Facts of the Case

The petitioners, M/s Trillion Lead Factory Private Limited and its director, challenged two summons dated 19.09.2025 issued by the Directorate General of Goods and Service Tax Intelligence (DGGI), Hyderabad Zonal Unit, before the Karnataka High Court. The petitioners also contended that a search conducted on 21.07.2025 at their Telangana premises involved seizure of original records without drawing a Mahazar or Seizure Memo as required under Rule 139 of the CGST Rules, 2017, and sought a refund of Rs. 61,00,000 paid vide Form GST DRC-03 during the investigation, alleging it was paid under coercion.

Issues Involved

  1. Whether the summons and the search/seizure conducted without a proper Mahazar and Seizure Memo were valid.
  2. Whether the petitioners were entitled to protection from coercive recovery, including arrest, pending conclusion of the DGGI investigation.
  3. Whether the Rs. 61 lakh deposited during investigation, alleged to be under coercion, warranted a refund direction.

Petitioner's Arguments

  • The search and seizure of original records on 21.07.2025 without drawing a Mahazar/Seizure Memo under Rule 139 of the CGST Rules was ab initio void and illegal.
  • The Rs. 61,00,000 paid via Form GST DRC-03 was paid under threat of coercion and should be refunded.
  • Alternatively, the investigation should be concluded without insisting on further payment and without pre-trial arrest of the director. During the hearing, the petitioner's counsel offered to cooperate with the ongoing investigation and sought only protection from coercive steps and arrest, reserving liberty to pursue other remedies later.

Respondent's Arguments

  • If the petitioner cooperated with the investigation pursuant to the two summons, the department would proceed further and conclude the investigation in accordance with law.

Court Order / Findings

  • The Court, without expressing any opinion on the merits of the rival contentions, disposed of the petition directing the petitioners to cooperate with the ongoing investigation.
  • The Court directed that if the petitioner extends such cooperation, the department shall not take any precipitative or coercive steps against the petitioner for recovery of any amount, and shall proceed further in accordance with law.
  • The petitioner was directed to appear before the DGGI on 17.10.2025, with liberty reserved to approach the Court again if the occasion arose.

Important Clarification

  • Courts routinely balance an ongoing GST investigation against a taxpayer's rights by directing that no coercive recovery or precipitative action (including arrest) be taken so long as the taxpayer genuinely cooperates with the investigating authority, without going into the merits of the underlying allegations at that stage.
  • Allegations that payments made via Form GST DRC-03 during investigation were coerced, and that seizure was effected without a Mahazar/Seizure Memo under Rule 139, are left open for adjudication rather than being decided at the interim writ stage when the petitioner opts for cooperation instead of a merits contest.

Sections Involved

  • Rule 139, CGST Rules, 2017 – procedure for search and seizure, including drawing of a Mahazar/Seizure Memo.
  • Form GST DRC-03 – voluntary or investigation-driven payment of tax/interest/penalty.
  • Articles 226 and 227, Constitution of India – writ jurisdiction invoked to challenge DGGI summons and search action.

Decision – In Favour of

The decision is disposed of with directions, in part in favour of the petitioner — no ruling was made on the legality of the search/seizure or the refund claim, but the petitioner secured protection from coercive recovery and arrest during cooperation with the investigation.

Case Details

Court: High Court of Karnataka at Bengaluru — Case No.: Writ Petition No. 30099 of 2025 (T-RES) — Coram: Hon'ble Mr. Justice S.R. Krishna Kumar — Date of Order: 8 October 2025.

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