Directed to refund the payment deposited during search proceedings being without authority of law

The Punjab and Haryana High Court has ruled that any money collected by the Revenue Department during a search, without legal authority, must be refunded. In this case, a company had deposited over £83 lakh under protest during a search, with the assurance it would be credited to their Input Tax Credit ledger. When this didn't happen, they took the matter to court. The court found no legal basis for retaining the funds and ordered their refund with interest.

The Hon'ble Punjab and Haryana High Court in William E Connor Associates and Sourcing Pvt Ltd. and Anr v. Union of India and Others [C.W.P-733 of 2021 dated May 04, 2023] held that amount collected without authority of law at the time of search should be refunded along with the interest @ 6% p.a. from the date of filling this petition, within 30 days after the receipt of certified copy of order.

Facts

M/s. William E Connor Associates and Sourcing Pvt. Ltd ("the Petitioner") is providing Export of Business Support Services to William E Connor & Associates Limited, Hong Kong ("WECA HK").

A search was conducted on the premises of Petitioner dated December 23, 2020 and December 24, 2020 by the Revenue Department ("the Respondent"). The Petitioner were made to deposit an amount of INR 83,89,196 on January 06, 2021 under protest and on the assurance that it would be reverted in the Input Tax Credit ledger ("ITC") of the Petitioner. The Petitioner has requested to reinstate the aforementioned amount in their ITC Ledger by sending a letter to Respondent but the request of the Petitioner has not been considered even though a period of two years has lapsed.

The Petitioner had filed a Writ before the Hon'ble Punjab and Haryana High Court praying for the refund of amount deposited along with interest.

Issue

Whether the amount collected at the time of search by the Revenue Department should be refunded?

Held

The Hon'ble Punjab and Haryana High Court in C.W.P-733 of 2021 dated May 04, 2023held as under:

• Noted that, the Respondent is in process to issue notice under section 74(1) of the Central Goods and Services Tax Act, 2017 ("the CGST Act") but till the date no notice has been issued to Petitioner imposing the penalty or raising any demand.
• Relied upon the judgement of Union of India and others vs. Bundl Technologies Pvt. Ltd and others [ILR 2022 Karnataka 3077] wherein the Karnataka High court held that any amount deposited voluntarily by the Petitioner during search would not amount to collection of tax under Article 265 of the Constitution of India and amount collected without authority of law, would not amount to collection of tax and the same would amount to depriving a person of his property without any authority of law and would infringe his rights under Article 300A of the Constitution of India.
• Held that, the Respondent had failed to place any material record to show that they got deposited amount of INR 83,89,196 from the Petitioner with any authority of law and allow the refund along with interest @6% p.a. from the date of filling of this petition, within the period of 30 days after the receipt of certified copy of order.