GST Dept Recovers Over 20% of Disputed Tax During Pendency of Rectification Application: Calcutta HC Stays Recovery [Read Order]

In a recent ruling, the Calcutta High Court stayed the recovery proceedings considering that the GST department had already recovered more than 20% of the disputed tax while the taxpayer’s rectification application was still pending before the adjudicating authority.

Tirupati Traders and another petitioner filed a writ petition before the Calcutta High Court challenging an order-in-original passed by the adjudicating authority under Section 73 of the West Bengal Goods and Services Tax Act, 2017 and the Central Goods and Services Tax Act, 2017. They also challenged the recovery action taken by the GST department based on that order.

The petitioners said that the order was passed in violation of natural justice because their reply to the show cause notice was not considered and they were not given a chance of personal hearing. They also claimed that the adjudicating authority had applied the wrong provision of law while passing the order.

The petitioners filed a rectification application before the adjudicating authority to correct this mistake. This application was still pending but the GST department started recovery proceedings and recovered amounts from the petitioners’ electronic credit ledger.

Mr. Ray, advocate for the petitioners, argued that if the rectification application is decided in their favour, the tax demand raised by the order may not survive. The counsel said that the department should not continue recovery when the rectification application is pending, especially since more than 20% of the disputed tax had already been recovered.

Mr. Banerjee, counsel for the GST department, argued that the writ petition should not be entertained because the petitioners had the option to file an appeal and had approached the court after delay. The counsel also argued that merely filing a rectification application does not stop recovery proceedings.

The single-judge bench of Justice Om Narayan Rai observed that the rectification application filed by the petitioners was still pending. The court said that if the application is allowed, the tax demand may no longer exist.

The court also noted that the petitioners had shown that the GST department had already recovered more than 20% of the disputed tax. In these circumstances, the court said it was proper to stop further recovery until the rectification application is decided.

The court directed the GST authority to decide the rectification application within four weeks. It also ordered that no further recovery should be made until the application is decided, provided that more than 20% of the disputed tax has already been recovered. The writ petition was disposed of without any order on costs.