The Karnataka High Court has directed the refund of a Rs 10 crore GST payment made by a Bengaluru businessman, holding that the payment claimed by GST authorities as "voluntary" was in fact not voluntary in nature.
The order, passed on October 13 by Justice S. R. Krishna Kumar and made public this week, comes after the businessman alleged that the payment was extracted under coercion during a search and seizure operation.
Search, Seizure & Alleged Coercion
The petitioner, a trader dealing in electronics and footwear and registered under GST since 2017, was subjected to a raid in March 2023 by officials of the GST West Commissionerate under the Inspector of Central Tax. Officers seized a laptop, hard drives and other items, which were returned days later.
During the operation, the businessman transferred Rs 10 crore, which authorities later classified as a voluntary tax payment based on self-assessment. However, he argued before the court that the amount was paid under threat of arrest, making it involuntary and therefore liable for refund.
Court Finds No Evidence of Voluntary Payment
The petitioner also pointed out that no GST DRC-04 form - the mandatory acknowledgement for voluntary payments was ever issued. The DGGI, however, maintained that the payment was made voluntarily.
The High Court disagreed.
Justice Krishna Kumar observed that:
- There was no prior notice, adjudication, or determination of tax liability.
- The authorities had seized all business records, laptops, and accounts, making it "highly improbable" for the petitioner to assess tax on his own.
- The absence of DRC-04 further weakened the claim of voluntariness.
Quoting the order, the court noted: "At the time of payment, there could not have been any material, accounts, etc., available with the petitioner that would enable him to proceed with self-ascertainment… it is highly improbable that the petitioner was in a position to carry out self-ascertainment and make payment."
Refund With Interest Ordered
After reviewing legal precedents and relevant provisions of the CGST Act, the court directed authorities to refund the entire Rs 10 crore, along with 6% interest, reinforcing that tax payments extracted through coercion cannot be treated as voluntary.
The ruling is expected to have wider implications for ongoing GST investigations, especially where large "voluntary" payments are obtained during raids without proper documentation.
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