Recently, the Delhi High Court (‘Delhi HC') vide its order in the case of M/s Vaibhav Textile V. Senior Intelligence officer and Ors. [W.P.(C) 9834/2022] directed the Department to refund the amount, along with interest, deposited by the Petitioner through Form DRC 03, during the search proceedings conducted by the officers of the department. The HC held that the revenue officers did not follow the directions laid down by the Gujarat High Court (‘Gujarat HC') and the instructions issued by the Central Board of Indirect Taxes and Customs (‘CBIC'), in this regard. A quick summary of the matter is mentioned below for your reference.

1. Facts of the Case

Department officers conducted a search at the Petitioner's premise. During the search proceedings, Petitioner deposited Rs. 1.15 crores on Form DRC 03. No acknowledgment was given by the officers confirming the receipt of payment. The Petitioner, therefore, approached the HC, for refund of money along with interest.

2. Petitioner's contentions

Petitioner contended that the payment made on Form DRC 03 and the statements given during the search proceedings were not voluntarily. Also, the officers issued summons and continued the investigation even after the payment was made.

3. Revenue's contentions

Revenue contended that the payments were voluntarily made by the Petitioner and the point of payment made under coercion was an after-thought.

4. HC's Decision

The HC held that the revenue officers did not follow the directions laid down by the Gujarat HC in its order passed in the matter of Bhumi Associate v. Union of India [R/Civil Application No. 2515 of 2021] and the instructions later issued by the CBIC vide instruction no. 01/2022-2023 dated 25.05.2022. Both the directions of the HC and instructions issued by the CBIC, which are binding on the officers, prescribe that any voluntary payment by the assessee should be made only after the day on which the search proceedings end. This is with a view to provide an opportunity to the assessee to seek legal advice, as may be required, before making the payment. Further, the law also prescribes for issuance of acknowledgement of such payments made in Form GST DRC-04, which was not done by the officers. Accordingly, Delhi HC directed the Department to refund the amount along with 6% simple interest.

5. Phoenix Legal Comment

The above judgement of Delhi HC will provide a huge relief to many companies who made the payments in such similar circumstances and the amount so paid is lying as blocked capital with the authorities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.