Arhaan Ferrous And Non Ferrous Solutions Private Limited vs. Assistant Commissioner

Held

The Court held that the provisions of Section 107(6) and (7) of the GST Act, 2017, are clear and peremptory. Section 107(7) explicitly states 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. The Court noted that it was admitted that there was no disputed tax and the entire tax payable had been paid by the petitioner. Therefore, the only remaining question was whether the penalty could be recovered while the appeal was pending and the 10% pre-deposit requirement was met. The Court found that the law clearly prohibits recovery until the appeal is disposed of. Consequently, the Court allowed the writ petition, setting aside the Garnishee Order dated 18.02.2025. No order as to costs was made. The Court was unable to assist the State in recovering the penalty amount due to the clear mandate of Section 107(6) read with 107(7).

Facts

The petitioner, Arhaan Ferrous And Non Ferrous Solutions Private Limited, a registered dealer in iron scrap and steel products, was levied a penalty of Rs. 91,27,10,650/- by an order dated 19.11.2024. The petitioner filed a writ petition challenging a Garnishee Order issued on 18.02.2025 to the petitioner's customers for the recovery of this penalty amount. The petitioner contended that an appeal had been filed against the penalty order, and as per Section 107(7) of the GST Act, recovery proceedings for the balance amount should be stayed upon payment of 10% of the disputed tax. The petitioner stated that the entire tax payable had been paid. The respondents argued that initially only an intimation of appeal was filed, and the proper appeal was filed much later on 24.02.2025, making the Garnishee Order valid.

Key Issues

1. Whether the Garnishee Order dated 18.02.2025, issued for the recovery of penalty, is valid when the petitioner has filed an appeal against the penalty order dated 19.11.2024, and has complied with the pre-deposit requirements under Section 107(6) of the GST Act, 2017? Petitioner's contention: The petitioner argued that since the entire tax payable has been paid and an appeal has been filed, Section 107(7) of the GST Act mandates a stay on recovery proceedings for the penalty amount. They relied on Section 107(6) and (7) of the GST Act, 2017. Respondent's contention: The respondents contended that an appeal was not properly filed initially, with only an intimation being filed. The proper appeal was filed later on 24.02.2025. Therefore, at the time the Garnishee Order was issued on 18.02.2025, Section 107(7) was not applicable, and the order was in accordance with law. They also raised contentions regarding the reasons for the penalty imposition, stating it arose from a large-scale investigation into traders in iron and steel.