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13 July 2021

Amount paid during investigation cannot be considered as tax liability unless admitted, thereby liable to be refunded.

Shri Nandhi Dhall Mills India Private Limited

v.

Senior Intelligence Officer

(IN THE HIGH COURT OF MADRAS)

[W.P. No. 5192 of 2020]

Petition Allowed

In the present matter, during the course of investigation a statement of one of the concerned persons of Shri Nandhi Dhall Mills India Private Limited (“the Petitioner”) was recorded admitting GST liability and setting the scheme of instalments.

The Petitioner deposited two instalments as set out in the statement and subsequently, retracted its statement citing stress as reason for admitting the liability. The Petitioner sought refund of the said amount. In the present case, enquiry and investigations are on-going, thus, the instalments paid by the Petitioner cannot be contemplated as one under Section 74(5) of the CGST Act, 2017.

Sub-section (5) and (6) of Section 74 of the CGST Act, 2017 provide an opportunity for closure of proceedings either by self-ascertainment by an assessee and acceptance of the same by the revenue or vice versa. Where there is no such closure sub-section (7) provides for an avenue to the revenue to continue the proceedings.

The Hon’ble Madras High Court observed that merely because an assessee has, under the stress of investigation, signed a statement admitting tax liability and has also made a few payments as per the statement, cannot lead to self-assessment or self-ascertainment. The Hon’ble Court held that “the ascertainment contemplated under Section 74(5) is of the nature of self-assessment and amounts to a determination which is unconditional, and not one that is retracted as in the present case.”