Recovery proceedings cannot be initiated in cases where appeal has been filed against the assessment order

The Madras High Court has ruled that tax recovery proceedings cannot be initiated if an appeal has already been filed against the assessment order. In a recent case, the court directed tax authorities to halt recovery actions, including from bank accounts, until the appeal is fully heard and decided. This decision clarifies that filing an appeal, particularly with the required pre-deposit, should automatically stay recovery of the disputed tax amount.

The Hon'ble Madras High Court in Tvl. R. Selvarathinam v. Deputy State Tax Officer-II, Chennai [Writ Petition No. 26893 of 2024 dated September 11, 2024], disposed of the writ petition directing the Department to defer the recovery proceedings till the time of disposal of the appeal.

Facts:

Tvl. R. Selvarathinam ("the Petitioner"), has filed the petition for quashing of order dated April 30, 2024 ("the Impugned Order"), passed by the Revenue Department ("the Respondent"), under Sections 73 of the Tamil Nadu Goods and Services Tax Act, 2017 ("the TNGST Act"), to restrain the Respondent from recovering the tax liability, including interest and penalty from the Petitioner's bank account.

The Petitioner had been issued a show cause notice in Form GST DRC-01 dated August 21, 2023 ("the SCN"), for which the Petitioner had filed replies on April 12, 2024, April 26, 2024 and April 29, 2024, however, the Respondent, without considering the replies filed, passed the Impugned order and in pursuance of the said Impugned Order, also initiated recovery proceedings dated August 02, 2024, from the Petitioner's bank account, thus aggrieved by the recovery proceedings, the Petitioner has filed the said petition.

Issue:

Whether recovery proceedings could be initiated in cases where appeal has been filed against the assessment order?

Held:

The Hon'ble Madras High Court in W.P. No. 26893 of 2024 held as under:

• Opined that, the Petitioner has preferred an Appeal which is yet to be disposed of, however, the Respondent irrespective of the said fact, proceeded with the recovery proceedings.
• Held that, the writ petition is disposed with the direction to the Respondent to defer the recovery proceedings till the disposal of the Appeal.

Our Comments:

Section 107(7) of the TNGST Act, clearly states that where the Appellant has paid the amount of pre-deposit at the time of filing of appeal as per Section 107(6) of the TNGST Act, the recovery proceedings for the disputed amount in appeal shall deemed to be stayed.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED