Deposit Under Protest Not Admission of GST Liability | HC

Case Details: Shyama Power India Ltd. vs. State of H. P. - [2025] 175 taxmann.com 926 (Himachal Pradesh)

Judiciary and Counsel Details

• Tarlok Singh Chauhan & Sushil Kukreja, JJ.
• Rakesh Sharma & Ms Sakshi Gautam, Advs. for the Petitioner.
• Anup Rattan, A.G., Ramakant Sharma, Navlesh Verma, Ms Sharmila Patial, Sushant Keprate, Addl. A. Gs., I. N. Mehta, Y. W. Chauhan, Sr. Addl. A.Gs. & Raj Negi, Dy. A.G. for the Respondent.

Facts of the Case

The petitioner challenged an order passed under section 74 of the CGST Act which imposed interest and penalty on the ground of alleged wrongful availment of input tax credit (ITC). It was submitted that a portion of the ITC had been reversed solely under protest, and not as an admission of liability, due to continuous pressure exerted by the jurisdictional officer under GST.

The petitioner further contended that no independent investigation was carried out by the department to establish fraud, wilful misstatement, or suppression of facts as required under section 74. It was argued that treating a deposit made under protest as a voluntary admission of liability for the purpose of imposing interest and penalty was unjustified and contrary to law. On the strength of these submissions, the matter was accordingly placed before the Himachal Pradesh High Court.

High Court Held

The Himachal Pradesh High Court held that the amount deposited under protest could not be construed as an admission of liability so as to justify imposition of interest and penalty under section 74 of the CGST Act and the Himachal Pradesh GST Act. The Court observed that reversal of ITC could not be sustained solely on the basis of suspicion or pressure, absent a reasoned determination based on material evidence. It was categorically held that a payment made under protest does not constitute a voluntary act, and cannot confer upon the Department of Revenue the authority to invoke penal consequences without proper adjudication. Accordingly, the impugned order was set aside.