M/S. BABA CONTRACTORS AND ENGINEERS vs UNION OF INDIA

(1 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
D.B. Civil Writ Petition No. 21298/2025
M/s. Baba Contractors And Engineers, A Registered Partnership
Firm Having Registration No. 01/24/2014 Registered In The
Office Of Registrar Of Firms, Sirohi Raj, Having Its Principal Place
Of Business At 36, Arbuda Devi Nagar, Abkari Road, Abu Road,
District Sirohi, Rajasthan - 307026 Through Its Authorized
Partner, Shri Hemendra Singh Kachawa.
----Petitioner
Versus
1. Union Of India, Through The Additional Director,
Directorate General Of Gst Intelligence, Udaipur
Regional Unit Jaipur zonal Unit, 2Nd Floor, 142-B,
Sector-11, Hiran Magri, Udaipur, Rajasthan, 313002
2. Intelligence Officer, Directorate General Of Gst
Intelligence, Udaipur Regional Unit Jaipur Zonal Unit,
2Nd Floor, 142-B, Sector-11, Hiran Magri, Udaipur,
Rajasthan, 313002
3. State Of Rajasthan, Through Its Joint Secretary Tax,
Finance Department, Tax Division, Secretariat, Jaipur -
302001.
----Respondents
For Petitioner(s) : Mr. Hemant Kothari
For Respondent(s) : Mr. Mahaveer Bishnoi, AAG with
Mr. Harshvardhan Singh Chundawat
Mr. Rajvendra Saraswat with
Mr. Rishabh Dadhich
HON'BLE MR. JUSTICE ARUN MONGA
HON'BLE MR. JUSTICE SUNIL BENIWAL
Order
Reportable
Conclusion of arguments and
Reserved on : 02/04/2026
Pronounced on : / 06 22 /2026
(per Beniwal, J.)
1. The present writ petition has been filed seeking a direction to
the respondents to refund an amount of Rs.2,35,23,506/- along
with interest, on the allegation that the said amount was
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(2 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
involuntarily paid through Form GST DRC-03 towards reversal of
Input Tax Credit during the course of search and seizure
proceedings conducted at the business premises of the petitioner-
firm as well as at the residential premises of its partners.
2. The facts, as pleaded by the petitioner, are that the
petitioner is a partnership firm having its principal place of
business at Sirohi, Rajasthan. On 11.07.2025, two Intelligence
Officers of respondent No.1 conducted search and seizure
proceedings under the Central Goods and Services Tax Act, 2017
(hereinafter referred to as “the CGST Act”) at the business
premises of the petitioner-firm as well as at the residential
premises of its partners. As per the panchnama, the search at the
office premises was conducted from 10:00 AM to 7:55 PM,
whereas the search at the residential premises of the partners was
conducted from 8:25 AM to 8:55 PM.
2.1. During the course of search, summons under Section 70 of
the CGST Act were issued to Mr. Hemendra Singh, partner of the
petitioner-firm, requiring him to remain present at the office
premises along with the relevant documents and he was
compelled to sign a pre-printed statement, and the entire record
of the firm was seized.
2.2. During the search proceedings, the respondents compelled
the petitioner-firm and its partners to deposit an amount of
Rs.2,35,23,506/- without issuance of any demand or show cause
notice. The said amount comprised reversal of Input Tax Credit
(hereinafter referred to as “ITC”) to the extent of
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(3 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
Rs.1,08,39,276/- and cash payment of Rs.1,26,84,240/-, which
included utilisation of TDS, payment through the cash balance
available on the GST portal and payment through bank transfer.
Further, the petitioner was compelled to file Form GST DRC-03
during the search proceedings itself.
2.3. Thereafter, by way of letter dated 17.07.2025, the petitioner
informed the respondents that the statement of its partner had
been recorded under pressure and when he was not in a sound
state of mind. By another letter dated 27.08.2025, the petitioner
clarified that the amount deposited during the search was paid
under protest on account of departmental pressure. Moreover,
neither Form GST DRC-04 acknowledging voluntary payment
under Rule 142 of the Central Goods and Services Tax Rules, 2017
(hereinafter referred to as “the CGST Rules”) has been issued nor
any show cause notice has been served till date.
2.4. Hence, the present writ petition has been filed seeking
refund of the amount of Rs.2,35,23,506/- along with interest at
the rate of 12% per annum, on the allegation that the same was
recovered under threat and coercion, without authority of law and
contrary to Instruction No.1/2022-23 dated 25.02.2022.
3. Learned counsel for the petitioner made the following
submissions:-
(i) The search was conducted without providing Form GST INS-
01 as mandated under Rule 139 of the CGST Rules. During the
course of search and seizure proceedings, the respondents illegally
threatened and coerced the petitioner-firm and its partners to
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(4 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
deposit a huge amount towards alleged tax liability, without
issuance of any show cause notice, demand or adjudication order.
Succumbing to such pressure, the petitioner was compelled to
deposit a total amount of Rs.2,35,23,506/-.
(ii) The sequence and timing of events clearly establish coercion.
Immediately after deposit through banking channels at 6:34 PM,
the search at the office premises was brought to a close at 7:55
PM. Thereafter, Form GST DRC-03 was got filed at 8:24 PM by
reversal of ITC and utilization of TDS/cash balance, and the search
at the residence of the partners was concluded almost
immediately thereafter at 8:55 PM. It was, therefore, contended
that the search proceedings were used as a tool to extract
payment from the petitioner-firm, though the officers conducting
search had no authority in law to effect recovery during
investigation. The absence of Form GST DRC-04 under Rule 142 of
the CGST Rules further demonstrates that the alleged payment
was never treated as a voluntary payment by the department.
(iii) The petitioner immediately protested against the coercive
action. Vide letter dated 17.07.2025, the petitioner specifically
stated that the statements tendered by its partner were not made
in a sound state of mind and were obtained under pressure.
Thereafter, vide letter dated 27.08.2025, it was clarified that the
payment made during search proceedings was under protest and
due to departmental pressure. Despite this, till date, neither any
show cause notice has been issued nor any adjudication
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(5 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
proceedings have been completed, and even Form GST DRC-04
acknowledging voluntary payment has not been issued.
(iv) The controversy involved in the present writ petition is
squarely covered by a catena of judgments wherein the High
Courts have deprecated recovery of tax, interest or reversal of ITC
during search and investigation proceedings, without issuance of
show cause notice or adjudication of liability. Reference was made
to Sri J. Ramesh Chand v. Union of India & Ors.; Writ
Petition No.9890/2023 , decided on 13.10.2025 , by the
Karnataka High Court, wherein during search proceedings
conducted on 24.03.2023, the petitioner was allegedly coerced to
deposit Rs.10 crores through Form GST DRC-03, without issuance
of show cause notice and without issuance of Form GST DRC-04
acknowledgement. The Court took note of the allegation that the
payment was extracted under threat and coercion, contrary to
Instruction No.01/2022-23 dated 25.02.2022.
(v) Similar view has been taken by the Delhi High Court in
Neeraj Paper Marketing Ltd. v. Special Commissioner,
Department of Trade and Taxes, GNCTD & Ors.; 2023 SCC
OnLine Del 7692 , where payments of Rs.25.20 lakhs and Rs.3
lakhs were made through Form GST DRC-03 during and
immediately after search proceedings, without issuance of Form
GST DRC-04. Likewise, in Vallabh Textiles v. Senior
Intelligence Officer & Ors.; 2022 SCC OnLine Del 4508 , the
amount of Rs.1.08 crores deposited in four tranches during search
was held to be lacking voluntariness, particularly when no Form
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(6 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
GST DRC-04 acknowledgement had been issued. In both these
cases, the Courts held that recovery during search cannot be
countenanced unless the deposit is demonstrably voluntary.
(vi) In the case of Samyak Metals v. Union of India; 2023
SCC OnLine P&H 7168 , during search conducted on 25.02.2021,
the petitioner was coerced to reverse ITC and deposit a total
amount of Rs.71.46 lakhs through Form GST DRC-03, without
issuance of Form GST DRC-04 and the same was directed to be
refunded by the Punjab and Haryana High Court. Reliance was
also placed upon Shree Ganesh Molasses Trading Co. v.
Superintendent, Office of the Commissioner; 2023 SCC
OnLine Guj 4758 , wherein ITC amounting to Rs.18.84 lakhs was
reversed during search and Form GST DRC-03 was filed
subsequently, without any assessment order. The consistent view
emerging from these judgments is that the power of search and
investigation does not include the power of recovery, and any
amount collected during such proceedings, in the absence of
adjudication, lacks authority of law unless it is proved to be
voluntary.
(vii) The facts of the present case stand on the same footing as in
the judgments cited. The petitioner-firm was subjected to search
and seizure proceedings; statements were recorded; and a
substantial amount was compelled to be deposited on the very
same day through Form GST DRC-03, without issuance of any
show cause notice or determination of liability. The surrounding
circumstances, including the timing of deposit, seizure of records
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(7 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
and continuation of summons, clearly establish that the payment
was not voluntary but was made under coercion. It was further
submitted that no adjudication proceedings have been completed
and no Form GST DRC-04 or refund order has been issued.
In view of the above submissions, learned counsel for the
petitioner submitted that the amount collected is without authority
of law, and the petitioner is entitled to refund of the same along
with applicable interest.
4. Per contra, learned counsel for the respondents, while
refuting the stand of the petitioner, made the following
submissions:-
(i) The writ petition is misconceived and deserves to be
dismissed, as the petitioner has suppressed material facts and has
attempted to portray a voluntary statutory payment as one made
under coercion. The investigation was initiated on specific
intelligence that the petitioner-firm had fraudulently availed and
utilized ITC in connection with transactions with M/s Keshav
Cement Agency. Pursuant thereto, search proceedings were
conducted on 11.07.2025 at the principal place of business of the
petitioner-firm as well as at the residential premises of its
partners, under due authorization of the competent authority
under Section 67(2) of the CGST Act. The search proceedings
were conducted in the presence of independent witnesses,
panchnamas were prepared, and the proceedings, including
recording of statement, were video-graphed.
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(8 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
(ii) During investigation against M/s Keshav Cement Agency, its
partner had stated that fraudulent ITC had been passed on to the
petitioner-firm without actual supply of goods. When these facts
were confronted to the petitioner during search proceedings, the
partner of the petitioner-firm admitted that only invoices had been
received from M/s Keshav Cement Agency without underlying
supply of goods and further admitted wrongful availment and
utilization of ITC amounting to Rs.2,04,55,222/-. It was submitted
that the petitioner thereafter voluntarily deposited a total amount
of Rs.2,35,23,506/-, comprising tax of Rs.2,04,55,222/- and
penalty of Rs.30,68,284/-, by filing Form GST DRC-03 dated
11.07.2025 under Section 74(5) of the CGST Act read with Rule
142(2) of the CGST Rules. The petitioner’s own remarks in Column
8 of Form GST DRC-03 recorded that the payment was a
“voluntary payment for wrongful availment of ITC from M/s
Keshav Cement Agency without underlying goods along with
penalty upon initiation of enquiry by DGGI.”
(iii) Section 74(5) of the CGST Act expressly enables a taxpayer
to voluntarily pay tax, interest and penalty even before issuance
of show cause notice, either on the basis of his own ascertainment
or on the basis of ascertainment by the proper officer. By filing
Form GST DRC-03 through its own GST portal credentials and by
making payments through its own banking channels, cash ledger
and available credits, the petitioner consciously availed the
statutory benefit of early payment, thereby limiting the penalty
exposure to 15% instead of the higher penalty which may follow
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(9 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
upon issuance of show cause notice and adjudication. The
respondents had no access to the petitioner’s GST portal
credentials or bank accounts and, therefore, the allegation of
forced payment is wholly baseless.
(iv) The absence of show cause notice at this stage does not
render the proceedings illegal, as the investigation is yet to be
completed and show cause notice, if required, would be issued
upon finalization of the investigation. Further, the Form GST DRC-
04 is only a procedural acknowledgement of voluntary payment
and its non-issuance does not, by itself, render the payment
involuntary or illegal. In the present case, issuance of Form GST
DRC-04 is premature as the petitioner has not paid interest under
Section 50 of the CGST Act and investigation is still pending. Thus,
the petitioner’s contention based on non-issuance of Form GST
DRC-04 is misconceived.
(v) The CBIC Instruction No.01/2022-23 does not prohibit
voluntary payment during search, inspection or investigation
proceedings. Rather, it clarifies that though there may be no
circumstance necessitating recovery during such proceedings,
there is no bar on a taxpayer voluntarily making payment on the
basis of ascertainment of liability. In the present case, the
petitioner was merely informed about the statutory option of
voluntary payment through Form GST DRC-03, whereafter it
consciously chose to deposit the admitted tax and penalty.
In view of the above submissions, learned counsel for the
respondents submitted that the allegation of coercion, raised
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(10 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
subsequently by way of retraction, is an afterthought intended to
derail the ongoing investigation, and the writ petition being
premature, misconceived and devoid of merit deserves to be
dismissed.
5. Heard learned counsel for the parties and perused the
material available on record.
6. Before delving into the merits of the case, it would be
appropriate to refer to the relevant provisions of the CGST Act and
CGST Rules which are applicable in the present case.
Section 74 of the CGST Act
“ 74. Determination of tax not paid or short paid or
erroneously refunded or input tax credit wrongly availed or
utilised by reason of fraud or any wilful- misstatement or
suppression of facts.
(1) Where it appears to the proper officer that any tax has not
been paid or short paid or erroneously refunded or where
input tax credit has been wrongly availed or utilised by reason
of fraud, or any wilful-misstatement or suppression of facts to
evade tax, he shall serve notice on the person chargeable with
tax which has not been so paid or which has been so short
paid or to whom the refund has erroneously been made, or
who has wrongly availed or utilised input tax credit, requiring
him to show cause as to why he should not pay the amount
specified in the notice along with interest payable thereon
under section 50 and a penalty equivalent to the tax specified
in the notice.
XXX XXX XXX
(5) The person chargeable with tax may, before service of
notice under sub-section (1), pay the amount of tax along with
interest payable under section 50 and a penalty equivalent to
fifteen per cent. of such tax on the basis of his own
ascertainment of such tax or the tax as ascertained by the
proper officer and inform the proper officer in writing of such
payment.
(6) The proper officer, on receipt of such information, shall not
serve any notice under sub-section (1), in respect of the tax so
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(11 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
paid or any penalty payable under the provisions of this Act or
the rules made thereunder.
(7) Where the proper officer is of the opinion that the amount
paid under sub-section (5) falls short of the amount actually
payable, he shall proceed to issue the notice as provided for in
sub-section (1) in respect of such amount which falls short of
the amount actually payable.
(8) Where any person chargeable with tax under sub-section
(1) pays the said tax along with interest payable under section
50 and a penalty equivalent to twenty-five per cent. of such tax
within thirty days of issue of the notice, all proceedings in
respect of the said notice shall be deemed to be concluded.
XXX XXX XXX”
Rule 142 of the CGST Rules
“ 142. Notice and order for demand of amounts payable
under the Act.-
(1) The proper officer shall serve, along with the
(a) Notice issued under section 52 or section 73 or section 74
or section 76 or section 122 or section 123 or section 124 or
section 125 or section 127 or section 129 or section 130, a
summary thereof electronically in FORM GST DRC-01,
(b) statement under sub-section (3) of section 73 or sub-
section (3) of section 74, a summary thereof electronically in
FORM GST DRC-02, specifying therein the details of the
amount payable.
(1A) The proper officer may, before service of Notice to the
person chargeable with tax, interest and penalty, under sub
section (1) of Section 73 or sub-section (1) of Section 74, as
the case may be, communicate the details of any tax, interest
and penalty as ascertained by the said officer, in Part A of
FORM GST DRC-01A.;
(2) Where, before the service of Notice or statement, the
person chargeable with tax makes payment of the tax and
interest in accordance with the provisions of sub-section (5) of
section 73 or, as the case may be, tax, interest and penalty in
accordance with the provisions of subsection (5) of section 74 ,
or where any person makes payment of tax, interest, penalty or
any other amount due in accordance with the provisions of the
Act whether on his own ascertainment or, as communicated by
the proper officer under sub-rule (1A), he shall inform the
proper officer of such payment in FORM GST DRC-03 and the
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(12 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
proper officer shall issue an acknowledgement, accepting the
payment made by the said person in FORM GST DRC-04.
(2A) Where the person referred to in sub-rule (1A) has made
partial payment of the amount communicated to him or desires
to file any submissions against the proposed liability, he may
make such submission in Part B of FORM GST DRC-01A.
XXX XXX XXX”
6.1. A plain reading of Section 74(5) of the CGST Act reveals that
the legislature has carved out a mechanism enabling a taxable
person to voluntarily discharge his liability even before issuance of
a show cause notice under Section 74(1). The provision applies to
cases involving allegations of fraud, wilful misstatement or
suppression of facts. It permits the person chargeable with tax to
pay, prior to service of notice, the amount of tax along with
interest payable under Section 50 and a penalty equivalent to
15% of the tax amount, either on the basis of his own
ascertainment or on the basis of the liability ascertained by the
proper officer. Upon making such payment, the taxable person is
required to inform the proper officer in writing.
6.2. The consequence of such payment is provided under Section
74(6), which mandates that upon receipt of the information
regarding payment, the proper officer shall not serve a notice
under Section 74(1) in respect of the tax so paid or the penalty
payable thereon. Thus, the statutory scheme contemplates a pre-
notice resolution of the dispute and grants an opportunity to the
taxpayer to avoid adjudicatory proceedings by voluntarily
discharging the liability together with the prescribed interest and
reduced penalty. However, under Section 74(7), where the proper
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(13 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
officer forms an opinion that the amount so paid falls short of the
amount actually payable, he is not precluded from issuing a notice
in respect of the differential amount.
6.3. Rule 142(2) of the CGST Rules prescribes the procedure for
implementation of the aforesaid statutory scheme. The Rule
provides that where a person makes payment in accordance with
Section 74(5), whether on his own ascertainment or pursuant to
the liability communicated by the proper officer under Rule
142(1A) through Form GST DRC-01A, he is required to intimate
such payment in Form GST DRC-03. Upon receipt of such
intimation, the proper officer is required to issue an
acknowledgment in Form GST DRC-04.
6.4. The conjoint reading of Section 74(5), Section 74(6) and
Rule 142(2) makes it evident that the statutory framework
encourages voluntary compliance before initiation of formal
adjudication proceedings. Once the taxpayer discharges the tax,
interest and penalty liability and intimates the same through Form
GST DRC-03, the proper officer is obliged to consider such
payment and acknowledge the same through Form GST DRC-04,
whereupon no show cause notice under Section 74(1) is required
to be issued for the amount so paid. The entire scheme thus
manifests the legislative intent to facilitate early resolution of tax
disputes and obviate unnecessary adjudication where the taxpayer
voluntarily accepts and discharges the liability at the pre-notice
stage.
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(14 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
7. Considering the submissions and the statutory scheme, the
sole issue which arises for consideration is whether the petitioner
voluntarily deposited a sum of Rs.2,35,23,506/- and furnished
Form GST DRC-03 under Section 74(5) of the CGST Act of its own
free will or whether such payment was made under coercion
during the course of search and seizure proceedings.
8. Before examining the rival contentions, it would be apposite
to notice the principles emerging from the judgments relied upon
by learned counsel for the petitioner.
8.1. In the case of Vallabh Textiles (supra), the Delhi High
allowed the refund of reversal of the ITC claimed on the count that
firstly, the petitioner therein was not issued the acknowledgement
receipt in the Form GST DRC-04 after filing the Form GST DRC-03
which reflected that payment was made involuntarily, secondly,
the deposit was made in four instalments before the search and
seizure proceedings were concluded, and thirdly, the CBIC
Instruction No.01/2022-23 which was issued following the
directions of the Gujarat High Court in the case of Bhumi
Associate Vs. Union of India; R/Special Civil Application
Nos. 3196 of 2021 failed to include the direction that the
assessee would be advised to fill the Form GST DRC-03 for
voluntary payment on the next day after the search and seizure
proceedings have concluded and officers have left the premises
and even otherwise, such direction been issued vide a judicial
order was required to be adhered to by the authorities which they
failed to do and lastly, the delay of the petitioner in objecting the
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(15 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
amount deposited would not obliterate the process prescribed
under statue or by law, that is, via dicta contained in a judgment.
8.2. In Shree Ganesh Molasses Trading Co. (supra), the
Gujarat High Court reiterated the principles enunciated in Vallabh
Textiles (supra) and examined the incomplete incorporation of
the directions issued in Bhumi Associate (supra) while publishing
CBIC Instruction No.01/2022-23. The Court also considered the
material placed on record, including the telephonic conversation
relating to procurement of OTP for filing Form GST DRC-03, and
ultimately directed refund of the amount deposited.
8.3. In Samyak Metals (supra), the Punjab and Haryana High
Court, relying upon Vallabh Textiles (supra), held that in the
absence of issuance of Form GST DRC-04 and any subsequent
proceedings under Section 74(1) of the CGST Act, the payment
could not be treated as voluntary and accordingly directed refund
of the amount deposited.
8.4. In the case of Neeraj Paper Marketing Ltd. (supra), the
Delhi High Court considering its earlier judgment in the case of
Vallabh Textiles (supra), also allowed the reversal of amount
deposited through Form GST DRC-03 on the count that the same
could not be termed to be deposited voluntarily as neither the
deposit was acknowledged nor its benefit was granted while
issuing show cause notice in terms of Section 74(7) of the CGST
Act.
8.5. In the case of Sri J. Ramesh Chand (supra), the learned
Single Judge of the Karnataka High Court allowed the writ petition
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(16 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
holding that the collection of Rs.10 crores from the petitioner
therein during the course of search, inspection and seizure
proceedings could not be treated as a voluntary payment or a
payment made on self-ascertainment under Section 74(5) of the
CGST Act. The Court found that prior to the payment, neither any
notice had been issued nor had any proceedings been initiated for
ascertainment, quantification or determination of tax liability. The
absence of any contemporaneous material demonstrating self-
ascertainment by the petitioner, coupled with the failure of the
department to issue an acknowledgment in Form GST DRC-04 as
contemplated under Rule 142(2), led the Court to conclude that
the payment was not voluntary in nature. The Court further held
that the circumstances surrounding the search and seizure
proceedings clearly negated the plea of voluntary compliance. The
records and electronic devices necessary for undertaking self-
ascertainment had already been seized by the authorities, making
it highly improbable for the petitioner to independently determine
the alleged liability. The Court further noticed that the payment
reflected in Form GST DRC-03 did not include any component
towards interest or penalty, which ordinarily forms part of a
payment contemplated under Section 74(5) of the CGST Act.
Significantly, the department itself quantified the alleged liability
only subsequently through issuance of Form GST DRC-01A,
thereby demonstrating that no ascertainment of liability existed at
the time the amount was collected.
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(17 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
9. This Court finds itself in agreement with the observations
made in the aforesaid decisions. A common thread running
through all the judgments is that a payment made through Form
GST DRC-03 during the course of search proceedings cannot,
merely by reason of such deposit, be presumed to be voluntary.
The surrounding circumstances, including the stage at which the
payment was made, compliance with the statutory safeguards
under the Act and Rules, issuance of Form GST DRC-04,
subsequent conduct of the department, and the existence of any
material demonstrating self-ascertainment of liability, are all
relevant factors for determining whether the payment was
genuinely voluntary or was made under coercion.
9.1. It is noted that the judgments rendered in Samyak Metals
(supra), Shree Ganesh Molasses Trading Co. (supra), Neeraj
Paper Marketing Ltd. (supra) and Sri J. Ramesh Chand
(supra) have not been challenged further. As regards the
judgment in Vallabh Textiles (supra), it is evident from the
information available on the website of the Hon'ble Supreme Court
that the said matter is tagged as an impugned order in Special
Leave to Appeal (C) No(s). 13670/2025 and 24821/2023.
However, the said proceedings have not been finally decided on
merits, nor has any material been placed before this Court to
indicate that the judgment in Vallabh Textiles (supra) has been
stayed, reversed or set aside. Accordingly, the aforesaid
judgments continue to hold the field and are entitled to due
persuasive value.
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(18 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
10. At this stage, it would also be apposite to refer to the
observations made by the Hon’ble Supreme Court regarding the
instructions issued by CBIC so also the instances of filing of DRC-
03 under threat. In the case of Radhika Agarwal Vs. UOI &
Ors.; 2025 INSC 272 , the Hon’ble Supreme Court observed as
under:
“63. One of the assertions and allegations made on behalf of
the petitioners is that the parties are compelled and coerced to
admit and make payment of tax in view of the threat of arrest.
This is in spite of the fact that there is no assessment or
adjudication as to the alleged demand.
64. In this regard, we may refer to the circular
F.No.GST/INV/Instructions/2022 2023 (Instruction No.
01/2022-23) dated 25.05.2022 issued by the Central Board of
Indirect Taxes and Customs referring to the taxpayers
depositing partial or full GST liability during the course of
search, inspection or investigation. The relevant extracts of the
circular reads:
XXX XXX XXX
65. The circular notes that instances have been noticed where
allegations of force and coercion were made by the officers for
making recovery during the course of search, inspection and
investigation. Some of the taxpayers had accordingly
approached the High Courts. Reference is made to Section 79
of the GST Acts to state that recovery can be made only after
following the due process of issuance of notice and subsequent
confirmation of demand by issuance of an adjudicating order.
On the last aspect, reference is made to Sections 73(5) and
74(5) of the GST Acts, which help the taxpayers in discharging
their admitted liability, self-ascertained or as ascertained by
the tax officer, without having to bear the burden of interest
under Section 50 of the GST Acts. The statement in the circular
that an assessee may voluntarily deposit tax as noticed was a
cause of discussion before us. In this regard, our attention was
drawn to Section 74(5) of the GST Acts, which states that a
person chargeable with tax may, before service of notice under
sub-section (1), pay the amount of tax along with interest
payable under Section 50 and a penalty equivalent to 15% of
such tax on the basis of his own ascertainment of such tax or
the tax as ascertained by the proper officer, and inform the
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(19 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
proper officer in writing of such payment. Sub section (5) to
Section 74 relates to voluntary payment, and does not
postulate payment under force, coercion or threat of arrest.
The aforesaid circulars are binding and should be adhered to
in letter and spirit. The authorities must exercise due care and
caution as coercion and threat to arrest would amount to a
violation of fundamental rights and the law of the land. It is
desirable that the Central Board of Indirect Taxes and
Customs promptly formulate clear guidelines to ensure that no
taxpayer is threatened with the power of arrest for recovery of
tax in the garb of self-payment. Way back in the year 1978, a
three Judges Bench of this Court in Nandini Satpati v. P.L.
Dani and Another : (1978) 2 SCC 424 had observed as under:
“57. (…) We are disposed to read “compelled
testimony” as evidence procured not merely by
physical threats or violence but by psychic
torture, atmospheric pressure, environmental
coercion, tiring interrogative prolixity,
overbearing and intimidatory methods and the
like — not legal penalty for violation. (…)””
10.1. The above observations of the Hon’ble Supreme Court
make it clear that a payment made during the course of search,
inspection or investigation proceedings cannot automatically be
presumed to be involuntary merely because it was made at the
pre-notice stage. At the same time, the mere filing of Form GST
DRC-03 does not, by itself, foreclose an assessee from contending
that the payment was obtained under coercion. The question as to
whether a payment was voluntary or otherwise is essentially a
question of fact, which is required to be determined on the basis
of the attending circumstances and the material available on
record.
11. In the present case, admittedly, no notice under Section
74(1) of the CGST Act had been issued when the amount of
Rs.2,35,23,506/- came to be deposited. Further, the respondents
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(20 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
have not placed on record any material to demonstrate that prior
to filing of Form GST DRC-03, there existed any quantification,
determination or ascertainment of liability undertaken by the
petitioner. Apart from relying upon the declaration contained in
Form GST DRC-03, no contemporaneous material has been
produced to establish that the petitioner independently evaluated
the alleged wrongful availment of ITC and voluntarily arrived at
the figure ultimately deposited.
12. It is also pertinent to note that the amount came to be
deposited during the course of search and seizure proceedings
itself. The petitioner has specifically pleaded that the deposit was
made under pressure exerted by the officers conducting the
search. Though the respondents have denied such allegation, the
surrounding circumstances assume significance. The search
proceedings were continuing, the records and electronic devices of
the petitioner were under the control of the authorities and no
material has been placed on record to indicate that the petitioner
was afforded any reasonable opportunity to undertake an
independent exercise of self-ascertainment as contemplated under
Section 74(5) of the Act.
12.1. Further, much emphasis has been laid by the
respondents on Column 8 of Form GST DRC-03 to contend that
the payment was voluntarily made by the petitioner. However, a
perusal of the said column itself reveals that the payment was
made pursuant to initiation of enquiry by the department. The said
declaration, therefore, does not establish that the liability had
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(21 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
been independently self-ascertained by the petitioner prior to
commencement of departmental action. Rather, it fortifies the
position that the deposit came to be made only after the
investigative machinery had been set in motion. In the absence of
any material demonstrating a prior and independent determination
of liability by the petitioner, the payment cannot be conclusively
construed as voluntary payment within the meaning of Section
74(5) of the CGST Act.
13. This Court further notes that admittedly no acknowledgment
in Form GST DRC-04 was issued by the respondents. Though non-
issuance of Form GST DRC-04 may not by itself be determinative,
the same assumes relevance while examining the conduct of the
department when the voluntary deposit was made during the
search and seizure proceedings.
13.1. The contention advanced on behalf of the respondents
that Form GST DRC-04 was not issued since the petitioner had not
deposited interest along with the tax amount also does not
impress this Court. If the respondents seek to justify the deposit
as a voluntary payment under Section 74(5) of the CGST Act, it
was incumbent upon them to demonstrate due compliance with
the statutory procedure contemplated thereunder.
13.2. If the respondents were of the view that the payment
made by the petitioner did not satisfy the requirements of Section
74(5) on account of non-payment of interest, the same would
itself indicate that there was no complete and valid self-
ascertainment of liability as contemplated under the provision.
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(22 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
Such a circumstance weakens, rather than strengthens, the
respondents' contention that the petitioner had voluntarily
determined and discharged its liability under Section 74(5) of the
CGST Act.
13.3. Moreover, even if the contention of respondents is
accepted that the acknowledgement in the Form GST DRC-04 was
not issued due to interest not having been paid by the petitioner,
the other circumstances existing at the time of deposit remain
relevant and are required to be considered independently to
examine the conduct of the respondents. Further, even if the Form
GST DRC-03 was incomplete as per the respondents, then they
may have communicated the same to the petitioner after carrying
out the necessary calculations, whereas, admittedly, no such
information was supplied nor any show cause notice has been
issued as the process is still pending. Hence, this reflects an
additional circumstance which casts doubt on the respondents'
assertion that the amount deposited through Form GST DRC-03
represented a voluntary payment under Section 74(5) of the CGST
Act.
14. The subsequent conduct of the petitioner is also relevant.
The petitioner did not acquiesce in the payment and raised
objections regarding voluntariness of the deposit within a
reasonable period. Such conduct is inconsistent with the theory of
conscious and voluntary acceptance of liability sought to be
projected by the respondents.
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(23 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
15. It is also pertinent to note that, as also observed by the
Delhi High Court in the case of Vallabh Textiles (supra), the
CBIC Instruction No.01/2022-23 dated 25.05.2022 came to be
issued pursuant to the observations and directions of the Gujarat
High Court in Bhumi Associate (supra) with the object of
ensuring that taxpayers are not subjected to recovery proceedings
during the course of search, inspection or investigation. The
Gujarat High Court had, inter alia , emphasized that if an assessee
desires to make a voluntary payment, such payment should
ordinarily be made after conclusion of the search proceedings and
after the officers have left the premises so as to eliminate any
apprehension of pressure or coercion. Although the aforesaid
safeguards were intended to ensure genuine voluntariness of
payment, the material available on record does not indicate
adherence thereto in the present case. On the contrary, the
amount came to be deposited during the course of search
proceedings itself. The failure of the respondents to adhere to the
safeguards envisaged in Bhumi Associate (supra), which formed
the basis of the aforesaid CBIC Instruction, constitutes an
additional circumstance supporting the petitioner's contention that
the payment cannot be treated as a truly voluntary payment
under Section 74(5) of the CGST Act.
16. On the basis of the discussion made above, the following
aspects emerge in the present case:-
(i) the payment was obtained during search proceedings,
(ii) there was no prior ascertainment or determination of
liability,
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(24 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
(iii) the respondents have failed to establish any
independent self-ascertainment by the petitioner,
(iv) the petitioner subsequently disputed the voluntariness
of the payment, and
(v) the directions issued in Bhumi Associate (supra) by
the Gujarat High Court as well as in CBIC Instruction
No.01/2022-23 were not adhered to.
17. Considering the above aspects so also the discussion made
hereinabove, this Court is of the considered opinion that the
impugned amount deposited by the petitioner was not voluntary in
nature and thus, the retention of the amount deposited by the
petitioner vide Form GST DRC-03, cannot be sustained.
Accordingly, the writ petition is partly allowed .
18. The respondents are directed to refund the amount of
Rs.2,35,23,506/- deposited by the petitioner through Form GST
DRC-03.
18.1. So far as the prayer for grant of interest on the
refunded amount is concerned, this Court takes note of the
undisputed fact that the investigation initiated against the
petitioner has not yet attained finality and no final determination
of tax liability has been made by the competent authority.
Although this Court has come to the conclusion that the amount
deposited through Form GST DRC-03 cannot be treated as a
voluntary payment under Section 74(5) of the CGST Act and is
therefore liable to be refunded, the question as to whether any
tax, interest or penalty is ultimately payable by the petitioner is
yet to be adjudicated. In the absence of a final determination of
liability, it would not be appropriate for this Court to adjudicate the
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)

(25 of 25)
[2026:RJ-JD:27036-DB] [CW-21298/2025]
petitioner's claim for interest on the refunded amount. It is
possible that upon conclusion of the investigation and subsequent
proceedings, the respondents may determine a tax liability against
the petitioner. Conversely, it may also transpire that the amount
deposited by the petitioner exceeds the liability, if any, ultimately
determined. The entitlement of either party to claim interest
would necessarily depend upon the outcome of such
determination. Therefore, this Court, at this stage, is not inclined
to grant interest on the amount to be refunded.
19. The aforesaid amount shall be refunded within a period of
eight weeks from the date of receipt of a certified copy of this
order.
20. It is made clear that this order shall not preclude the
respondents from proceeding further in accordance with law and
undertaking assessment, adjudication or any other proceedings
permissible under the provisions of the CGST Act.
21. It is further clarified that this Court has not expressed any
opinion on the merits of the allegations relating to wrongful
availment of ITC and all rights and contentions of the parties in
that regard are kept open.
22. All pending applications stand disposed of.
(SUNIL BENIWAL),J (ARUN MONGA),J
skm/-
(Uploaded on 26/06/2026 at 10:13:48 AM)
(Downloaded on 04/07/2026 at 12:04:38 AM)
Powered by TCPDF (www.tcpdf.org)