M/S Kum Internationals vs Assistant Commissioner(Hpu) on 13 October, 2025
AI Legal Insights
This GST case law examines the critical issue of GST refunds related to payments made during search and inspection operations. In M/S Kum Internationals vs Assistant Commissioner, the Karnataka High Court addressed whether a payment of Rs. 10 crore was voluntary under Section 74(5) of the CGST Act, 2017, or coerced. The court's decision highlights the importance of distinguishing between voluntary tax payments and those obtained under duress. This case provides valuable insights into the rights of GST taxpayers during investigations and the conditions under which refunds can be claimed.
This case clarifies the importance of voluntary GST payments under Section 74(5) of the CGST Act, 2017, versus payments made under coercion. Taxpayers can claim refunds on payments deemed involuntary, while the department must ensure payments are genuinely voluntary.
- GST payments made under coercion during raids can be challenged for refunds.
- Interest at 6% is applicable on delayed GST refunds from the date of payment.
- Ensure GST payments are voluntary and based on self-ascertainment under Section 74(5).
- Maintain detailed records to prove the circumstances of GST payments during investigations.
- Challenge show cause notices and adjudication proceedings separately, even after a refund order.
QWhat happens if I pay GST under pressure during a raid?
If you can prove that a GST payment was made under coercion during a raid, you may be entitled to a refund. The Karnataka High Court's ruling in M/S Kum Internationals supports this position, emphasizing the need for voluntary payments.
QHow do I claim a refund for GST paid involuntarily?
To claim a refund for GST paid involuntarily, gather evidence demonstrating the coercion or threat that led to the payment. File a refund application with the relevant GST authorities, citing relevant case laws like M/S Kum Internationals to support your claim.
Ruling Summary
Here's a summary of the judgment from the perspective of a Senior GST Legal Analyst:
1. Outcome
The High Court of Karnataka allowed the writ petition. It directed the respondents to refund the sum of Rs. 10,00,00,000/- (Rupees Ten Crores) to the petitioner, along with interest at 6% per annum from 24.03.2023 until the date of payment, within a period of two months. All rival contentions between the parties related to the show cause notice and subsequent adjudication proceedings were kept open.
2. Core Issue
The core issue was whether the payment of Rs. 10,00,00,000/- made by the petitioner during a search and inspection operation conducted by the GST authorities was a voluntary payment based on self-ascertainment under Section 74(5) of the CGST Act, 2017, or if it was obtained under coercion and threat, thereby entitling the petitioner to a refund.
3. Key Facts
* The petitioner, M/s Kum Internationals, operating as M/s Million Lights, is engaged in trading electronic equipment and footwear and is a registered GST taxpayer.
* On 23.03.2023, the 3rd respondent (Inspector of Central Tax) conducted a raid at the petitioner's residence and seized a laptop.
* On 24.03.2023, the 3rd and 4th respondents (Inspector of Central Tax and Intelligence Officer, DGGI) carried out search, inspection, and seizure operations at the petitioner's business premises.
* During these operations, the respondents allegedly obtained a transfer of Rs. 10,00,00,000/- from the petitioner towards Goods and Service Tax, recorded via Form GST DRC-03.
* The respondents did not issue any acknowledgment in the prescribed Form GST DRC-04 for this payment.
* The petitioner filed the writ petition on 03.05.2023, alleging the payment was made under coercion and threat of arrest.
* During the pendency of the petition, the respondents issued an intimation (GST DRC-01A) followed by a show cause notice (GST DRC-01) to the petitioner.
4. Arguments (Taxpayer vs Revenue)
* Taxpayer (Petitioner):
* The payment of Rs. 10 crores was not voluntary but obtained under coercion and threat, contrary to law and Instruction No. 01/2022-23 dated 25.05.2022 issued by the respondents.
* No notice under Section 73 or 74 of the CGST Act was issued prior to the payment.
* The respondents failed to issue an acknowledgment in Form GST DRC-04.
* The amount was illegally obtained and should be refunded with interest.
* Revenue (Respondents):
* The payment of Rs. 10 crores by the petitioner was purely voluntary and based on the petitioner's self-ascertainment of tax liability.
* Therefore, the payment was legal and proper, and the petition should be dismissed.
5. Court’s Reasoning
The Court, after considering the arguments and various precedents, concluded that the payment was involuntary, illegal, arbitrary, and without jurisdiction. Its reasoning was based on the following points:
- General Principle & Statutory Framework: The Court reiterated the Apex Court's and High Courts' condemnation of forced/involuntary tax payments during search proceedings (citing Dabur India Ltd. and Radhika Agarwal). It emphasized that Section 74(5) of the CGST Act and Rule 142(2) specifically refer to voluntary payment based on self-ascertainment, which requires the issuance of Form GST DRC-04 as an acknowledgment. It also highlighted CBIC Instruction No. 01/2022-23, which prohibits "recovery" during search/investigation and mandates that voluntary payments should occur after the search is concluded.
- Specific Reasons for Involuntary Payment in this case:
- Absence of Prior Proceedings: No notice or proceedings to ascertain/adjudicate tax, interest, or penalty were initiated before the search, suggesting no basis for voluntary self-ascertainment.
- No Acknowledgment (DRC-04): The respondents admittedly failed to issue Form GST DRC-04, which is mandatory for voluntary payments.
- No Prior Demand: There was no demand from the respondents prior to the search and payment, making voluntary payment during the search unwarranted.
- Lack of Quantification Details: Form GST DRC-03 lacked material particulars or quantification details for the Rs. 10 crores, other than the amount itself, indicating a lack of genuine self-ascertainment.
- Improbability of Admission of Guilt: It is highly improbable for a taxpayer undergoing search for fraud-related offenses (Section 74 grounds) to voluntarily pay and admit guilt, especially before understanding the full extent of allegations or initiation of formal proceedings.
- No Ascertainment Basis: There was no material to show how the Rs. 10 crores figure was quantified or arrived at by the petitioner or the respondents at the time of payment.
- Seizure of Records: All necessary equipment and records for self-ascertainment (laptop, desktops, server disks, mobile phones, hard disks) were seized by the respondents, making genuine self-ascertainment by the petitioner impossible.
- Subsequent Ascertainment by Revenue: The respondents themselves ascertained the actual amount payable only later, during the petition's pendency (via DRC-01A dated 17.02.2025), confirming no prior ascertainment existed at the time of payment.
- Complexity of Self-Ascertainment: Genuine self-ascertainment under Section 74(5) involves detailed verification, calculation of discretionary interest (up to 18%/24%), and penalty (15%), which is physically and humanly impossible under duress during a search operation.
- Non-Payment of Interest/Penalty: The Form GST DRC-03 showed 'Nil' for interest and penalty, contrary to Section 74(5) which mandates payment of tax, interest, and penalty for voluntary payments made under this section.
- Violation of Instructions: The payment was contrary to the respondents' own Instruction No. 01/2022-23 and the guidelines emphasized by the Apex Court in Radhika Agarwal.
6. Statutory References
* Constitution of India: Articles 226, 263, 265, 300-A
* Central Goods and Services Tax Act, 2017 (CGST Act):
* Section 50 (Interest on delayed payment)
* Section 67 (Power of inspection, search, and seizure)
* Section 69 (Power to arrest)
* Section 70 (Power to summon person to give evidence and produce documents)
* Section 73(1), (3), (5), (6), (7)
* Section 74(1), (5), (6), (7), (8)
* Section 79 (Recovery of tax)
* Section 132 (Punishment for offences)
* Central Goods and Services Tax Rules, 2017 (CGST Rules):
* Rule 142(1), (1A), (2)
* Form GST DRC-01A, Form GST DRC-03, Form GST DRC-04
* Other Acts/Codes:
* Code of Civil Procedure, 1908
* Indian Penal Code, 1860 (Sections 193, 228)
* Customs Act, 1962 (Sections 27, 42)
* Central Excise Act, 1944 (Section 11B(3))
* Finance Act, 1994
* Delhi Value Added Tax Act, 2004
7. Precedents Cited
* Dabur India Ltd. v. State of U.P., (1990) 4 SCC 113 (Supreme Court)
* Radhika Agarwal v. Union of India, (2025) 6 SCC 545 (Supreme Court)
* Siddharth v. State of U.P., (2022) 1 SCC 676 (Supreme Court)
* Joginder Kumar v. State of U.P., (1994) 4 SCC 260 (Supreme Court)
* D.K. Basu v. State of W.B., (1997) 1 SCC 416 (Supreme Court)
* Nandini Satpathy v. P.L. Dani, (1978) 2 SCC 424 (Supreme Court)
* Bhumi Associates vs. UOI., (2021) 124 taxmann.com 429 (Gujarat High Court)
* Bundl Technologies Pvt. Ltd. vs. UOI; W.P. No. 4467/2021 dated 14.09.2021 (Karnataka High Court)
* Union of India vs. Bundl Technologies Pvt. Ltd.; (2022) 136 taxmann.com 112 (Kar.) (Division Bench, Karnataka High Court)
* Suretex Prophylactics (India) Private Limited vs. Union of India and Others; W.P.No.2444/2022 dated 27.02.2023 (Karnataka High Court)
* Kesar Colour Chem Industries vs. Senior Intelligence Officer and Another -W.P.No.17853/2021 dated 26.09.2024 (Karnataka High Court)
* The Intelligence Officer and Another vs. M/s. Kesar Colour Chem Industries W.A.No.1649/2024 dated 28.01.2025 (Division Bench, Karnataka High Court)
* Vallabh Textiles vs. SIO & Ors.; (2022) 145 taxmann.com 596 (Delhi High Court)
* Lovelesh Singhal vs. Commr., Delhi GST; (2023) 157 taxmann.com 611 (Delhi High Court)
* Mahavir Singh vs. Assistant Commissioner; (2024) 163 taxmann.com 543 (Delhi High Court)
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* LML Ltd., vs Collector of Central Excise, Kanpur - 2002 (142) ELT 273 (Supreme Court)
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* Swadeshi Cotton Mills Co. Ltd V. Union of India - AIR 1981 SC 818, 831 (Supreme Court)
* Rajesh Kumar v. Dy. CIT- [2006] 157 Taxmann 168 (SC) (Supreme Court)
* EBIZ. Com Pvt LTd. V. Commissioner of Central Excise, Customs and Service Tax and Ors [2016 (9) TMI 1405] (Allahabad High Court)
* Commissioner of Central Excise v. KVR Construction, 2012 (50) VST 469 (Karnataka High Court)
* Capri Bathaid Pvt. Ltd. v. Commissioner of Trade & Taxes 2016 (155) DRJ 526 (DB) (Delhi High Court)
* VODAFONE ESSAR SOUTH LTD VS. UNION OF INDIA, 2009 (237) ELT 35 (BOM) (Bombay High Court)
* CENTURY KNITTERS (INDIA) LTD. VS. UNION OF INDIA, 2013 (293) ELT 504 (P & H) (Punjab & Haryana High Court)
* CONCEPTS GLOBAL IMPEX VS. UNION OF INDIA, 2019 (365) ELT 32 (P & H) (Punjab & Haryana High Court)
* William E Connor Associates & Sourcing (P.) Ltd v. Union of India , [2023] 152 taxmann.com 174 (Punj. & Har.) (Punjab & Haryana High Court)
* Diwakar Enterprises (P.) Ltd v. Commissioner of CGST , [2023] 149 taxmann.com 419 (Punj. & Har.) (Punjab & Haryana High Court)