books and accounting literature as per section 35. After carrying out the search process till late night, after midnight, the officer took the personal laptop of the applicant's representative and recovered an amount of Rs. 37,68,300/- to recover Rs. 37,68,300/- after completing the recovery procedure with Form DRC03 under Section 74(5) the petitioner being aggrieved by the voluntary recovery of unpaid amount and without any demand filed a writ in the Gujarat High Court and all recovered Requested a refund of the amount.

Presentation of the applicant

It was submitted by the petitioner that the account has wrongly processed the amount at the time of search without any provision.Furthermore, the officer himself logged on to the GST portal of the petitioner and filled the form DRCO3 after midnight for which the petitioner did not give any consent. The statement of account and the affidavit or consent voluntarily given by the petitioner are totally false.

The recovery of the officer's amount is illegal and against the notification 01/2022-23 issued by the Government. Thus Rs. 37,68,300/- is refundable.

Argument of Govt

On the government side, it was submitted that the accounts literature was not found and the recovery was not done without any coercion.

Judgment of Gujarat High Court

The Gujarat High Court ruled that in the present case the Government's Notice 01/2022-23 has been ignored and the order passed by the Gujarat High Court in SCA 3196 of 2021 has not been complied with. (Applicant Name Bhumi Associates) Thus, held that the amount has been dutifully recovered and ordered refund to the applicant with 6% interest.