Court Dismisses Coercion Allegations, Affirms Voluntary Payment of Tax Liabilities by Coaching Institute
In a significant ruling, the Gujarat High Court has dismissed a writ petition filed by Hirenkumar Valjibhai Sankhalava, proprietor of "Alpha-1 Tuition Classes and Hostel," challenging the denial of a refund of taxes paid under the Gujarat Goods and Services Tax Act, 2017. The petitioner had claimed that the taxes, amounting to Rs. 1,96,25,330, were paid under coercion during a GST search operation at his premises.
The case arose when GST authorities conducted a search of the coaching institute between October 6 and October 10, 2023, under Section 67(2) of the Act, leading to the seizure of documents and collection of statements from the petitioner. The petitioner alleged that he was forced to pay taxes, interest, and penalties during the search without any formal adjudication process for the financial years from 2018-19 to 2023-24.
The petitioner’s claim for a refund was based on Section 54 of the Gujarat GST Act, 2017, arguing that the payment was made under duress. However, the court found substantial evidence, including written statements and panchnamas, indicating that the petitioner had voluntarily undertaken to pay the tax liability due to his lack of GST registration. The court noted that the petitioner did not lodge any complaints of coercion for almost two years after the payment, undermining the credibility of his claims.
Justice A.S. Supehia and Justice Vaibhavi D. Nanavati, presiding over the case, emphasized that the allegations of coercion were an afterthought, particularly as the petitioner had agreed to the tax liability during the search proceedings. The court further pointed out that the petitioner had ample opportunity to contest the tax demand through appeals under Section 107 of the Act but chose to seek a direct judgment on merits.
The judgment also highlighted the provisions under Section 74(8) of the Act, which state that voluntary payment of tax along with interest and penalty concludes the proceedings. The issuance of FORM GST DRC-04, acknowledging voluntary payment, was deemed not prejudicial to the petitioner, as no disputes were raised for nearly two years following the initial payment.
The court rejected the petitioner's reliance on various judgments, including those from the Calcutta and Karnataka High Courts, which dealt with different factual circumstances regarding coercive recovery and procedural improprieties in tax collection. The court maintained that the petitioner’s case was not analogous to these precedents, as the payment was made voluntarily after the petitioner was caught operating without GST registration and collecting fees in cash.
Ultimately, the Gujarat High Court upheld the decision of the tax authorities to deny the refund application, citing a lack of evidence supporting coercion and the absence of eligibility under Section 54 for a refund. The dismissal of the writ petition reinforces the importance of adhering to statutory tax liabilities and pursuing appropriate legal channels for contesting tax demands.
Bottom line:-
Goods and Services Tax (GST) - Allegations of coercive recovery of tax - Petitioner accused of operating without GST registration and collecting fees in cash - Voluntary payment of tax liability affirmed through documented evidence during search proceedings - Claims of coercion found to be an afterthought - Writ petition dismissed as the petitioner failed to establish eligibility for refund under Section 54 of the Gujarat GST Act, 2017.
Statutory provision(s): Gujarat Goods and Services Tax Act, 2017, Section 54(1), Section 74(8), Section 67(2), Section 107, Rule 142, Rule 92(3)
