M/S HUKKERI TALUKA SAMAGRA GRAMEEN ABHIVRADDI SANGH vs THE STATE OF KARNATAKA

Court
Karnataka High Court

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R


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IN THE HIGH COURT OF KARNATAKA AT DHARWAD



ST
DATED THIS THE 31 DAY OF AUGUST, 2026


BEFORE

THE HON'BLE MR. JUSTICE C.M. POONACHA

WRIT PETITION NO. 108177 OF 2025 (T-RES)


BETWEEN:

M/S. HUKKERI TALUKA SAMAGRA
GRAMEEN ABHIVRADDI SANGH,
CTS 2360, GURUKRIPA BUILDING,
NEAR BDCC BANK, HUKKERI,
BELAGAVI, KARNATAKA- 591309,
GSTIN: 29AAAAH1667D1ZU

REPRESENTED HEREIN BY
ITS PRESIDENT,
MR. VIJAYAKUMAR RAVADI
S/O BALAPPA RAVADI,
AGED ABOUT 66 YEARS,
ADDRESS HOUSE NO. 2360/1,
NEAR BUS STAND,
HUKKERI BELAGAVI,
KARNATAKA- 591309,
AADHAR NO: 324976146396,
MOB: 9735595311
EMAIL: [email protected]
…PETITIONER
(BY SRI. GANESH VISHWANATH SHANDAGE, ADVOCATE AND
SMT. PRATIMA SHIPURKAR S., ADVOCATE)

AND:

1. THE STATE OF KARNATAKA,
REPRESENTED BY CHIEF SECRETARY,
VIDHANA SOUDHA,
BENGALURU- 560009.

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2. THE COMMISSIONER OF COMMERCIAL TAXES,
COMMERCIAL TAX DEPARTMENT,
GOVERNMENT OF KARNATAKA,
COMMERCIAL TAX OFFICE-1,
FIRST MAIN ROAD,
GANDHINAGAR,
BENGALURU- 560009.

3. THE JOINT COMMISSIONER
OF COMMERCIAL TAXES (APPEALS)
COMMERCIAL TAX DEPARTMENT
GOVERNMENT OF KARNATAKA,
TH
SUMOULYA SOUDHA, 5 FLOOR,
CLUB ROAD, BELAGAVI- 590001.

4. THE JOINT COMMISSIONER OF
COMMERCIAL TAXES ENFORCEMENT
COMMERCIAL TAX DEPARTMENT
GOVERNMENT OF KARNATAKA,
SUMOULYA SOUDHA,
TH
4 FLOOR, CLUB ROAD,
BELAGAVI- 590001.

5. THE JOINT COMMISSIONER OF
COMMERCIAL TAXES ADMINISTRATION
COMMERCIAL TAX DEPARTMENT
GOVERNMENT OF KARANTAKA,
TH
SUMOULYA SOUDHA, 4 FLOOR,
CLUB ROAD, BELAGAVI- 590001.

6. THE COMMERCIAL TAX OFFICER,
SGSTO-381, SANSUDDI BUILDING,
POST OFFICE ROAD,
SANKESHWAR- 591313.

7. THE COMMERCIAL TAX OFFICER,
(ENFORCEMENT) GOKAK,
NORTH ZONE, BELAGAVI,
SUMOULYA SOUDHA,
CLUB ROAD, BELAGAVI- 590001.

8. THE COMMERCIAL TAX OFFICER,
(ENFORCEMENT)-3, BELAGAVI,
SUMOULYA SOUDHA,

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CLUB ROAD, BELAGAVI- 590001.
…RESPONDENTS
(BY SRI. GANGADHAR J.M., AAG AND
SMT. NANDINI SOMAPUR, AGA)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA, PRAYING TO, A. ISSUE A WRIT OF
CERTIORARI, OR SUCH OTHER WRIT, ORDER OR DIRECTION IN THE
NATURE OF A WRIT OF CERTIORARI, QUASHING THE IMPUGNED
ORDERS IN APPEAL VIDE ARN NO. AD2902250288123 DATED
28.08.2025 FOR FY 2017-18 AND ARN NO. AD290225028856R
DATED 28.08.2025 FOR FY 2018-19, BOTH PASSED BY RESPONDENT
NO. 03 UNDER SECTION 107(11) OF KARNATAKA GST ACT, 2017
(ANNEXURE Y-1 AND ANNEXURE Y-2 RESPECTIVELY) AND ETC.

THIS PETITION, COMING ON FOR PRELIMINARY HEARING,
THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE C.M. POONACHA

ORAL ORDER

The present writ petition is filed seeking for the following
reliefs:
a. “Issue a Writ of Certiorari, or such other writ, Order
or direction in the nature of a Writ of Certiorari,
quashing the impugned Orders in Appeal vide ARN
No. AD2902250288123 dated 28.08.2025 for FY
2017-18 and ARN No. AD290225028856R dated
28.08.2025 for FY 2018-19, both passed by
Respondent No. 03 under Section 107(11) of
Karnataka GST Act, 2017 (Annexure Y1 and
Annexure Y2 respectively);

b. Issue an appropriate writ, order or direction, holding
and declaring that the petitioner is legally entitled to
receive a refund amount of Rs.53,97,352
(38,97,352+15,00,000) along with applicable
interest, which the Respondent No. 07 has recovered
from the Petitioner during the course of investigation
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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under duress by adopting coercive and forceful
means without any pre-dated subsisting tax demand
outstanding at relevant time;

c. Issue a Writ of Mandamus, or such other writ, Order
or direction, as this Honourable Court may deem fit
to Respondent No. 06 to grant refund of the entire
amount of Rs.53,97,352 (38,97,353+15,00,000)
coercively recovered along with applicable interest;
and

d. Pass such other or further orders as this Honourable
Court may deem fit and proper in the facts and
circumstances of the case, and in the interests of
justice, equity and good conscience, including the
costs of this writ petition.”


2. The relevant factual matrix in a nutshell is that the
petitioner is a registered taxpayer engaged in providing
manpower supply services to various government departments
and public authorities and is registered under the provisions of
1
the Central Goods and Services Tax Act, 2017 , as well as the
2
Karnataka Goods and Services Tax Act, 2017 . It is the case of
the petitioner that he has periodically filed the returns under
the relevant statutory provisions.

3. It is the further case of the petitioner that on a
purported intelligence report alleging discrepancy between the
petitioner GSTR-3B and GSTR-7 records, the respondent

1

Hereinafter referred to as the ‘CGST Act’
2

Hereinafter referred to as the ‘KGST Act’
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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No.4/Joint Commissioner authorised the respondent
3
No.7/Commercial Tax Officer to inspect the petitioner's
premises. Accordingly, on 20.01.2024, the CTO along with
other officials inspected the premises of the petitioner.
Subsequently, the petitioner on 27.03.2024 is stated to have
voluntarily paid a sum of ₹20,97,352/- and ₹15,00,000/- (i.e.,
a total sum of ₹35,97,352/-) (details at Annexures-A1 and A2
to the writ petition) under Section 73(5) of the CGST Act. The
petitioner has also submitted Form GST DRC-03 towards the
said payments. It is the contention of the petitioner that the
said payments made on 27.03.2024 was made under duress.

4. Thereafter, notice dated 08.05.2024 (Annexure-P1
to the writ petition) and endorsement dated 13.05.2024
(Annexure-P2 to the writ petition) has been issued by the CTO.
Vide the endorsement dated 13.05.2024, the petitioner has
been called upon to appear in person on 16.05.2024 at 11.00
a.m., in the office of the CTO. The petitioner was further
notified that, in the event, he failed to appear for personal
hearing, legal action would be initiated under Section 70 of the

3

Hereinafter referred to as the ‘CTO’
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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KGST Act. At this juncture, it is pertinent to notice that no
provision of law is mentioned in the endorsement dated
13.05.2024, pursuant to which, the personal appearance of the
petitioner was required. The respondents also do not dispute
that no provision of law is mentioned in the
intimation/endorsement dated 08.05.2024.

5. The petitioner is stated to have voluntarily made a
payment of ₹18,00,000/- on 14.05.2025 (Annexure-A2 to the
writ petition) under Section 73(5) of the CGST Act. The
petitioner has also filed Form GST DRC-03 with respect to the
said payment. It is the contention of the petitioner that the said
payment of ₹18,00,000/- is also under duress.

6. Thereafter, a Show-cause notice dated 18.07.2024
has been issued in Form DRC 01A under Section 74 of the
CGST and KGST Act, making a demand of a sum of ₹3,21,870/-
along with interest and penalty (Annexure-Q to the writ
petition). The petitioner, vide reply dated 29.07.2024,
(Annexure-R to the writ petition), has replied to the said Show-
cause notice dated 18.07.2024. Thereafter, a Show-cause
notice dated 07.08.2024, (Annexure-S to the writ petition), has
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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been issued in Form GST DRC-01 Rule 142(1A), being a Show-
cause notice issued under Section 74 of the KGST Act. The
petitioner vide reply dated 02.09.2024, (Annexure-T to the writ
petition), has replied to the same. In the said reply, the
petitioner has specifically stated that he was coerced to pay a
sum of ₹53,97,352/-, which was involuntary and under the
protest.

7. Thereafter, the petitioner made refund applications
dated 12.09.2024 (Annexures-C1 and C2 to the writ petition),
seeking for refund of a sum of ₹38,97,352/- and ₹15,00,000/-.
In the said refund applications, the petitioner has detailed the
sequence of events, under which, it is alleged that a forceful
recovery was sought to be made by the authorities, consequent
to which, the said payments have been made. The petitioner
was afforded an opportunity of personal hearing and thereafter,
the refund applications were rejected vide orders dated
12.11.2024 (Annexures-B1 and B2 to the writ petition).

8. Subsequently, an adjudication order under Section
74(9) of the CGST/KGST Act dated 06.02.2025, (Annexure-W
to the petition), was issued. The petitioner filed
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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W.P.No.103059/2025 assailing the notice dated 06.02.2025. A
Co-ordinate Bench of this Court, vide interim order dated
03.06.2025 (Annexure-X1 to the writ petition), has directed
that the respondent shall not precipitate the matter till the next
date of hearing.

9. The petitioner had filed an appeal [Appeal No.GST-
902/2024-25/B-945], challenging the rejection of refund
orders. The appeal filed by the petitioner assailing the refund
applications were also rejected by the Joint Commissioner by
order dated 28.08.2025 (Annexure-Y1 to the writ petition).
Being aggrieved, the present petition is filed.

10. It is the primary contention of the learned counsel
for the petitioner that the payments made by the petitioner on
27.03.2024 and 14.05.2024 are as a result of coercion by the
respondents/authorities and hence, the petitioner is entitled for
refund of the said amounts.

11. Learned Additional Advocate General appearing for
the State vehemently contesting the allegations made by the
petitioner submits that the payments made on 27.03.2024
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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were after 68 days of inspection that was conducted on
20.01.2024. It is further contented that the second payment
made on 14.05.2024 was after 41 days of the first payment. In
any event, it is contented on behalf of the State that the
proceedings having been initiated under Section 74(9) of the
CGST Act, vide the order dated 06.02.2025, (Annexure-W to
the writ petition), the question of refunding the amounts paid
by the petitioner does not arise.

12. It is forthcoming that pursuant to the inspection
conducted on 20.01.2024, (Annexure-N to the writ petition), no
proceedings have been initiated against the petitioner. The
official respondents seek to rely on Section 73(5) of the Act to
contend that there is a provision for making payment
voluntarily, which has been availed by the petitioner. It is
pertinent to notice Section 73(5) of the CGST Act, reads as
under:
“ 73(5). The person chargeable with tax may, before
service of notice under subsection (1) or, as the case may
be, the statement under sub-section (3), pay the amount
of tax along with interest payable thereon under section
50 on the basis of his own ascertainment of such tax or the
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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tax as ascertained by the proper officer and inform the
proper officer in writing of such payment.”


13. It is also pertinent to notice Rule 142(2) of the
4
Central Goods and Services Tax Rules, 2017 , which reads as
under:
“142(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 clause (i)
of sub-section (8) of section 74A, as the case may be, or
tax, interest and penalty in accordance with the
provisions of subsection (5) of section 74 or clause (i) of
sub-section (9) of section 74A], or where any person
makes payment of tax, interest, penalty or any other
amount due in accordance with the provisions of the
2
Act [whether on his own ascertainment or, as
communicated by the proper officer under sub-rule
8
(1A),] [he shall inform the proper officer of such
payment in FORM GST DRC-03 and an
acknowledgement, in FORM GST DRC–04 shall be
made available to the person through the common
portal electronically].”


4
Hereinafter referred to as the ‘CGST Rules’
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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14. It is pertinent to note that Rule 142 of the Rules
specifically stipulates that if a voluntary payment is made under
sub-section (5) of Section 73 or Section 74 in Form GST DRC-
03, an acknowledgment of such payment is required to be
issued by the concerned authorities in Form GST DRC-04.
Admittedly, in the present case, the respondents have not
issued GST DRC-04.

15. Further, it is pertinent to note that sub-section (5)
of Section 73 or Section 74 is to be made on the basis of own
ascertainment of tax by the taxpayer or as ascertained by the
proper officer. In the present case, there is no material on
record to indicate any manner of assessment that has been
made with regard to the tax on the basis of which the amounts
that have been paid.

16. It is also pertinent to note that pursuant to the
judgment of the Supreme Court in the case of Radhika
5
Agarwal vs. Union of India and other judgments,
instructions dated 25.05.2022 have been issued by the
Commissioner/GST as to the manner and circumstances on

5
(2025) 6 SCC 545
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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which voluntary payment is to be made. It is pertinent to notice
the relevant portions of the said instructions, which is as under:
“ Subject: Deposit of tax during the course of
search, inspection or investigation reg .
During the course of search, inspection or
investigation, sometimes the taxpayers opt for deposit
of their partial or full GST liability arising out of the
issue pointed out by the department during the course
of such search, inspection or investigation by
furnishing DRC-03. Instances have been noticed
where some of the taxpayers after voluntarily
depositing GST liability through DRC-03 have alleged
use of force and coercion by the officers for making
'recovery' during the course of search or inspection or
investigation. Some of the taxpayers have also
approached Hon'ble High Courts in this regard.
2. The matter has been examined. Board has felt the
necessity to clarify the legal position of voluntary
payment of taxes for ensuring correct application of
law and to protect the interest of the taxpayers. It is
observed that under CGST Act, 2017 a taxpayer has
an option to deposit the tax voluntarily by way of
submitting DRC-03 on GST portal. Such voluntary
payments are initiated only by the taxpayer by
logging into the GST portal using its login id and
password. Voluntary payment of tax before issuance
of show cause notice is permissible in terms of
provisions of Section 73(5) and Section 74 (5) of the
CGST Act, 2017. This helps 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 CGST
Act, 2017 for delayed payment of tax and may also
save him from higher penalty imposable on him
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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subsequent to issuance of show cause notice under
Section 73 or Section 74, as the case may be.
3. It is further observed that recovery of taxes not
paid or short paid, can be made under the provisions
of Section 79 of CGST Act, 2017 only after following
due legal process of issuance of notice and
subsequent confirmation of demand by issuance of
adjudication order. No recovery can be made unless
the amount becomes payable in pursuance of an order
passed by the adjudicating authority or otherwise
becomes payable under the provisions of CGST Act
and rules made therein. Therefore, there may not
arise any situation where "recovery" of the tax dues
has to be made by the tax officer from the taxpayer
during the course of search, inspection or
investigation, on account of any issue detected during
such proceedings. However, the law does not bar the
taxpayer from voluntarily making payment of any tax
liability ascertained by him or the tax officer in respect
of such issues, either during the course of such
proceedings or subsequently.
4. Therefore, it is clarified that there may not be any
circumstance necessitating 'recovery' of tax dues
during the course of search or inspection or
investigation proceedings. However, there is also no
bar on the taxpayers for voluntarily making the
payments on the basis of ascertainment of their
liability on non-payment/ short payment of taxes
before or at any stage of such proceedings. The tax
officer should however, inform the taxpayers
regarding the provisions of voluntary tax payments
through DRC-03.”
(emphasis supplied)

Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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17. Learned counsel for the petitioner relies upon the
Division Bench judgment of this Court in the case of Union of
6
India vs. Bundl Technologies , whereunder the Division
Bench, while considering an appeal filed against an order of the
learned Single Judge, which ordered for refund of the tax
amount paid and dismissed the appeal. The Division Bench
while considering the question as to whether the amount paid
during the investigation was voluntary, noticing Section 74(1)
and (5) of the CGST Act as well as the judgment of the Division
Bench of the Gujarat High Court in the case of Bhumi
7
Associates vs. Union of India , has held as under:
19. The issue which arises for consideration is
whether amount of Rs. 27,51,44,157/- has been paid by
the company on its own ascertainment under section
74(5) of the Act. In the instant case, there is no material
on record to indicate that the amount of Rs. 15 Crores
and an amount of Rs. 12,51,44,157/- which were paid at
about 4AM and 1PM on 30-11-2019 and 27-12-2019
respectively were paid on admission by the Company
about its liability. There is no communication in writing
from company to the proper officer about either self
ascertainment or admission of liability by company to

6
[2022] 136 taxmann.com 112(Karnataka)
7
(2021) 124 taxmann.com 429 (Guj.)
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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infer that such a payment was made under section 74(5)
of the Act. The company intimated the Department vide
Communication dated 30-11-2019 that it reserves its
right to claim refund of the amount and the same should
not be treated as admission of its liability.
xxxxxx
21. Thus it is evident that payments have not been
made admitting the liability. On the other hand, the
company reserved its right to seek refund and made it
expressly clear that payment of the amount should not
be treated as admission of its liability. Besides the
aforesaid, there is no material on record to establish that
guidelines issued by division bench of High Court of
Gujarat were followed.
Thus for the aforementioned reasons, the first issue is
answered in the negative and it is held that the amount
was not paid voluntarily under section 74(5) of the CGST
Act.”



18. Further, while considering as to whether the
amounts recovered from the company during investigation was
under coercion and threat, and as to whether the action of the
concerned officers was high handed and arbitrary, the Division
Bench held as under:
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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“ 26. DGGI officers have invoked the provisions
under section 67(1) of the CGST Act relating to
inspection, search and seizure and have issued summons
under section 70 of CGST Act to officers of the company
to give evidence. The company has taken a stand in the
writ petition that during the course of investigation, the
DGGI officers have acted in a high-handed and arbitrary
manner and that the officers locked the door and
extended threats of arrest to Directors of the Company.
However, the Department has disputed the aforesaid
stand in its objections and has asserted that investigation
took place in a cordial atmosphere in which officer of the
company co-operated with DGGI officers. It is pertinent to
note that company in the writ petition has neither
attributed any specific role to officers of DGGI by name
nor has impleaded them in the writ petition. Therefore,
the same being a question of fact cannot be adjudicated
in a summary proceeding under Article 226 of the
constitution of India.
27. Before parting with the issue we would like to
state that no one in a society governed by rule of law can
take resort to a course of action not permissible in law. A
Statutory power has to be exercised reasonably and in
good faith, and for the purpose for which it is conferred.
The power vested in any Authority by law has to be
exercised in consonance with the spirit as well as letter of
the Act. The broader the sweeper ambit of the power, the
more caution and circumspection is required while
invoking such power. A statutory power has to be
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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exercised within a system of controls and has to be
exercised by relevance and reason. It needs reiteration
that a statutory power should not be exercised in a
manner, so as to instil fear in the mind of a person.
However, the facts and circumstances of the case the
third issue is kept open to be agitated in an appropriate
proceeding.
xxxxxx
31. The submission by the company that Green
Finch is neither a non-existent entity nor that the
company has rightly availed input tax credit is concerned
need not be adverted to in this proceeding, as the same is
pending investigation. Article 265 of the Constitution
mandates that collection of tax has to be by the authority
of law. If tax is collected without any authority of law, the
same would amount to depriving a person of his property
without any authority of law and would infringe his right
under article 300A of the Constitution of India as well. In
the instant case, the only provision which permits deposit
of an amount during pendency of an investigation is
section 74(5) of CGST Act, which is not attracted in the
fact situation of the case. Therefore, it is evident that
amount has been collected from Company in violation of
article 265 and 300-A of the Constitution. Therefore, the
contention of the Department that amount under deposit
be made subject to the outcome of the pending
investigation cannot be accepted. The Department,
therefore, is liable to refund the amount to the Company.”
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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19. A Co-ordinate Bench of this Court while considering
a similar fact situation in the case of Sri. J. Ramesh Chand
8
vs. Union of India and Others , after noticing the Division
Bench judgment of this Court in the case of Bundl
6
Technologies , as well as the judgment of the Supreme Court
9
in the case of Dabur India Ltd. Vs. State of Uttar Pradesh
5
and Radhika Agarwal , as also various other judgments held
as under:
“25. In the instant case, the material on record
discloses that on 23.03.2023, the 3rd respondent
undertook a raid at the residence of the petitioner and
seized a laptop; thereafter, on 24.03.2023, the
respondents 3 and 4 along with other officials undertook
search and inspection proceedings in the principal place
of business of the petitioner, during the course of which,
a sum of Rs.10 crores was obtained / received /
collected by them from the petitioner on 24.03.2023
itself. In my considered opinion, the material on record
clearly indicates that the aforesaid payment of Rs.10
crores by the petitioner to the respondents was
involuntaryand the same was not voluntary or by way of
self-ascertainment as contended by the respondents for
the following reasons:-

8
W.P.No.9890/2023, dated 13.10.2025, NC:2025:KHC:40313
9
(1990) 4 SCC 113
Digitally Signed by CHEPPUDIRA
MONNAPPA POONACHA

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(i) It is an undisputed fact that prior to the
search and inspection conducted by the
respondents on 24.03.2023, they did not issue any
notice to the petitioner nor were any proceedings to
ascertain, adjudicate or determine the tax, interest
and penalty payable by the petitioner which
indicates that there was no occasion for the
petitioner to pay the said sum voluntarily by way of
self-ascertainment to the respondents, thereby
indicating that the said amount was not paid
voluntarily by the petitioner.
(ii) Rule 142(2) of the CGST Rules, 2017,
contemplates that upon the petitioner making
payment in Form GST DRC-03, the respondents are
bound to issue an acknowledgment in Form GST
DRC-04 to the petitioner; undisputedly,
respondents did not issue any such
acknowledgment to the petitioner which is a
circumstance to clearly indicate that the said
amount was not a voluntary payment made by the
petitioner.
(iii) Prior to the search and inspection made by
the respondents, there was no demand made by
the respondents in relation to the amount paid by
the petitioner under any of the provisions of the
CGST Act, 2017, which is yet another circumstance
to indicate that there was no warrant / reason for
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the petitioner to make voluntary payment during
the course of search and inspection proceedings.
(iv) The material on record also indicates that
even at the time of payment by the petitioner, the
details, material particulars, quantification etc., of
the alleged self - ascertainment and voluntary
payment by the petitioner are conspicuously absent
except for filling up Form DRC-03 which merely
contains the amount without additional details in
this regard; interestingly, there are no other
contemporaneous document in this regard, thereby
establishing that the payment made by the
petitioner cannot be construed or treated as
voluntary as contended by the respondents.
(v) It is pertinent to note that the respondents
would be entitled to invoke Section 74 only in cases
of tax not paid / short paid / erroneously refunded /
input tax credit wrongly availed or utilised by
reason of fraud or any wilful - misstatement or
suppression of facts; it follows therefrom that the
provisions contained in Section 74 would apply only
if the respondents were to prove the aforesaid
allegations contemplated in the said provision made
against the assessee; in such proceedings to be
initiated under Section 74, it is highly inconceivable
that a tax payer / assessee in respect of whom,
search, seizure and inspection proceedings are
being conducted by the respondents would
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voluntarily make payment thereby exposing himself
to the risk of admitting that he is guilty of the
allegations contemplated in Section 74 of the CGST
Act; in other words, in the light of Form GST DRC-
03 said to have been submitted by the petitioner
along with the payment by invoking Section 74 (5)
of the CGST Act, it is highly / inherently improbable
that the said payment was made voluntarily by the
petitioner that too during the course of search,
seizure and inspection proceedings and even before
he became aware or came to know whether
proceedings under Sections 73 to 74 would be
initiated against him and as such, the payment
made by the petitioner cannot be said to be
voluntary by way of self-ascertainment on this
ground also.
(vi) A perusal of the material on record will
clearly indicate that prior to the payment made by
the petitioner, there was no proceeding or order by
the respondents which adjudicated or quantified or
ascertained the amount payable by the petitioner
nor any such quantification or ascertainment done /
made by the petitioner for the purpose of arriving
at the sum of Rs.10 crores paid by the petitioner,
which was not preceded by any order or basis so as
to arrive at the said figure; to put it differently, in
the absence of any material to establish as to how
the petitioner or quantified or arrived at a sum of
Rs.10 crores paid by him and in the absence of
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requisite / necessary material particulars / details in
this regard, it cannot be said that the said sum paid
by the petitioner was voluntary and by way of self -
ascertainment as contended by the respondents
whose contention in this regard deserves to be
rejected.
(vii) A perusal of the material pertaining to
search, inspection and seizure proceedings
comprising of mahazar, seizure order etc., will
indicate that on 23.03.2023 itself, the residence of
the petitioner was inspected by the respondents
who seized one laptop from the petitioner; on the
very next day i.e., on 24.03.2023, the respondents
seized various movable, articles comprising of
account books, desktops, server disks, mobile
phones, hard disks, laptop etc., from the business
premises of the petitioner and all necessary data
that was required for the purpose of self-
ascertainment had been seized from the petitioner
by the respondents; it follows therefrom that at the
time of payment, there could not have been any
material, accounts, etc., available with the
petitioner that would enable him to proceed with
self-ascertainment and accordingly, voluntarily
make payment of Rs.10 crores to the respondents;
in other words, in the light of the undisputed fact
that all necessary material, account etc., which was
the basis for self-ascertainment having been seized
by the respondents, it is highly improbable that the
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petitioner was in a position to carryout self-
ascertainment and make payment which is yet
another circumstance to establish that the said
payment was not voluntary as falsely contended by
the respondents, whose contention is liable to be
rejected on this score also.
(viii) As stated supra, except conducting search,
inspection and seizure proceedings, no other
proceedings or order were initiated or passed by
the respondents prior to the payment made by the
petitioner and no ascertainment had been made /
done by the respondents till that time; the
undisputed fact that the respondents themselves
ascertained the actual amount payable by the
petitioner only during the pendency of the present
petition by issuance of intimation in Form GST DRC-
01A dated 17.02.2025, is sufficient to come to the
conclusion that prior thereto and at the time of
search, seizure and inspection proceedings during
the course of which, payment was made, there was
no ascertainment of the actual tax, interest and
penalty payable by the petitioner which also
establishes that the payment made by the
petitioner was involuntary and not on his own
account but at the instance of the respondents,
whose contentions are liable to be rejected on this
ground also.
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(ix) A perusal of the provisions contained in
Section 74(5) of the CGST Act will indicate that
voluntary payment by the petitioner would have to
be made as per the procedure prescribed in the
said provision, viz., firstly, ascertain the actual tax
payable by him after verification / scrutiny of his
accounts, secondly, calculate the interest payable
by him in terms of Section 50 of the CGST Act,
which provides for discretion in payment of interest
upto 18% / 24% p.a. and thirdly, to calculate the
penalty at 15% on the tax payable by him; in other
words, this process of self-ascertainment calls for
and demands verification / scrutiny of accounts and
calculation of discretionary rate of interest up to
18% / 24% which is not a fixed rate of interest and
penalty, all of which is highly improbable and
physically / humanly impossible to be done by a tax
payer / assessee who is already under immense
pressure on account of search, inspection and
seizure operation being conducted, particularly
when all equipment which would be required /
necessary for such self-ascertainment was not
available with the petitioner and as such, even on
this ground also, I am of the view that the payment
made by the petitioner was clearly not voluntary
and at the behest / instance of the respondents
during the course of their proceedings.
(x) A perusal of the payment made by the
petitioner in Form GST DRC-03 will indicate that the
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same is made under Section 74(5) of the CGST Act
which mandates that such voluntary payment of tax
should have been made by the petitioner along with
interest under Section 50 of the CGST Act and
penalty; in this context, the said payment in Form
GST DRC-03 will indicate that no payment is made
by the petitioner towards interest or penalty and
the relevant columns in this regard are shown as
'Nil' which is yet another circumstance to indicate
that the payment was not made by the petitioner
voluntarily in terms of Section 74(5) of the CGST
Act, 2017, as contended by the respondents whose
contentions are liable to be rejected.
(xi) A perusal of the material on record will
indicate that the payment of Rs.10 crores by the
petitioner during the course of search, inspection
and seizure proceedings is contrary to the
directions issued by the respondents themselves in
Instruction No.1/2022-23 dated 25.05.2022, in
which the officials of the respondents have been
cautioned / warned against taking steps to collect /
receive / obtain voluntary payment and reiterated
by the Apex Court in Radhika Agarwal's case
supra , and as such, the contentions of the
respondents cannot be accepted on this ground
also.”
(emphasis supplied)

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20. As noticed by the Division Bench of this Court in the
6
case of Bundl Technologies and a Co-ordinate Bench of this
8
Court in the case of Sri. J. Ramesh Chand , in the present
case, the alleged voluntary payment made by the petitioner is
admittedly under sub-section (5) of Section 74 of the CGST Act.
The same mandates that the said voluntary payment of tax is
to be made along with interest and penalty. However, in the
DRC-03, it is clear that no payment is made by the petitioner
towards interest or penalty and the relevant points are shown
as nil. Further Rule 142(2) of the CGST Rules contemplates that
upon the petitioner making payment in Form GST DRC-03, the
respondents are bound to issue an acknowledgment in Form
GST DRC-04. In the present case, admittedly the same has not
been done. It is also pertinent to note that there was no
demand made by the respondents of any amounts from the
petitioner prior to the search or the payments made by the
petitioner. Further, it is clear from the sequence of events that
even the payment of ₹18,00,000/- made on 14.05.2024 is after
issuance of the notice dated 13.05.2024, which required the
petitioner to appear personally on 16.05.2024 at 11.00 a.m.
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Admittedly, the said notice dated 13.05.2024 has not been
issued under any provision of law.

21. Although it is a vehement contention of learned
counsel on behalf of the respondents that the order in original
has been passed and assessment have been made, the same is
subject matter of challenge before this Court.

22. Mere proceedings initiated under Section 79 of the
Act will not in any manner indicate that the payments made by
the petitioner are voluntary.

23. The respondents have erroneously rejected the
applications for refund made on behalf of the petitioner. In view
of the discussions made above, the relief sought for in the writ
petition is required to be granted. Hence the following:
ORDER

(i) The writ petition is allowed ;

(ii) The orders dated 28.08.2025 passed by
respondent No.3 in Appeal
No. AD2902250288123 for FY 2017-18 and
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order dated 28.08.2025 in ARN
No.AD290225028856R for FY 2018-19
(Annexures-Y and Y1 to the writ petition) are
hereby quashed;

(iii) Direction is issued to the respondents to refund
₹
a sum of 53,97,352/- together with interest at
the rate of 6% per annum from the date of
payment till the date of refund;

(iv) All rival contentions between the parties urged in
the show-cause notice and adjudication
proceedings are kept open to be adjudicated in
the said proceedings.



(C.M. POONACHA)
JUDGE



PMP para Nos.1 to 20
YAN para Nos.21 to end
Ct-gtb
List No.: 1 Sl No.: 24

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MONNAPPA POONACHA