GST Dept cannot Recover Demand prior to Expiry of Statutory Period for Filing Appeal: Calcutta HC says Dept Committed ‘Grave Error’ [Read Order]
Even before the statutory appeal period had expired, the respondents had recovered the entire disputed tax, an action the Court found to be entirely irrational and a grave procedural error, said the bench
Calcutta HC says Dept Committed ‘Grave Error’
Calcutta HC says Dept Committed ‘Grave Error’
Calling it a “grave error” on part of the GST ( Goods and Services Tax ) authorities, the Calcutta High Court has held that the department cannot recover an entire tax demand before the expiry of the statutory period allowed to the assessee for filing an appeal.
The petitioner, Supreme Infotrade Pvt. Ltd., which had challenged a refund rejection order dated 11 March 2025 and sought the re-credit of ₹18,04,696 recovered from its electronic credit ledger.
The issue started from an adjudication order under Section 73 of the WBGST/CGST Act for July 2017-March 2018, passed on 14 June 2023. Before the appeal period expired on 3 August 2023, the Department debited the company’s entire disputed tax liability through Form DRC-07.
After an unsuccessful representation on 10 August 2023, the petitioner filed an appeal under Section 107, which was heard without any further pre-deposit, as the recovered amount was treated as such.
The appellate authority modified the adjudication order on 29 August 2024 and issued a revised demand in Form APL-04.
The petitioner sought a refund of the excess recovery, requesting that only 20% of the disputed tax be retained, but the GST authorities rejected this claim, citing the absence of any refund order from a competent authority.
Justice Raja Basu Chowdhury observed that even before the statutory appeal period had expired, the respondents had recovered the entire disputed tax, an action the Court found to be entirely irrational and a grave procedural error.
The Court noted that the statute explicitly permits taxpayers to maintain an appeal by depositing only 10% of the disputed tax from an adjudication order, and a further 10% from an appellate order when approaching the tribunal. Since the appellate tribunal is yet to be constituted, the Department could at most retain 20% of the disputed tax.
It said that “considering the fact that the respondents at best could have been entitled to 20 per cent of the amount of tax in dispute, having regard to the provisions contained in Section 107(6) and Section 112(8) of the said Act, I am of the view that the balance amount ought to be refunded to the petitioner No. 1.”
Accordingly, the Court set aside the refund rejection order and directed the GST Department to re-credit the balance amount to the petitioner’s electronic credit ledger within one week of receiving the order.
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