Facts of the Case

M/S North Eastern Information Technology Consultancy Services Private Limited, a company running a computer training institute in Shillong, Meghalaya, was served a demand notice dated 31.10.2019 followed by an order dated 03.09.2020 raising a demand of Rs. 11,16,914/- along with interest and penalty towards allegedly unpaid Service Tax. On 27.09.2022, the jurisdictional Deputy Commissioner initiated recovery proceedings and attached the petitioner's bank account. The petitioner had, in the meantime, filed an appeal before the Commissioner (Appeals), Central Goods and Services Tax, against the demand order, accompanied by a mandatory pre-deposit of Rs. 83,770/- (7.5% of the disputed amount). Despite the pending appeal, the Commissioner (Appeals) declined to grant interim stay of recovery, prompting the petitioner to approach the Gauhati High Court under Article 226.

Issues Involved

  1. Whether recovery proceedings could continue against the petitioner while its statutory appeal, filed with the requisite pre-deposit, remained pending before the Commissioner (Appeals).

Petitioner's Arguments

  • Clause 4.3 of the Circular dated 16.09.2014 issued by the Ministry of Finance mandates that recovery action be stayed pending disposal of an appeal before the Commissioner (Appeals)/Tribunal.
  • Despite this, the Commissioner (Appeals) had declined interim relief even though the statutory pre-deposit had been made.

Respondent's Arguments

  • Learned Standing Counsel for CGST fairly conceded that once an appeal against a GST demand is preferred with the requisite pre-deposit, coercive recovery action must be stayed until disposal of the appeal, as mandated by the Circular dated 16.09.2014.

Court Order / Findings

  • It was undisputed that the petitioner's appeal was accompanied by the requisite pre-deposit and remained pending.
  • The Court held that, in terms of Clause 4.3 of the Circular dated 16.09.2014, recovery proceedings initiated against an appellant who has made the pre-deposit must be stayed until the appeal is finally disposed of.
  • The writ petition was disposed of by directing that no coercive action be taken against the petitioner for recovery of the demanded amount until disposal of the pending appeal.

Important Clarification

An assessee who has filed a first appeal against a tax demand along with the statutorily required pre-deposit is entitled, as a matter of settled departmental circular policy, to protection from coercive recovery until the appeal is decided — a protection courts will enforce even where the appellate authority itself has declined interim stay.

Sections Involved

  • Circular dated 16.09.2014 (Ministry of Finance, Department of Revenue), Clause 4.3 – requires stay of recovery once an appeal with pre-deposit is pending before the Commissioner (Appeals)/Tribunal.
  • Central Goods and Services Tax Act, 2017 – recovery and appeal provisions administered by the respondent CGST authorities in relation to the underlying demand.

Decision – In Favour of

The matter was decided in favour of the Assessee, with the Court staying all coercive recovery action until the pending first appeal is finally disposed of.

Case Details

  • Court: Gauhati High Court (High Court of Assam, Nagaland, Mizoram and Arunachal Pradesh)
  • Case Number: WP(C)/4626/2023
  • CNR: GAHC010178152023
  • Coram: Hon'ble Mr. Justice Suman Shyam
  • Date of Order: 11 August 2023

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