Facts of the Case

The petitioner, Suryansh Broadcasting Pvt. Ltd., was common in both writ petitions and faced a substantial demand for payment of interest arising from belated payment of tax under the Goods and Services Tax Acts.

Considering the substantial demand, the petitioner had been granted permission under Section 80 of the Central Goods and Services Tax Act / State Goods and Services Tax Act to discharge the amount in instalments through the order marked as Ext.P6 in both writ petitions.

The petitioner, however, failed to comply with the timelines stipulated in Ext.P6. Following such default, the respondent department initiated garnishee proceedings against third parties from whom amounts were due to the petitioner.

Aggrieved by the garnishee proceedings, the petitioner approached the Kerala High Court through WP(C) No. 30855 of 2022 and WP(C) No. 29584 of 2022.

During the proceedings, the High Court had granted interim protection against the garnishee proceedings after recording the petitioner’s undertaking that it would comply with the stipulations contained in Ext.P6 without any further default.

It was subsequently submitted before the Court that the instalments permitted under Ext.P6 had been brought up to date and that the petitioner would continue to discharge the remaining liability in accordance with Ext.P6.

Issues Involved

The principal issues before the Kerala High Court were:

  1. Whether garnishee proceedings initiated against third parties for recovery of the petitioner’s GST-related liability should continue after the petitioner had brought the instalment payments up to date, though belatedly.
  2. Whether failure to comply with the timelines stipulated in an instalment order granted under Section 80 of the CGST/SGST Act makes the entire outstanding amount immediately due and recoverable under the proviso to Section 80.
  3. Whether the petitioner could be granted relief against the garnishee proceedings despite its earlier default in complying with the instalment schedule.

Petitioner’s Arguments

The petitioner relied upon the fact that the instalments payable in terms of Ext.P6 had been brought up to date, although there had been delay in payment.

The petitioner further submitted that it would continue to discharge the remaining liability strictly in terms of Ext.P6 and would not commit any further default.

The petitioner had also given an undertaking before the Court to comply with the stipulations contained in Ext.P6 without any further default.

On this basis, relief was sought against the garnishee proceedings initiated against third parties from whom money was due to the petitioner.

Respondent’s Arguments

The respondent department contended that there was absolutely no illegality in the garnishee proceedings.

The department specifically relied upon the proviso to Section 80 of the CGST/SGST Acts.

It was argued that where permission is granted to pay an amount due in instalments, failure to comply with the conditions and timelines stipulated in the instalment order results in the entire outstanding amount becoming due and recoverable.

Accordingly, the department submitted that, considering Section 80 and particularly its proviso, the petitioner was not entitled to any relief against the recovery proceedings.

Court Order / Findings

The Kerala High Court, after hearing the petitioner and the respondent department, allowed the writ petitions purely as a matter of indulgence.

The Court quashed the garnishee proceedings initiated against the petitioner.

The relief was granted after taking into consideration:

  • the submission that all instalments had been paid up to date, though belatedly; and
  • the undertaking that the balance amount payable in terms of Ext.P6 would be remitted without any further default.

Accordingly, the garnishee proceedings initiated against the petitioner were set aside.

However, the Court imposed a clear and significant condition regarding future compliance.

The Court expressly clarified that if the petitioner committed any further default, it would be open to the respondent department to proceed against the petitioner for recovery of the entire amount in terms of the proviso to Section 80 of the CGST/SGST Act.

The writ petitions were disposed of accordingly.

Important Clarification

This judgment does not lay down that a taxpayer who defaults under an instalment order granted under Section 80 has an unconditional right to continuation of the instalment facility or immunity from recovery proceedings.

The relief was expressly granted by the Kerala High Court purely as a matter of indulgence, considering that:

  • the delayed instalments had been brought up to date;
  • the petitioner undertook to pay the balance amount without further default; and
  • the Court had earlier recorded the petitioner’s undertaking regarding future compliance.

The Court simultaneously preserved the department’s right under the proviso to Section 80.

Therefore, the critical clarification emerging from the judgment is that any further default by the petitioner would permit the department to proceed for recovery of the entire amount in accordance with the proviso to Section 80 of the CGST/SGST Act.

Sections Involved

Section 80 of the Central Goods and Services Tax Act, 2017

Section 80 concerns payment of tax and other amounts in instalments, subject to the statutory conditions and the discretion contemplated under the provision.

The central controversy in the present case arose from the consequences of failure to adhere to the timelines fixed under the instalment order.

Proviso to Section 80 of the CGST Act / SGST Act

The proviso to Section 80 was specifically relied upon by the respondent department and expressly recognised by the High Court in its final order.

The Court clarified that if the petitioner committed any further default, the respondent department would be entitled to proceed for recovery of the entire amount in terms of the proviso to Section 80.

Link to Download the Order-https://mytaxexpert.co.in/uploads/1783490292_1433compressed.pdf

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