GST demand recovery during pending second appeal: statutory pre-deposit u/s112 triggers automatic stay; excess recovery refunded.

Recovery during pendency of a second appeal under the BGST/CGST regime was examined in light of the statutory pre-deposit and automatic stay mechanism. The HC held that once the assessee had paid the amounts contemplated for appeal-10% at the first appellate stage and a further 20% under s.112 for approaching the Appellate Tribunal-s.112(8) mandated stay of further recovery, and the Assessing Authority lacked jurisdiction to recover the entire demand; the impugned recovery was characterised as arbitrary and contrary to rule of law. Consequently, the excess amount recovered beyond the statutory pre-deposit was directed to be refunded within two weeks with 12% p.a. interest on default, costs were imposed on the erring officer, and the writ was allowed.

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Issues Involved:
1. Arbitrary and surreptitious tax recovery.
2. Applicability of exemption under Entry No. 66(b)(iii) of Notification No. 12/2017.
3. Compliance with statutory provisions and principles of natural justice.
4. Guidelines for tax recovery procedures.

Summary:

1. Arbitrary and Surreptitious Tax Recovery:
The court addressed the issue of a tax executive's overreach by recovering assessed tax due immediately after the dismissal of an appeal, despite the absence of a constituted Tribunal for further appeal. The recovery was deemed arbitrary, especially since notifications extended the period of limitation due to the non-constitution of the Tribunal. The court highlighted the statutory requirement under Section 112(8) of the BGST Act for a 20% payment to stay recovery until the Tribunal's constitution. The court condemned the recovery as high-handed and arbitrary, noting that the reasons recorded by the Recovery Officer were unconvincing and insufficient to justify such expedient action.

2. Applicability of Exemption under Entry No. 66(b)(iii) of Notification No. 12/2017:
The court refrained from dwelling on the legal issue of exemption for services provided to Government Polytechnic Institutes under Entry No. 66(b)(iii) of Notification No. 12/2017, as the appellate remedy was not exhausted. The focus remained on the improper recovery process rather than the exemption's applicability.

3. Compliance with Statutory Provisions and Principles of Natural Justice:
The court emphasized the necessity of adhering to statutory provisions and principles of natural justice. It cited the Constitution Bench decision in Mohinder Singh Gill and another v. The Chief Election Commissioner, New Delhi, asserting that fair hearing is a postulate of decision-making. The court found that the tax authority failed to provide proper notice and reasons to the assessee before recovery, violating the principles of natural justice and statutory requirements under Section 78 of the BGST Act.

4. Guidelines for Tax Recovery Procedures:
The court issued guidelines for tax recovery, emphasizing no recovery within the appeal filing time limit and ensuring reasonable notice and opportunity for the assessee to seek recourse. The guidelines included:
- No recovery of tax within the time limit for filing an appeal and before the stay application is disposed of.
- Initiating recovery only after a reasonable period post-stay application disposal.
- Providing notice to the assessee with reasons before initiating recovery under expedient circumstances.
- Allowing the assessee to make representations before withdrawing amounts from attached bank accounts.
- Balancing the interest of revenue with mitigating hardship to the assessee.

Conclusion:
The court found the tax authority's actions to be in complete derogation of statutory provisions and principles of natural justice. It directed the refund of improperly recovered amounts, with interest if not refunded within two weeks, and imposed a cost of Rs. 5,000 on the officer responsible for the arbitrary recovery. The writ petition was allowed with specified directions and guidelines for future tax recovery procedures.

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