S S Rail Works Private Limited vs. The Commissioner Of State Tax

Held

The Court held that the action of the respondent-assessing authority in recovering the entire amount covered by the impugned demand was illegal, arbitrary, and opposed to the provisions of sub-section (7) of Section 107 of the Central Goods and Services Tax Act, 2017. The Court reasoned that Section 107(7) clearly stipulates that upon payment of the pre-deposit amount as per sub-section (6), recovery proceedings for the balance amount are deemed to be stayed. By recovering the entire amount, the assessing authority acted contrary to this statutory provision. The ratio decidendi is that the mandatory pre-deposit under Section 107(6) triggers a stay on the recovery of the balance demand as per Section 107(7), and any recovery beyond the pre-deposit amount while appeals are pending is impermissible. The Court allowed the writ petitions, declared the recovery action illegal, and directed the respondents to refund the amount recovered from the petitioner's account, excluding the 10% pre-deposit amount.

Facts

The petitioner filed multiple writ petitions challenging the action of the assessing authority in adjusting the entire amount covered by the impugned demand. The assessing authority had initially issued show-cause notices under Section 73 of the Central Goods and Services Tax Act, 2017, for various periods. Subsequently, orders under Section 74 of the Act were passed on November 23, 2020. The petitioner then filed appeals before the appellate authority in April 2021, after making a pre-deposit of 10% of the demanded amount, as required. These appeals were pending consideration. The petitioner's grievance was that despite the pending appeals and the pre-deposit, the assessing authority proceeded to recover the entire demanded amount, which the petitioner contended was in contravention of Section 107(7) of the Act.

Key Issues

1. Whether the action of the assessing authority in recovering the entire amount covered by the impugned demand, despite the petitioner having filed appeals and made the mandatory pre-deposit under Section 107(6) of the Central Goods and Services Tax Act, 2017, is illegal and arbitrary? Petitioner's contention: The petitioner argued that the assessing authority's action of recovering the entire demanded amount contravened the provisions of Section 107(7) of the Act, 2017. This sub-section stipulates that where an appellant has paid the amount under sub-section (6), recovery proceedings for the balance amount shall be deemed to be stayed. Therefore, the recovery of the entire amount was not permissible. Revenue's contention: The judgment does not record any specific arguments made by the revenue or the State. The Government Pleader for Commercial Taxes was heard, but their contentions are not detailed in the judgment.