No Demand can be raised during investigations: Telangana HC

Last updated: 10 August 2021

Court :
Telangana HC

Brief :
In [Writ Petition no. 7063 of 2021], Telangana HC in it's order dated August 03, 2021 held that, M/S Deem Distributors Private ("the assessee/ the petitioner") cannot be asked to make payment towards tax, interest or penalty while investigation is underway.

Citation :
Writ Petition no. 7063 of 2021

In [Writ Petition no. 7063 of 2021], Telangana HC in it's order dated August 03, 2021 held that, M/S Deem Distributors Private ("the assessee/ the petitioner") cannot be asked to make payment towards tax, interest or penalty while investigation is underway.

The petitioner, being an assessee under Telangana GST Act, 2017, CGST Act, 2017, and IGST Act, 2017 is issued a letter specifying, Input Tax Credit (“ITC') availed by them are on the basis of fake invoices issued by certain fictitious suppliers/firms. The letter further specifies that, ITC availed by the petitioner is in a fraudulent manner without receiving any material, and the petitioner was requested to reverse ITC on such invoices.

In the instant case, no doubt, summon has been issued to the Director of the petitioner firm under Section 70 of the CGST Act to give evidence / depose statement and to produce certain purchase orders and to appear. Admittedly, investigation against the petitioner is underway and not complete, and no notice u/s 74(1) of the Act has been issued to it.

The HC observed that, Section 74(5) of the CGST Act gives an option to the taxpayer to make any payment, if he is so opts, but it does not confer any power on the respondents (authorities) to make a demand as if there has been a determination of liability of the assessee and demand tax along with interest and penalty.

Consequent to the observation made, the HC directed the respondents to refund the amount already collected from petitioner along with interest @7% from the date of receipt till the date of refund.