The Himachal Pradesh High Court in the case of M/S BHAWYA ENTERPRISES, M/S SOHAN SINGH MEET SINGH & SONS, M/S JALAM SINGH FAUJI SONS VERSUS ASSISTANT COMMISSIONER, STATE TAXES & EXCISE (GST/ALLIED TAXES) & ANOTHER vide CWPs No. 11694, 11696 & 11697 of 2025 dated 24.07.2025, held that premature recovery without recording reasons and before expiry of the appeal period was violative of the statutory scheme and amounted to denial of the right to appeal. Directed the department to refund/reversal of the amount along with applicable interest. The Court emphasised that once a departmental officer admits mistake, the State must act swiftly to rectify it and avoid unnecessary litigation.
Facts of the Case: In this case, the petitioner filed writ petitions before the High Court challenging the action of the Assistant Commissioner in recovering CGST demand amounts from their accounts within five days of passing of the adjudication order dated 01.05.2025, under Section 74 of the CGST Act, 2017. As per Section 107, the petitioners had three months’ time to file an appeal against the said order or deposit the tax amount.
The petitioners contended that the recovery was carried out without recording any reasons, and was in excess of the 10% pre-deposit required for preferring an appeal. The petitioners intended to file an appeal; however, the GST portal did not accept the appeal, stating that the mandatory 10% pre-deposit had not been made. The system treated the prematurely recovered amount as admitted tax, not as disputed tax, thereby disabling the appeal process.
The Assistant Commissioner later issued a certificate dated 19.06.2025, acknowledging that the recovery of demand for FY 2018–19 and 2019–20 had been made inadvertently. However, no steps were taken to reverse/refund the said amount. The limitation period for filing the appeal was due to expire on 31.07.2025, prompting the petitioners to seek judicial intervention.
The Court had earlier passed an interim order on 22.07.2025, noting that the recovery was contrary to law, and urged the State to rectify the mistake instead of engaging in avoidable litigation.
Issue: Whether recovery of tax demand under Section 74 of the CGST Act before expiry of the limitation period for filing an appeal under Section 107, without recording reasons and despite admitted mistake by the officer is valid, and whether the petitioners are entitled to refund/reversal with interest.
Held that:
The High Court held that the premature recovery of tax demand, effected without recording reasons and before the expiry of the appeal period, was illegal. Since the Assistant Commissioner admitted the recovery was inadvertent, the Court directed the respondents to refund/reverse the amount so recovered, along with interest as per the applicable provisions of the CGST Act.
The Court observed that such wrongful recovery prejudiced the petitioners’ right to appeal, especially when the GST portal refused to acknowledge the recovered amount as a valid pre-deposit. The inability of the portal to treat such recovered amount as the required 10% pre-deposit for filing an appeal compounded the prejudice to the petitioners.
The Court cautioned the State authorities to avoid unnecessary litigation and to act promptly when officials admit errors, so as not to burden the courts and cause prejudice to taxpayers.
The Court refrained from commenting on the merits of the demand itself but directed that the amount recovered should be returned by 26.07.2025, and if the petitioner chooses to appeal, the demand shall be subject to the outcome of that process.
Conclusion
This landmark judgment by the Himachal Pradesh High Court reinforces taxpayers’ rights against unlawful GST recoveries. If you’ve faced similar premature recovery or portal-related issues, don’t stay silent. Consult IndTax Filings to take the right legal steps and ensure compliance.
