Patna HC Directs State GST Dept to refund Rs. 10K against Illegal GST Recovery Conducted [Read Order]

The Patna High Court has ordered the State GST Department to return the money plus 9% simple interest and Rs. 10,000 in costs after invalidating an unlawful tax recovery made under the Goods and Services Tax (GST) regime.

After seeing that the authorities had violated their previous order, the division bench consisting of Justices Rajeev Ranjan Prasad and Ashok Kumar Pandey sent show-cause notices to the Appellate Authority and the Assistant Commissioner. They were requested to defend themselves against being held personally responsible for paying interest and legal fees resulting from their deliberate disregard for the court's order, as well as why contempt proceedings should not be brought against them. Both officers gave unequivocal apologies and show-cause replies in return.

Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here

Two specific orders made under the Goods and Services Tax (GST) regime were challenged by the petitioner, M/s Great Eastern Hire Purchase Private Limited, a Patna-based private entity registered under the GST. The Assistant Commissioner of State Tax, Gandhi Maidan Circle, Patna, issued the first ruling, and the Additional Commissioner of State Tax (Appeals), Patna West Division, issued the second appellate order.

According to the petitioner, these orders, which dealt with a tax demand and recovery procedure, were unlawful, capricious, and given against the law as established by a previous High Court ruling in the matter of SIS Cash Services Pvt Ltd vs. Union of India (CWJC No. 6514 of 2021).

The petitioner claimed that the Appellate Authority had mistakenly denied their appeal under the government's amnesty scheme (Notification No. 53/2023 dated 02.11.2023), claiming that the scheme did not cover orders issued under Section 62, and that the Assistant Commissioner had improperly invoked provisions of Section 62 of the CGST/BGST Act to begin recovery without following due process.

The petitioner argued that the Court's binding precedent in the SIS Cash Services case, which gave particular guidance on such topics under Sections 62, 73, and 74 of the GST Act, was violated by the denial of amnesty benefits and the execution of recovery orders. The Appellate Authority asserted that the petitioner had neglected to notify him of the precedent throughout the appeal proceedings, while the Assistant Commissioner asserted that she was not aware of the SIS Cash Services case since it had not been brought to her knowledge at the time the order was issued.

However, the Court raised concern over the absence of a formal explanation and pointed out that the Assistant Commissioner's submission was not given by affidavit. However, the Court accepted their responses and chose not to pursue a contempt action because the petitioner did not contest these representations.

The Court determined that the recovery was unlawful and that the authorities' acts had caused litigation for the petitioner. The State of Bihar was ordered by the High Court to return the money that was recovered, plus simple interest at the rate of 9% annually from the date of seizure to the refund date. Additionally, it mandated that the petitioner pay ₹10,000 as litigation costs.

The Court stated that if the State Government so desires, it is entitled to recover these amounts from the careless officers.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates