Distributory Committee vs. The Deputy Assistant Commissioner 1

Held

The Court held that the action of recovering interest and penalty could not be faulted in the absence of any specific direction in the previous order dated March 26, 2025, regarding the recovery of such charges. The previous order clearly directed government departments to release GST amounts and granted liberty to the petitioner to approach the appropriate authority for remission of interest and penalty. It did not issue any observation or direction against the recovery of interest or penalty. However, the Court acknowledged that the justification for levying interest and penalty and the remission thereof was a matter to be decided by the 4th respondent (Chief Commissioner of State Tax), to whom the application was made. Therefore, the writ petition was disposed of with a direction to the 4th respondent to take appropriate action on the petitioner's application/representation expeditiously, within six weeks from the receipt of a copy of the order, in accordance with law. The Court did not grant the prayer for refund of the recovered amounts at this stage.

Facts

The petitioner, a Water Users Association registered under the GST Act, completed works related to the K.C. Canal but did not receive payment from Government Agencies. This non-payment prevented the petitioner from filing its GSTR 3B returns and paying GST taxes. Consequently, the Department finalized assessment proceedings, determined tax liability, and imposed penalties. The petitioner had previously filed Writ Petition No. 7638 of 2021, which was disposed of on March 26, 2025. This order directed government departments to ascertain and release GST amounts payable to petitioners for contracts executed before July 1, 2017, within four months. It also allowed petitioners to approach the appropriate GST authority for remission of interest and penalty, considering the special circumstances and the government agencies' default in timely payment. Following this, the petitioner applied for remission of penalty and interest on June 3, 2025, to the Chief Commissioner of State Tax and the GST Council. Despite this pending representation, the 1st respondent recovered interest and penalty amounts by attaching the petitioner's bank account.

Key Issues

1. Whether the recovery of interest and penalty amounts from the petitioner by the 1st respondent, while the representation for remission of such amounts was pending before the 4th respondent (Chief Commissioner of State Tax), is unjust, arbitrary, and contrary to the spirit of the High Court's order dated March 26, 2025? (Question of law and fact, turning on the interpretation and application of the previous High Court order and principles of natural justice). Petitioner's contentions: The petitioner argued that the recovery of interest and penalty was unjust and arbitrary, violating the previous High Court order. They contended that the government agencies had released the GST amount payable to the petitioner, which was then paid to the department. However, the 1st respondent proceeded to recover interest and penalty by attaching the petitioner's bank account, despite the pending remission application. The petitioner sought a direction for the refund of these recovered amounts. Respondent's contentions: The Government Pleader submitted that the petitioner's representation for remission of interest and penalty was pending and no orders had been passed. He fairly submitted, on query from the Court, that appropriate orders on the application would be passed within the stipulated time.