M/S. Britannia Industries LTD. vs. Assistant Commissioner Of Commercial Taxes
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The petitioner, M/s. Britannia Industries Ltd., is challenging an order passed by the Assistant Commissioner of Commercial Taxes (Respondent No. 1) on September 3, 2024, rejecting their refund application. The refund sought was for interest recovered by the Authority on February 12, 2024. The core of the dispute revolves around whether the Assessing Authority could debit the disputed interest amount while an appeal filed by the petitioner under Section 107(1) of the Central Goods and Services Tax Act, 2017, was pending. The petitioner had sought a refund of this unilaterally debited amount, relying on an earlier order from the second respondent which suggested re-crediting the amount to the Electronic Cash Ledger.
Held
The Court held that the Assessing Authority could not have debited the disputed interest amount contrary to Section 107(7) of the Central Goods and Services Tax Act, 2017. The Court found that the unilateral debit undertaken by the Assessing Officer from the cash ledger towards the disputed amount, during the pendency of the appeal and in contravention of Section 107(7), was erroneous and without jurisdiction. The Court reasoned that Section 107(7) clearly contemplates that where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed. Therefore, the order of rejection of the refund was unsustainable and liable to be set aside. The Court directed the second respondent to re-credit the disputed amount of Rs. 13,92,041/- to the Electronic Cash Ledger of the petitioner. No issue was expressly left undecided.
Key Issues
1. Whether the Assessing Authority could debit the disputed interest amount contrary to Section 107(7) of the Central Goods and Services Tax Act, 2017, while an appeal filed by the petitioner under Section 107(1) of the Act was pending consideration? Petitioner's Contention: The petitioner argued that the debit of the disputed interest amount by the Assessing Authority was erroneous and without jurisdiction, especially since an appeal was pending. They relied on the principle that recovery proceedings for the balance amount are deemed to be stayed when the appellant has paid the amount under sub-section (6) of Section 107, as stipulated in sub-section (7) of Section 107. They also referred to an order from the second respondent supporting their claim for re-credit. Revenue's Contention: The Revenue, represented by the learned Additional Government Advocate, contended that the petitioner had an alternative remedy under Section 128(3) of the Act, thereby justifying the rejection of the refund claim.
Sections Cited
Section 107, Section 128
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ORAL ORDER
In the caption petition, petitioner is assailing the order of rejection passed by the respondent No.1 thereby declining to refund the interest recovered by the Authority on 12.02.2024. 2. The short point that needs consideration at the hands of this court as to whether the 1st respondent- Assessing Authority could have debited the disputed interest amount pending consideration of the appeal filed HC-KAR NC: 2025:KHC:20866 by the petitioner herein under Section 107(1) of the Central Goods and Services Act, 2017 (for short 'the Act, 2017').
Learned Additional Government Advocate while seriously contesting this petition would place reliance to Section 128(3) of the Act and contend that petitioner has an remedy under the said provision and therefore would justify the rejection of the petitioners claim seeking refund of the disputed interest amount.
Having heard the counsels on record, this Court needs to examine as to "whether the Assessing Authority could have debited the disputed interest amount contrary to Section 107(7) of Central Goods Service Tax Act, 2017 (for short ‘Act’)?". My answer is empathetically “No”.
The authority during the pendency of the appeal and in contravention of Section 107(7) of CGSC Act, 2017 debited the disputed interest amount. Petitioner sought for refund of unilateral debit of the disputed interest, while HC-KAR NC: 2025:KHC:20866 placing reliance on the order of the 2nd respondent who has ordered to re-credit on the premise is that amount was debited from cash ledger admittedly towards the disputed interest amount and therefore 2nd respondent opinioned that petitioner is eligible for re-credit to the Electronic cash ledger of the RTP.
However, respondent No.1 by the impugned order has rejected the request made by the petitioner seeking refund of disputed interest amount. Sub-section (7) of Section 107 plainly contemplates that where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed. Therefore, on examining the said provision coupled with the order passed by the 2nd respondent, this Court is of the view that unilateral debit undertaken by the Assessing Officer from the cash ledger towards the disputed amount of the creditor is not only erroneous and without juri iction and contrary to the mandate provided under sub-section(7) of Section 107. HC-KAR NC: 2025:KHC:20866 Therefore, this Court is of the view that order of rejection need not be sustainable and liable to be set aside.
For the foregoing reasons, this Court pass the following: ORDER
(i) The writ petition is allowed. (ii) The impugned order dated 03.09.2024 passed by the respondent No.1, is hereby set aside. (iii) Consequently, the 2nd respondent is hereby directed to re-credit the disputed amount to the tune of Rs.13,92,041/- to the Electronic cash ledger of the RTP. (SACHIN SHANKAR MAGADUM) JUDGE
KLY List No.: 3 Sl No.: 2
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.