GST Refund Denied Where Payment Made During Search Was Voluntary: Gujarat High Court in Hirenkumar Valjibhai Sankhalava Case

Background and Overview

The Gujarat High Court recently delivered a significant ruling in Hirenkumar Valjibhai Sankhalava Vs Deputy Commissioner of State Tax, rejecting a writ petition that challenged the dismissal of a refund claim filed under Section 54 of the Gujarat Goods and Services Tax Act, 2017. The judgment touches upon critical issues surrounding the nature of payments made during GST search operations, the validity of coercion allegations raised belatedly, and the scope of refund provisions under GST law.

At its core, the case presents a cautionary tale for assessees who voluntarily discharge outstanding tax liabilities during search proceedings and subsequently attempt to reclaim such payments by alleging duress — particularly when no contemporaneous complaint of coercion is on record.

Facts of the Case

The Assessee and the Coaching Institute

The petitioner, along with several family members including Gauriben Sankhalva, Shilpaben Sankhalva, Sanjaybhai Sankhalva, Valjibhai Sankhalva, and Sankhalva, collectively operated a coaching institute under the name "Alpha-1 Tuition Classes and Hostel", which provided academic coaching to students in the 4th and 5th grades of Gujarati Medium schools.

The GST Search and Subsequent Payment

GST authorities carried out a search operation at the institute's premises under Section 67(2) of the Gujarat Goods and Services Tax Act, 2017, commencing on 06.10.2023 and concluding on 10.10.2023, following due authorization from the Joint Commissioner of State Tax-10, Rajkot. Over the course of the search:

  • Various documents and account records were seized
  • Statements of the petitioner and staff members were recorded
  • Formal panchnamas were prepared in the presence of panchas

The search proceedings revealed that the institute had been operating without any GST registration, and that a portion of the fee collections from students had been received in cash and not reflected in the accounts. Upon being confronted with this material, the petitioner acknowledged the liability, agreed to pay the quantified amount, and signed an undertaking — on the basis of which a temporary GST registration number was issued to facilitate payment.

Following these proceedings, the petitioner deposited a total sum of Rs. 1,96,25,330/- towards tax, interest, and penalty.

The Refund Application — Filed Nearly Two Years Later

After a prolonged period of inaction spanning nearly two years, the petitioner filed an application in Form GST RFD-01 under Section 54(1) of the Act on 28.08.2025, categorizing the claim under "any other" ground and asserting that the payment had been made under protest and was coerced.

Subsequently:

  • Form GST DRC-04 was issued on 19.11.2025, acknowledging the prior voluntary payment
  • A show cause notice was issued to the petitioner in Form GST RFD-08
  • The petitioner filed a reply dated 30.01.2026 and was granted a personal hearing on 16.01.2026
  • The refund claim was ultimately rejected by order dated 03.02.2026 in Form GST RFD-06

Arguments Advanced by the Petitioner

Learned counsel for the petitioner raised the following contentions before the Gujarat High Court: