Tvl. Balaiah Venkatesh Vs State Tax Officer
Date: July 16, 2024
Subject Matter
Recovery proceedings under Section 78 of the CGST Act must be initiated by the Principal Commissioner and not State Tax Officer
Summary
In this writ petition, the petitioner sought the restoration of Rs.10,65,000 that was seized from their bank account following an order in original dated April 3, 2024. The petitioner filed a statutory appeal within the three-month period allowed by law, specifically on May 21, 2024. However, a bank attachment notice was issued on May 14, 2024, resulting in a deduction of the specified amount from the petitioner’s account on May 22, 2024. Following this, the petitioner submitted an application for a refund on May 28, 2024. The petitioner’s counsel argued that, according to the provisions under Section 79 of the GST Act, recovery actions should only commence after the three-month appeal period expired, unless there is a threat to revenue as specified in the proviso to Section 78. The counsel highlighted that the Central Board of Indirect Taxes and Customs (CBIC) issued instructions on initiating recovery proceedings, which were allegedly not followed. The government's counsel countered by stating that recovery measures were necessary because the petitioner’s registration had been cancelled, thus allowing for recovery actions before the three-month limit. The court found that the proper officer (State Tax Officer) failed to adhere to the legal requisites outlined in Section 78 regarding the initiation of recovery and consequently directed the respondent to refund the seized amount, ordering the processing of the petitioner’s refund application within three months. The case was disposed of without costs.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
By this writ petition, the petitioner seeks a direction to the respondent to restore the sum of Rs.10,65,000/-, which was recovered from the petitioner’s bank account pursuant to order in original dated 03.04.2024. Upon issuance of the above mentioned order in original, the petitioner presented a statutory appeal on 21.05.2024, which is within the prescribed limitation period of three months. Meanwhile, bank attachment notice dated 14.05.2024 was issued by the respondent herein. Pursuant thereto, a sum of Rs.10,65,000/- was debited from the petitioner’s account in the Federal Bank on 22.05.2024. After submitting application dated 28.05.2024 for refund of such amount, the present writ petition was
2. Learned counsel for the petitioner submits that, in due course, recovery is permissible in terms of Section 79 of applicable GST statutes only upon expiry of the three month period within which the tax payer is entitled to lodge a statutory appeal. As an exception, if recovery is necessary in view of revenue threat, recovery action may be taken under the proviso to Section 78 of applicable GST enactments by the jurisdictional Principal Commissioner / Commissioner of Central Tax. By referring to Instruction No.1/2024 – GST dated 30.05.2024, which was issued by the Central Board of Indirect Taxes and Customs (CBIC), he submits that clear instructions were issued with regard to the manner of initiation of recovery proceedings under Sections 78 and 79. Learned counsel contends that the statutory prescription was contravened in this case.
3. Mr. T.N.C.Kaushik, learned Additional Government Pleader, notice for the respondents. He submits that the petitioner’s registration was cancelled and, therefore, recovery measures were initiated even prior to the expiry of the three month time limit.
“78. Initiation of recovery proceedings Any amount payable by a taxable person in pursuance of an order passed under this Act shall be paid by such person within a period of three months from the date of service of such order failing which recovery proceedings shall be initiated:
PROVIDED that where the proper officer considers it expedient in the interest of revenue, he may, for reasons to be recorded in writing, require the said taxable person to make such payment within such period less than a period of three months as may be specified by him.”
5. The proviso to Section 78 prescribes that the proper officer may initiate recovery proceedings before expiry of three months if it is expedient in the interest of revenue for reasons to be recorded in Learned Additional Government Pleader has been unable to on record any decision in accordance with the proviso to on 78 along with reasons for such decision. In this connection, it is pertinent to notice that jurisdiction has been conferred on the jurisdictional Principal Commissioner / Commissioner as regards CGST. The recovery action, in this case, was taken by the State Tax Officer. For both these reasons, the recovery measure is unsustainable.
6. In these circumstances, W.P.No.17194 of 2024 is disposed of by directing the respondent to refund the sum of Rs.10,65,000/- by considering the petitioner’s application dated 28.05.2024 and disposing of the same within three months from the date of receipt of a copy of this order. No costs.