Facts of the Case

In three connected petitions led by M/s Bhawya Enterprises, the Assistant Commissioner, State Taxes and Excise, had passed a final order dated 01.05.2025 under Section 74 of the CGST Act, 2017 confirming a GST demand with penalty. Though the petitioners had three months to deposit the amount or file an appeal under Section 107, the department recovered the demanded amount from their bank accounts within just five days, without recording reasons, and in an amount exceeding 10% of the confirmed liability. When the petitioners tried to file appeals, the GST portal refused to accept them for want of a fresh 10% pre-deposit, since the recovered amount was treated as admitted tax rather than a disputed-amount deposit. The Assistant Commissioner himself later issued a certificate dated 19.06.2025 admitting the recovery for FY 2018-19 and 2019-20 had been made "inadvertently," yet did not reverse it.

Issues Involved

  1. Whether recovery of a confirmed GST demand within days of the order, before expiry of the three-month period for filing an appeal and without recording reasons, is permissible.
  2. Whether an admittedly mistaken recovery must be refunded/reversed with interest while the underlying demand's merits remain unexamined.

Petitioner's Arguments

  • Recovery effected within five days of the order, without reasons and exceeding the admissible threshold, prejudiced the statutory right to appeal within three months under Section 107.
  • The portal's refusal to treat the recovered amount as the pre-deposit forced the petitioners into an impossible position where they could neither get a refund nor file a valid appeal.
  • The Assistant Commissioner's own certificate admitted the debit was inadvertent, yet no reversal followed, compelling the writ petitions.

Respondent's Arguments

  • The Additional Advocate General sought time to obtain instructions on rectifying the admitted mistake, and the Assistant Commissioner concerned appeared in person and confirmed the recovery had indeed been made inadvertently.

Court Order / Findings

  • On the admitted position that the amount had been debited by mistake, the Court directed the department to take necessary action to refund/reverse the mistakenly recovered amount to the petitioners' accounts, along with interest as permissible under the statute, within a short timeframe.
  • The Court expressly declined to express any opinion on the merits of the underlying Section 74 demand, clarifying that if an appeal or other statutory remedy is later pursued, the demand would remain subject to that outcome, and that absent any appeal the department would remain entitled to recover the amount as permissible in law.
  • The petitions were disposed of on this basis, with pending miscellaneous applications also disposed of.

Important Clarification

  • Recovery of a confirmed GST demand must ordinarily await expiry of the statutory period available for filing an appeal, and cannot be effected within days without recorded reasons.
  • Where the department itself admits a recovery was made by mistake, courts will direct prompt refund with interest without needing to adjudicate the merits of the underlying demand, leaving those merits open for the ordinary appellate process.

Sections Involved

  • Section 74, CGST Act, 2017 — determination of tax demand and penalty in cases involving fraud or wilful misstatement, under which the original order was passed.
  • Section 107, CGST Act, 2017 — governs the limitation period for appeal and the 10% pre-deposit requirement, protecting against premature recovery during the period available for appeal.
  • Section 79, CGST Act, 2017 — modes of recovery of tax, invoked here to debit the petitioners' bank accounts.

Decision – In Favour of

The decision is in favour of the assessee on the procedural grievance. The department was directed to refund the mistakenly recovered amount with interest, while the merits of the underlying demand were left open and undecided.

Case Details

Court: High Court of Himachal Pradesh, Shimla
Case No.: CWP No.11694 of 2025 (with connected CWP Nos.11696 & 11697 of 2025); Neutral Citation 2025:HHC:24257
Coram: Hon'ble Mr. Justice Vivek Singh Thakur and Hon'ble Mr. Justice Sushil Kukreja
Date of Order: 24th July 2025

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