The Karnataka High Court in the case ofM/S. KESAR COLOUR CHEM INDUSTRIES VERSUS THE INTELLIGENCE OFFICER BANGALORE, THE SENIOR INTELLIGENCE OFFICER BENGALORE vide WRIT PETITION NO. 17853 OF 2021 (T-RES) dated 26.09.2024,  emphasized that recoveries made without voluntary self-ascertainment during an investigation, especially before a show-cause notice, are unlawful and must be refunded with interest. The findings in the judgment were confined to the issues argued and did not affect the pending adjudication under the show-cause notice.

Facts of the Case: In this case, The petitioner challenged the legality of several actions taken by the respondents under the CGST Act, 2017, including investigations, recovery of Rs. 2.50 crores, and summons. The amounts were paid under duress and coercion during investigations related to alleged tax evasion. It was contended that the recovery of Rs. 2.50 crores was illegal as it was made before the issuance of a show-cause notice and not based on voluntary self-ascertainment under Section 74(5) of the CGST Act. The petitioner filed a writ petition seeking a refund of the amounts collected forcibly.

The respondents argued that the payments were voluntary, made under self-ascertainment as per Section 74(5) of the CGST Act. Relied on statements made during the investigation and maintained that the petitioner cooperated voluntarily, including generating DRC-03 forms.

Held that:  The court noted that self-ascertainment under Section 74(5) requires voluntary determination by the assessee, which was absent in this case. The court noted that self-ascertainment under Section 74(5) requires voluntary determination by the assessee, which was absent in this case.

The court pointed out that the show-cause notice issued later indicated a complete adjudication process, which contradicted the respondents' claim of self-ascertainment. Consequently, the recovery made prior to adjudication was declared to be in violation of Article 265 of the Constitution of India, as it was not done as per the legal procedures.

To read the complete judgment 2024 Taxo.online 2349