Case Summary: Refund of deposit declined as Court holds coercion a disputed fact and directs remedy under statutory refund mechanism

Case Title: AIMLAY Private Limited (Through Director Rakesh Gupta) & Ors. v. Commissioner of Central Tax (Delhi West) & Ors.
Court: High Court of Delhi
Petition No.: W.P.(C) 4273/2024
Date of Judgment: 20.08.2024
Relevant Provisions:

• Section 67(2), 67(3), 67(5) – Search, seizure, retention, and right to copies

• Refund under Section 54 of the CGST Act (statutory claim mechanism)

• Issue relates to Search & Seizure + Provisional Attachment + Refund of alleged coerced deposit
  Category of Dispute: Refund of coerced deposit during investigation; seizure and return of electronic devices.

FACTS (Paras 4–20, 1–3)

The petitioners challenged (i) provisional attachment orders dated 20.11.2023 freezing multiple bank accounts of the company and its directors, (ii) seizure of laptops, CPUs, mobile phones and documents during search dated 16.11.2023, and (iii) recovery of ₹22,00,000 allegedly deposited under coercion by GST officers.

As recorded at paras 6–8 of the 25.07.2024 order, the petitioners were earlier allowed to seek relaxation of provisional attachment, and a speaking order dated 16.04.2024 rejected that request. During final hearing, the petitioners did not press the challenge to bank-account freezing.

Regarding seized devices, paras 10–17 show petitioners insisted on copies of data and return of hardware. The Department stated copies would be given, but retention of laptops continued, citing investigation necessity.

The core dispute (paras 17–19; judgment paras 3–8) was whether the ₹22 lakh deposit was voluntary. Petitioners contended the Director was forced to withdraw funds from his personal account after being accompanied by GST officers. The challan itself bore the remark “under protest”, reinforcing their narrative. The Department disputed coercion and argued the deposit was post-statement and voluntary.

QUESTIONS / ISSUES (Paras 17–20)

1. Whether the Court should order immediate refund of ₹22,00,000 allegedly deposited under coercion.

2. Whether the petitioners are entitled to immediate return of seized documents, data, laptops and other devices under Section 67(3).

3. Whether provisional attachment relief survives—ultimately not pressed.

COURT’S OBSERVATIONS (Paras 3–11; 13–17)

The Bench observed that the question of coercion raised factual dispute (paras 3–8). Although the challan mentioned “under protest”, voluntariness remained contested. The Court noted the GST officer’s presence at the bank required explanation (paras 5–7). The Department claimed the officer only delivered a letter enabling withdrawal due to attached accounts; petitioners alleged intimidation.

Given this conflict, the Court noted that adjudicating voluntariness under Article 226 was inappropriate (para 9). However, it clarified that the petitioners’ statutory right to apply for refund was unaffected and could be exercised without waiting for adjudication of the show cause notice.

On seized devices, Court reiterated Section 67(3) obligations (paras 10–14) requiring return of records within 30 days of notice and mandating that data copies be provided. Court noted petitioners’ grievance that additional hard disks were demanded for data transfer (paras 15–16). Directions were issued to ensure complete data access.

Regarding two laptops, the Department admitted they were stolen from GST office and FIR had been filed (para 10 of final judgment). Court reserved petitioners’ right to compensation (para 11).

JUDGMENT / VERDICT (Paras 8–12)

The Court declined to order refund of ₹22 lakh since coercion was a contested factual issue unsuitable for writ jurisdiction (para 9). It held the petitioners may pursue refund under law, even before adjudication.

On seized articles, the Court directed that copies of all seized data be made available and retention must comply with Section 67(3) timelines.

Regarding the missing laptops, the Court recorded the FIR and left compensation claims open (para 11).

The petition was accordingly disposed of.

SUMMARY OF CASES REFERRED (Para 18)

BETWEEN FINE LINES (Trade / Industry Impact)

This judgment underscores that taxpayers must rely on the statutory refund route when coercion is disputed. It also puts investigators on notice that retention of devices and data beyond Section 67 limits is impermissible. Businesses facing search actions should insist on recorded objections in challans, as done here, though that alone may not suffice to secure immediate refund without clear evidence of coercion. The judgment also highlights departmental accountability in safekeeping seized assets.

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”