Kerala HC Grants Relief to Spice Exporter: Stays Coercive Action Until Appeal is Heard [Read Order]

The Kerala High Court has directed the Income Tax Department to put on hold all recovery proceedings arising from multiple assessment orders, until the company’s stay applications are considered by the appellate authority.

The judgment came in response to a writ petition filed by the spice exporting firm, challenging the aggressive recovery initiated by the department even as their statutory appeals remained pending before the National Faceless Appeal Centre (NFAC), Delhi.

The petitioner company, M/s. South Coast Spices Exports Pvt. Ltd.,engaged in the export of spices from Kerala, was hit with assessment orders for four different financial years, 2015–16, 2018–19, 2020–21, and 2021–22, issued under the Income Tax Act. These assessments, all dated March 2023, resulted in tax demands that the company strongly disputed.

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The company correctly filed appeals in Form 35 before the NFAC in December 2023. It also filed stay petitions (dated May 31, 2025), seeking a hold on recovery action until the appeals were decided. Despite these pending applications, the department issued a recovery notice on May 29, 2025, pushing the company to approach the High Court.

The petitioners at the High Court wasn’t asking for the assessments to be quashed at this stage, but merely wanted the recovery to be paused until the appellate authority could take a fair call on the stay petitions. The company argued that pressing recovery during the pendency of appeals and stay petitions would lead to irreparable harm and violate the principles of fairness.

The department, represented by its standing counsel, opposed the plea but did not deny that the stay petitions were yet to be disposed of. They also acknowledged that appeals were filed, although there was some delay in doing so.

Justice Ziyad Rahman A.A, acknowledging that the appeals and stay petitions were pending, the Court directed the 3rd respondent, Commissioner of Income Tax (Appeals), NFAC, to dispose of the stay petitions within a period of three months from the date of receipt of the order.

The Court also clarified that, since there was some delay in filing the appeals, the appellate authority should first decide whether such delay was condonable, but only after giving the petitioner an opportunity to be heard.

The court asserted that till a decision is made on the stay petitions, all coercive steps, including recovery proceedings based on the demand notice, were all ordered to be kept in abeyance.

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