Facts of the Case

The petitioner, M/S. MA Agency, Coimbatore, through its proprietor Muhammed Ameen, challenged the appellate order dated 15.09.2022 (Appeal No. APL/GST-121-2218-409) passed by the Joint Commissioner of Commercial Taxes (Belagavi Division), and the confiscation order dated 17.09.2021 issued by the Assistant Commissioner of Commercial Taxes (Enforcement), Vijayapura. Pursuant to the notice demanding differential tax with penalty, the goods in question were seized, confiscated and subsequently auctioned, with the auction proceeds retained by the respondents.

Issues Involved

  1. Whether the auction proceeds of the confiscated goods, being in excess of 20% of the demand raised, satisfy the pre-deposit requirement under Section 112(8)(b) of the KGST Act so as to bar further recovery pending appeal.
  2. Whether recovery can be pursued against the petitioner while the GST Appellate Tribunal remains non-operational.

Petitioner's Arguments

  • The amount realised from the auction of the confiscated goods exceeded 20% of the demand raised against the petitioner, satisfying Clause (b) of Sub-section (8) of Section 112 of the KGST Act, entitling the petitioner to the protection of Section 112(9) against further recovery proceedings pending appeal.

Respondent's Arguments

  • The respondents contested the reliefs sought, including quashing of the appellate and confiscation orders and refund of the auction proceeds.

Court Order / Findings

  • Justice Suraj Govindaraj accepted that the amount already realised through auction, being in excess of 20% of the demand, satisfied the requirement under Section 112(8)(b) of the KGST Act, entitling the petitioner to the bar on further recovery under Section 112(9) while the appeal remains pending.
  • Since the GST Appellate Tribunal had not yet become operational, the Court reserved liberty to the petitioner to approach the Tribunal within 60 days of it becoming functional, per the Notification dated 17.09.2025.
  • The respondents were directed not to initiate or continue any recovery proceedings against the petitioner during the interim period, subject to the auction proceeds continuing to be held in deposit.

Important Clarification

  • Where goods have been auctioned pursuant to confiscation and the sale proceeds retained by the department exceed 20% of the disputed demand, that amount can be treated as satisfying the mandatory pre-deposit under Section 112(8)(b) of the KGST/CGST Act, entitling the taxpayer to the recovery bar under Section 112(9) pending appeal before the GST Appellate Tribunal.
  • Pending the GST Appellate Tribunal becoming operational, High Courts are granting a 60-day window from the Tribunal's functional notification for aggrieved taxpayers to file their appeals, with recovery stayed in the interim.

Sections Involved

  • Section 112(8) and 112(9), Karnataka Goods and Services Tax Act, 2017 — pre-deposit requirement for appeal to the Appellate Tribunal and consequent stay on recovery.

Decision – In Favour of

In favour of the Assessee — recovery stayed pending the GST Appellate Tribunal becoming operational, with liberty to appeal once it does.

Case Details

Court: High Court of Karnataka, Dharwad Bench
Case No.: WP No. 105123 of 2024
Neutral Citation: 2025:KHC-D:12989
Coram: Hon'ble Mr. Justice Suraj Govindaraj
Date of Order: 23.09.2025

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