A search was conducted on 25/5/2023 by the GST departmental officers and GST, interest and penalty under section 74(5) was deposited for one of the vendors of such taxpayer from whom purchases were made. The registration of the selling had been cancelled w.e.f. 1/7/2017 from back date. After that the selling dealer has filed writ in Delhi high court for challenging the registration Suo moto cancellation by department and has obtained stay from the court. Can receiving dealer apply for refund of tax which was deposited by him or any other remedy?

At the outset, it is submitted that any tax or interest or any other amount collected by the officers are not as per provisions of law and also against the directions issued vide various orders by the Hon'ble high Courts. Instruction were issued by the GST- Investigation Wing, CBIC, in the backdrop of an order dated 16.02.2021, passed by the Gujarat High Court in the matter of Bhumi Associate v. Union of India MANU/GJ/0174/2021, whereby the following wholesome directions were issued-

The Central Board of Indirect Taxes and Customs as well as the Chief Commissioner of Central/State Tax of the State of Gujarat are hereby directed to issue the following guidelines by way of suitable circular/instructions: (1) No recovery in any mode by cheque, cash, e-payment or adjustment of input tax credit should be made at the time of search/inspection proceedings under Section 67 of the Central/Gujarat Goods and Services Tax Act, 2017 under any circumstances.

Further, since the vendor on whose account tax has been paid by the searched assessee, the assessee can pursue refund of such deposited amount quoting that the action basis which the recovery was made is illegal as the cancellation is being contested and is stayed. Appropriate relief both in terms of dropping of demand and provision of refund should be available to the assessee in question.