We know that whenever a tax revenue department has reasons to believe of tax evasions, they have
powers to conduct search and inspection of premises of tax evaders. During search proceedings, it is
common to say that they might identify certain tax leakages. In that case, what should be the duty of
those officials conducting search? Should they be insisting taxpayers for depositing tax, interest, and
penalties immediately, even if taxpayers have things to defend to or should they be following the
procedure laid down under section 73 or 74 of the CGST Act?
In this regard, CBIC has issued an instruction on 25.05.2022 instructing tax officers to not to make any
recovery forcefully and without following the procedure laid down under the Law. The instruction made
an interesting observation that, recovery of taxes should not be made until unless the case is adjudicated,
and the demand order has been issued.
A similar case came before Honorable Court of Punjab and Haryana, where petitioner alleged of forceful
recovery of tax, interest, and penalty by officers which conducted search. The HC ordered that, since tax
officers recovered tax during search, it cannot be said to be a voluntary payment by taxpayer, and it
has been 2 years since the payment and GST officials has neither issued any notice nor adjudicated the
case. Therefore, the Government must refund taxes to petitioner.
| SW Point of View:This verdict emphasizes the importance of adhering to proper procedures in tax recovery cases, highlighting the judiciary’s dedication to safeguarding taxpayers’ rights. The decision serves as a strong reminder to tax departments about the necessity of following prescribed protocols and regulations when recovering taxes. The obligation to refund the amount with interest underscores the gravity attached to such violations. This groundbreaking judgment is anticipated to have far-reaching consequences for future disputes and legal proceedings related to GST. |
Source: IN RE, SAMYAK METALS PVT. LTD. VS UNION OF INDIA AND OTHERS (PUNJAB AND HARYANA HIGH COURT)
