Facts of the Case:

In this case, the petitioner was running a coaching institute without obtaining GST registration. Acting on intelligence, the GST authorities conducted a search under Section 67(2) of the GST Act. During the search, various documents were seized, statements were recorded, and panchnamas were drawn.

The petitioner admitted that he was liable for GST, requested issuance of a temporary GST registration, and voluntarily deposited ₹1.96 crore towards tax, interest, and penalty through Form GST DRC-03. Nearly two years later, the petitioner filed a refund application under Section 54 claiming that the payment had been extracted under coercion during the search proceedings. The refund application was rejected through Form GST RFD-06 after issuance of a show cause notice and grant of personal hearing. Aggrieved, the petitioner approached the High Court challenging the rejection of the refund claim and alleging illegal coercive recovery.

Issue:

Whether the tax, interest and penalty deposited by the petitioner during GST search proceedings constituted a coercive recovery entitling him to refund under Section 54 of the GST Act, and whether the delayed issuance of Form GST DRC-04 acknowledging voluntary payment rendered the recovery illegal.

Held That:

The Court found no material to substantiate the allegation of coercion. On the contrary, the contemporaneous panchnamas, statements recorded during the search, and the petitioner’s written undertaking clearly established that the petitioner voluntarily admitted his GST liability, requested issuance of a temporary GST registration, and agreed to deposit the quantified tax, interest and penalty.

The Court observed that if the petitioner had genuinely been subjected to coercion, he would have immediately lodged complaints before higher departmental authorities or the police, which he failed to do. The allegation of coercive recovery raised almost two years later was therefore held to be a mere afterthought intended to secure refund of taxes voluntarily paid.

The Court further held that issuance of Form GST DRC-04 after nearly two years did not invalidate the payment or create any right to refund. DRC-04 merely acknowledges voluntary payment under Rule 142, and neither the GST Act nor the Rules prescribe any limitation for its issuance. Since the petitioner had voluntarily discharged the tax liability during the search itself, the proceedings stood concluded and no prejudice was caused by the delayed acknowledgment. The Court also clarified that Section 54 permits refund only where tax was not legally payable or had been paid in excess. As the petitioner failed to establish either circumstance, the refund claim was rightly rejected.

The Court distinguished the judgments relied upon by the petitioner, including Gunnam Infra Projects, Suraj Mangar and Radhika Agarwal, holding that they were factually inapplicable. It also noted that disputed questions regarding alleged coercion cannot ordinarily be adjudicated in writ proceedings under Article 226, particularly when the contemporaneous record demonstrates voluntary compliance.

Case Name: Hirenkumar Valjibhai Sankhalava Versus Office of Deputy Commissioner of State Tax. dated 25.06.2026

To read the complete judgement 2026 Taxo.online 1821