Introduction
The Goods and Services Tax (GST) regime, though designed for simplification, has generated considerable litigation around the issue of recovery proceedings. Recent judicial pronouncements have played a pivotal role in defining the boundaries of power exercisable by GST authorities while recovering dues from taxpayers. This article examines key landmark judgments that collectively assert the supremacy of procedural fairness, natural justice, and constitutional safeguards in the recovery process under GST laws.
1. Chaizup Beverages LLP - Madras High Court (2019) 25 GSTL 26
Key Holding: Deemed Stay Upon Mandatory Pre-deposit
The Court held that once an assessee complies with the statutory pre-deposit requirement of 10% while filing an appeal under Section 107 of the CGST Act, the remaining disputed demand is deemed to be stayed. Any adjustment of refunds or coercive recovery in the absence of a separate stay order is legally unsustainable.
Implication: Revenue authorities cannot override the statutory deeming provision by insisting on additional compliance or attempting recovery during the pendency of a valid appeal. The Court directed the refund to be issued within three weeks.
2. Penna Cement Industries Ltd. - Andhra Pradesh High Court (2024) 84 GSTL 507
Key Holding: Premature Recovery is Impermissible
In this case, the assessee's tax liability was determined under Section 16 of the CGST Act. However, the Department initiated recovery proceedings before the expiration of the statutory period for filing an appeal. The Court ruled that such action was premature and impermissible.
Implication: The judgment reiterates the principle that taxpayers must be given a fair opportunity to exercise their appellate remedies before the coercive recovery machinery is set in motion.
3. Tvl. GRB Dairy Foods Pvt. Ltd. - Madras High Court (2020) 32 GSTL 514
Key Holding: Eagerness to Recover Cannot Override Legal Procedure
Here, the Revenue issued a demand notice for tax, interest, and penalty merely ten days after passing the assessment order-well within the three-month window available to the assessee for filing an appeal.
Implication: The Court frowned upon the Department's haste and reaffirmed the taxpayer's right to appeal before recovery, calling out the administrative overreach.
Author's Note: Both Penna Cement and GRB Dairy reflect a judicial consensus that recovery proceedings must not be initiated during the pendency of statutory appellate periods.
4. Tvl. Arun Medicals - Madras High Court (2024) 24 CENTAX 59
Key Holding: Violation of Natural Justice in Digital-only Service
The impugned order in this case was based on a Show Cause Notice (SCN) that was merely uploaded on the GST portal without any physical or acknowledged service to the assessee, whose GST registration had already been cancelled. The Court held this to be a blatant violation of natural justice, thereby setting aside the order.
Implication: The ruling underscores that electronic service through the GST portal cannot replace actual notice-particularly in cases involving de-registered taxpayers.
5. Prasanna Karunakar Shetty - Bombay High Court (2024) 17 CENTAX 418
Key Holding: Recovery Without SCN Violates Constitutional Rights
Recovery proceedings were initiated without issuing a Show Cause Notice or granting an opportunity of being heard. The Revenue proceeded to attach the assessee's bank account. The Court held this to be violative of:
- Section 14 of the CGST Act (Right to be heard)
- Article 300A of the Constitution (Right to property)
Implication: This judgment is a resounding affirmation of the constitutional principle that no person shall be deprived of property without due process of law.
Conclusion
The above cases collectively reinforce that the power of recovery under GST law is not absolute, but circumscribed by statutory provisions, constitutional mandates, and principles of natural justice. Judicial review continues to act as the bulwark against arbitrary action by the tax administration.
For professionals and taxpayers alike, these decisions highlight the need to assert one's procedural rights and challenge overreach-whether in the form of premature recovery, defective service of notices, or absence of hearing.
As the GST jurisprudence matures, these landmark rulings serve as essential precedents ensuring that revenue collection is never at the cost of justice.
CAclubindia
