Calcutta HC: GST Authorities Cannot Recover Full Tax Demand Before Appeal Period Ends

The Calcutta High Court, calling it a “grave error” by the GST authorities, ruled that the tax department could not recover the entire tax demand before the expiry of the statutory period allowed to the taxpayer to file an appeal.

A refund rejection order dated 11 March 2025 has been contested by the applicant, Supreme Infotrade Pvt. Ltd and pursued the re-credit of ₹18,04,696 recovered from its electronic credit ledger.

From an adjudication order u/s 73 of the WBGST/CGST Act for July 2017-March 2018, passed on 14 June 2023, the problem has arisen. The department debited the whole disputed tax obligation of the company via Form GST DRC-07 before the period of appeal expired on 3 August 2023.

The applicant, on unsuccessful representation dated 10 August 2023, has submitted a plea u/s 107, which was heard without any additional pre-deposit as the recovered amount was deemed as such.

On 29 August 2024, the appellate authority changed the adjudication order and issued a revised demand in Form APL-04.

The applicant asked for a refund of the excess recovery, asking that merely 20% of the disputed tax be retained; however, the GST authorities denied this claim, mentioning the lack of any refund order from a competent authority.

Justice Raja Basu Chowdhury cited that the respondents had recovered the disputed tax, even before the statutory appeal period had expired, an action the Court discovered to be entirely irrational and a grave procedural error.

Read Also: Calcutta HC Quashes GST Order for Violating Mandatory Hearing Requirement U/S 75(4)

As per the court, the statute allows the taxpayers to keep an appeal by depositing merely 10% of the disputed tax via an adjudication order and an additional 10% from an appellate order when approaching the tribunal. The department may retain 20% of the disputed tax, as till now the appellate tribunal has not been constituted.

It mentioned that “considering the fact that the respondents at best could have been entitled to 20 per cent of the amount of tax in dispute, having regard to the provisions contained in Section 107(6) and Section 112(8) of the said Act, I am of the view that the balance amount ought to be refunded to the petitioner No. 1.”

As per that, the court set aside the refund rejection order and asked the GST department to re-credit the balance amount to the electronic credit ledger of the applicant within 1 week of getting the order.