M/S M Munivenkatappa And Company vs. The State Of Karnataka
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Cause title — parties, addresses and appearances
ORAL ORDER
In this petition, petitioner seeks for the following reliefs:-
“ i) Declare the Provisions of section 16(2) (c) of CGST ACT/SGST/ACT, 2017 as being illegal, unreasonable, arbitrary and discriminatory and therefore to be struck, down as violative of article 14, 19(1)(g) and 300A of Constitution of India. ii) Issue of a Writ of Certiorari or other appropriate writ or order quashing the impugned adjudication order passed by the Respondent No.3, dated 30.11.2022, bearing reference no-CTO(A)-3.4/DGSTO-3/2022-23 is herewith enclosed as ANNEXURE-H and the copy of the summary adjudication order in DRC-07 bearing reference no ZD2901230041780 dated: 16.01.2023 is herewith enclosed as ANNEXURE-H1, iii) Issue of a Writ of Certiorari or any other appropriate writ or order quashing the impugned appeal order passed by the 2nd respondent authority on 26.12.2023 vide order bearing No. T.NO.1154/2023-24 HC-KAR NC: 2025:KHC:47969 under Section 107(11) of the CGST/KGST Act-2017. vide Annexure-L. iv. Issue of a Writ of Certiorari or any other appropriate writ or order quashing the impugned the form DRC-13, dated 12.01.2024 bearing no-(Audit)-3.4/DRC- 13/2023-24 is herewith enclosed as ANNEXURE-M.
V. Issue a Writ of mandamus, or orders of similar nature, the directing 3rd respondent authority to refund an amount of Rs.15,63,108/- along with interest to the petitioner forthwith, which was recovered from the bank account of petitioner i.e., State Bank of India, Puttenahalli Branch, Bearing IFSC-SBIN0040622, Vide Account No- 64197288723, at ANNEXURE-N. ON. 12.01.2024. vi. Grant such other orders of directions as it deems fit to this Hon’ble Court in the circumstances of the case in the interest of justice.”
Heard learned counsel for the petitioner and learned HCGP for the respondents and perused the material on record.
It is the grievance of the petitioner that pursuant to the show cause notice dated 19.10.2022 issued by the 3rd respondent under Section 73(1) of the KGST Act, the petitioner submitted reply dated 18.11.2022, which proceedings culminated in an order dated 30.11.2022 against the petitioner. Being aggrieved by the said order, the petitioner filed an appeal along with relevant documents HC-KAR NC: 2025:KHC:47969 which was dismissed by the 2nd respondent – appellate authority while noticing that certain documents were not produced by the petitioner.
Per contra, learned HCGP for the respondents submit that there is no merit in the petition and the same is liable to be dismissed.
Before adverting to the rival contentions, it is profitable to extract the Circular No.224/18/2024-GST dated 11.07.2024, which reads as under:- CircularNo.224/18/2024-GST CBIC-20001/4/2024-GST Government of India Ministry of Finance Department of Revenue Central Board of Indirect Taxes and Customs GST Policy Wing
**** New Delhi, Dated the11thJuly,2024 To, The Pr.Chief Commissioners/ Chief Commissioners/ Principal Commissioners/Commissioners of Central Tax (All) The Principal Directors General/Directors General(All)
Madam/Sir, Subject: Guidelines for recovery of outstanding dues, in cases wherein first appeal has been disposed of, till Appellate Tribunalcomes into operation. HC-KAR NC: 2025:KHC:47969 Doubts have been raised by the trade and the field formations in respect of recovery of outstanding dues, in cases where the first appellate authority has confirmed the demand created by the adjudicating authority, fully or partially, and where appeal against such order of appellate authority could not be filed under section 112 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as ‘the CGST Act’) due to non- constitution of Appellate Tribunal (hereinafter referred to as ‘Tribunal’), as yet. Doubts have also been raised as to whether the amount that was originally intended to be paid towards the demand created but has inadvertently been paid and intimated by the taxpayer through FORM GST DRC-03 either under the ‘voluntary’ category or under the ‘others’ category, can be adjusted against the pre-deposit that is required to be paid by the taxpayer for filing appeal before the appellate authority under section 107, and before the appellate tribunal under section 112 of the CGST Act.
The matter has been examined. In order to clarify the issue and to ensure uniformity in the implementation of the provisions of the law across field formations, the Board, in exercise of its powers conferred by section 168 (1) of the CGST Act, hereby issues the following clarifications and guidelines.
In cases, where the first appellate authority has confirmed the demand issued by the adjudicating authority, partially or fully, the taxpayers cannot file appeal against the said appellate order at present due to non-operation of GST Appellate Tribunal as yet. As per Section 112 of the CGST Act, every person has statutory remedy of appeal against the order passed by the first appellate authority or by a revisional authority, before the Tribunal. As per section78 of CGST Act, the recovery proceedings are to be initiated, if the amount payable as per the order issued under the said act is not paid by the concerned person within the said period of three months from the date of service of the said order. It may further be noted that if any person files an appeal in accordance with the requirement of sub-section(8) of section 112 of the CGST Act (i.e., on payment of prescribed pre-deposit), the recovery proceedings for the balance amount is deemed to be stayed till disposal HC-KAR NC: 2025:KHC:47969 of the appeal as per sub-section (9) of section 112 of the CGST Act. However, as the taxpayers are not able to file appeal under section 112 in Appellate Tribunal against the orders of appellate authority and therefore, are not able to make the pre-deposit under sub-section (8) of section 112 of CGST Act, in some cases, the tax officers are taking a view that there is no stay against recovery as per sub-section (9) of section 112 of CGST Act. In some cases, taxpayers have either paid or are willing to pay the requisite amount of pre-deposit as per sub-section (8) of section 112 of CGST Act either by crediting in their electronic liability register against the demand so created, or by depositing the said amount through FORM DRC-03. However, tax officers are still resorting to recovery proceedings after completion of period stipulated under section 78 of CGST Act.
In order to facilitate the taxpayers to make the payment of the amount of pre-deposit as per sub-section (8) of section 112 of CGST Act, and to avail the benefit of stay from recovery of the remaining amount of confirmed demand as per sub-section (9) of section112 of CGST Act, it is hereby clarified that in cases where the taxpayer decides to file an appeal against the order of the appellate authority and wants to make the payment of the amount of pre-deposit as per sub-section (8) of section 112 of CGST Act, he can make the payment of an amount equal to the amount of pre-deposit by navigating to Services >> Ledgers>> Payment towards demand, from his dashboard. The taxpayer would be navigated to Electronic Liability Register (ELL) Part-II in which he can select the order, out of the outstanding demand orders, against which payment is intended to be made. The amount so paid would be mapped against the selected order and demand amount would be reduced in the balance liability in the aforesaid register. The said amount deposited by the taxpayer will be adjusted against the amount of pre-deposit required to be deposited at the time of filing appeal before the Appellate Tribunal.
The taxpayer also needs to file an undertaking/ declaration with the juri ictional proper officer that he will file appeal against the said order of the appellate authority before the Appellate Tribunal, as and when it comes into operation, within the timelines HC-KAR NC: 2025:KHC:47969 mentioned in section 112 of the CGST Act read with Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 dated 03.12.2019. On providing the said undertaking and on payment of an amount equal to the amount of pre-deposit as per the procedure mentioned in para 4 above, the recovery of the remaining amount of confirmed demand as per the order of the appellate authority will stand stayed as per provisions of sub-section (9) of section 112of CGST Act.
In case, the taxpayer does not make the payment of the amount equal to amount of pre-deposit or does not provide the undertaking/declaration to the proper officer, then it will be presumed that taxpayer is not willing to file appeal against the order of the appellate authority and in such cases, recovery proceedings can be initiated as per the provisions of law. Similarly, when the Tribunal comes into operation, if the taxpayer does not file appeal within the timelines specified in Section 112 of the CGST Act read with Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 dated 03.12.2019, the remaining amount of the demand will be recovered as per the provisions of law.
It has also been noticed that some taxpayers have already paid amounts that were intended to have been paid towards a demand, through FORM GST DRC-03. Attention is invited to notification No. 12/2024- CT dated 10.07.2024, vide which sub-rule (2B) of Rule 142 and FORM GST DRC-03A has been inserted in Central Goods and Services Rules, 2017 (hereinafter referred to as ‘CGST Rules), providing for a mechanism for cases where the person liable to pay tax, interest and penalty under section 52 or section 73 or section 74 or section 76 or section 122 or section 123 or section 124 or section 125 or section 127 or section 129 or section 130 of CGST Act has made payment of such tax, interest and penalty, inadvertently through FORM GST DRC-03 under sub-rule (2) of Rule 142. In such cases, the said person can file an application in FORM GST DRC-03A, electronically on the common portal, and the amount so paid and intimated through the FORM GST DRC-03 shall be adjusted as if the said payment was made towards the said demand on the date of such intimation through FORM GST DRC-03. HC-KAR NC: 2025:KHC:47969
Accordingly, in cases where the concerned taxpayer has paid an amount that was intended to have been paid towards a particular demand through FORM GST DRC-03, has submitted an application in FORM GST DRC-03A on the common portal, the amount so paid and intimated through the FORM GST DRC-03 will be considered as if the payment was made towards the said demand on the date of such intimation through FORM GST DRC-03.Theamount so paid shall also be liable to be adjusted towards the amount required to be paid as pre- deposit under Section 107 and Section 112 of the CGST Act, if and when the taxpayer files an appeal against the said demand, before the appellate authority or the appellate tribunal, as mentioned in para 4 above, and the remaining amount of confirmed demand as per the order of the adjudicating authority or the appellate authority, as the case maybe, will stand stayed as per provisions of sub-section (6) of section 107 and sub-section (9) of section 112 of CGST Act. However, if the taxpayer does not file appeal within the timelines prescribed in Section 107 and Section 112 of the CGST Act, as the case may be, read with Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 dated 03.12.2019, the remaining amount of the demand will be recovered as per the provisions of law.
3 In this regard, it is to be mentioned that the application in FORM GST DRC-03Afor adjustment of demand liability against the payment through FORM GST DRC-03 cannot be made in cases where against the payment made through the said FORM GST DRC-03, proceedings have already been concluded by issuance of an order in FORM GST DRC-05 as per the Rule 142(3) of CGST Rules, 2017. 8.1 Currently, the above-mentioned functionality for filing of an application in FORM GST DRC-03A, is not available on the common portal. Therefore, till the time such functionality is made available on the common portal, in respect of cases where an amount of pre-deposit has been inadvertently paid through FORM GST DRC-03 instead of making the said payment through Electronic Liability Ledger-II against the demand created in the said ledger, the concerned taxpayer may intimate the proper officer about the same, and on such intimation, the proper HC-KAR NC: 2025:KHC:47969 officer may not insist on recovery for the remaining amount payable by the concerned taxpayer, till the time the said functionality of FORM GST DRC-03Ais made available on the portal.
Once the functionality of FORM GST DRC-03A is made available on the portal, the concerned taxpayer may file an application in FORM GSTDRC-03A, on the common portal, at the earliest, as mentioned in para 7.1 above and on doing so, the amount paid vide FORM GSTDRC-03 maybe adjusted against the pre-deposit under section 107orsection 112 of the CGST Act, as the case may be, as detailed in para 7.2 above. However, in case the taxpayer fails to file an application in FORM GSTDRC-03Aon the common portal, the proper officer may proceed to recover the amount payable as per provisions of section 78 and section 79 of CGST Act.
It is requested that suitable trade notices may be issued to publicize the contents of this Circular.
Difficulty, if any, in implementation of the above instructions may please be brought to the notice of the Board. Hindi version would follow. Sanjay Mangal Principal Commissioner(GST)
A perusal of the material on record will indicate that though the 2nd respondent – appellate authority passed an order dated 26.12.2023, the respondents have proceeded to appropriate / recover a sum of Rs.15,63,108/- as on 12.01.2024 within a period of 17 days from the date of the order of the appellate authority and less than a period of three months, which is impermissible in law in HC-KAR NC: 2025:KHC:47969 the light of the provisions contained in Section 78 of the KGST Act, 2017, which reads as under:-
Initiation of recovery proceedings.- Any amount payable by a taxable person in pursuance of an order passed under this Act shall be paid by such person within a period of three months from the date of service of such order failing which recovery proceedings shall be initiated: Provided that where the proper officer considers it expedient in the interest of revenue, he may, for reasons to be recorded in writing, require the said taxable person to make such payment within such period less than a period of three months as may be specified by him.
A plain reading of the aforesaid provision will indicate that within a period of 90 days from the date of passing the order under the said Act, the respondents are not entitled to recover any money from the petitioner, since the petitioner had already deposited 10% by way of mandatory pre-deposit for the purpose of filing an appeal. Therefore, the respondents did not have juri iction or authority of law to recover a sum of Rs.15,63,108/- within the statutory period of 90 days as contemplated under Section 78 of the KGST Act and the same deserves to be refunded back to the petitioner. HC-KAR NC: 2025:KHC:47969
In the result, I pass the following:- ORDER (i) Petition is hereby allowed. (ii) The impugned order at Annexure-L dated 26.12.2023 passed by the 2nd respondent is hereby set aside. (iii) The matter is remitted back to the 2nd respondent – appellate authority for reconsideration afresh in accordance with law. (iv) Petitioner shall appear before the 2nd respondent on 15.12.2025 without awaiting further notice. (v) Liberty is reserved in favour of the petitioner shall produce additional documents, pleadings etc., before the 2nd respondent – appellate authority, who is directed to dispose of the matter afresh in accordance with law. (vi) The respondents are directed to refund a sum of Rs.15,63,108/- in terms of Annexures-M and N back to the petitioner within a period of two weeks from the date of receipt of a copy of this order. (S.R.KRISHNA KUMAR) JUDGE Srl.
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.