Pal Hardware vs. State Of West Bengal And Ors.

Held

The Court found that the petitioner had made out a prima facie case warranting interference. It directed the Appellate Authority to dispose of the petitioner's appeal expeditiously, preferably by 31st October 2026, after affording a hearing and passing a reasoned order. The respondent authorities were restrained from taking further coercive steps to recover the balance assessed demand until the appeal was finally decided, given that more than 10% of the demand had already been recovered and a pre-deposit had been made. The Appellate Authority was granted liberty to decide the issue of non-availment of Input Tax Credit during the appeal hearing. The Court also permitted the petitioner to operate their bank account, lifting the attachment, provided a sufficient balance was maintained to satisfy the revenue's claim if upheld. The banking authorities were to monitor the account balance. The respondent authorities were at liberty to take recovery steps if the appeal was dismissed.

Facts

The petitioner, Pal Hardware, challenged a notice of attachment issued under Section 79(1)(e) of the West Bengal Goods and Services Tax Act, 2017. This followed an ex parte adjudication order dated 31.05.2024 under Section 73 of the Act for the period 2018-2019, based on a show-cause notice dated 21.12.2023 concerning discrepancies in returns. The petitioner preferred an appeal before the Appellate Authority on 03.02.2026. Meanwhile, on 15.01.2026, the respondent authorities initiated garnishee proceedings and recovered Rs.11,68,316/- against a total assessed demand of Rs.59,88,150/-. The petitioner had also deposited Rs.3,00,594/- as pre-deposit for the appeal.

Key Issues

1. Whether the action of the respondent authorities in recovering the assessed demand, including through garnishee proceedings, is arbitrary and legally unsustainable, despite an appeal having been preferred before the Appellate Authority? Petitioner's arguments: The petitioner contended that the recovery action was arbitrary and legally unsustainable as an appeal had already been filed. They argued that since 20% of the assessed demand had been recovered, the respondent authorities should be restrained from recovering the balance amount until the appeal attained finality. They also sought permission to operate their bank account for business purposes. Revenue/State's arguments: The State-respondents opposed the petitioner's submissions, arguing that the appeal was filed after the initiation of garnishee proceedings. They claimed the petitioner had not availed available Input Tax Credit, causing prejudice to revenue. They further argued that permitting the bank accounts to be operated could lead to revenue suffering and that the balance of the assessed demand should be secured until the appeal's finality.