2025 (1) TMI 1199 - HC - GST

Interim stay of appellate demand; petitioner to deposit additional 10% within two weeks under Section 107(6); prima facie relief

HC granted interim relief in a challenge to an appellate order dated 24 Oct 2024, noting the Appellate Tribunal is yet to be constituted and finding a ... Recovery of outstanding dues - Challenge to impugned appellate order dated 24th October, 2024 passed by the respondent no.3 - reliance placed upon Circular No.224/18/2024-GST dated 11th July, 2024 issued by the Ministry of Finance - non-constitution of Tribunal - HELD THAT:- Having heard the learned advocates appearing for the respective parties and having considered the materials on record as also taking note of the fact that the Appellate Tribunal is yet to be constituted, the petition should be heard. Since, the petitioner has been able to make out a prima facie case, there shall be an unconditional stay of the demand of the Appellate order dated 24th October, 2024, for a period of two weeks from date - In the event, the petitioner makes payment of 10% of the balance amount of tax in dispute, in addition to the amount already deposited in terms of Section 107(6) of the said Act, within two weeks from date, the interim order passed herein, shall continue till the disposal of the writ petition or until further order, whichever is earlier. Let affidavit-in-opposition to the present writ petition be filed within a period of six weeks from date, reply, if any, be filed within one week thereafter. ISSUES PRESENTED and CONSIDEREDThe primary issue considered in this judgment is whether the petitioner is entitled to an unconditional stay of the demand arising from the appellate order dated 24th October 2024, given the lack of an operational Appellate Tribunal under the Central Goods and Services Tax (CGST) Act. Additionally, the court examined the applicability of Circular No. 224/18/2024-GST issued by the Ministry of Finance, which provides guidelines for the recovery of outstanding dues in cases where a first appeal has been disposed of but the Appellate Tribunal is not yet operational.ISSUE-WISE DETAILED ANALYSIS1. Legal Framework and PrecedentsThe relevant legal framework involves Section 112 of the CGST Act, which outlines the procedure for filing appeals and obtaining stays on recovery of confirmed demands. Sub-section (8) of Section 112 specifies the requirement for a pre-deposit to avail a stay, while sub-section (9) provides for a stay on recovery of the remaining amount upon fulfilling certain conditions. The Ministry of Finance's Circular No. 224/18/2024-GST further clarifies these provisions, particularly in the context of the absence of an Appellate Tribunal.2. Court's Interpretation and ReasoningThe Court interpreted the provisions of Section 112 and the Circular to mean that the petitioner could seek a stay of the demand if they complied with the pre-deposit requirements and provided the necessary undertakings. The Court acknowledged the absence of the Appellate Tribunal and noted that the Circular was intended to mitigate the impact of this absence by allowing taxpayers to defer recovery proceedings until the Tribunal becomes operational.3. Key Evidence and FindingsThe Court considered the fact that the petitioner had made a prima facie case for the stay of the demand. The petitioner relied on the Circular, which supports the argument that recovery should be stayed if the taxpayer intends to appeal and complies with the pre-deposit requirements. The absence of the Appellate Tribunal was a significant factor in the Court's decision to grant an interim stay.4. Application of Law to FactsApplying the law to the facts, the Court determined that the petitioner should be allowed an unconditional stay of the demand for a period of two weeks. This decision was contingent upon the petitioner making an additional payment of 10% of the balance amount of tax in dispute, in addition to the amount already deposited under Section 107(6) of the CGST Act, within two weeks.5. Treatment of Competing ArgumentsThe State, represented by Mr. Siddiqui, argued that the writ petition should be heard under the usual terms of Section 112(8). However, the Court found that the petitioner's reliance on the Circular and the absence of the Appellate Tribunal justified an interim stay. The Court balanced the interests of the State in recovering dues with the petitioner's right to seek appellate relief under the CGST framework.6. ConclusionsThe Court concluded that the petitioner was entitled to an interim stay of the demand from the appellate order, subject to compliance with the specified conditions regarding the additional pre-deposit. The Court's decision was influenced by the procedural gap caused by the non-operational status of the Appellate Tribunal and the guidelines provided in the Circular.SIGNIFICANT HOLDINGSThe Court held that the petitioner had established a prima facie case for the stay of the demand. The judgment emphasized the importance of the Circular in providing interim relief to taxpayers in the absence of an operational Appellate Tribunal. The Court's decision underscored the principle that procedural fairness must be maintained, particularly when statutory mechanisms are not fully in place.Core Principles EstablishedThe judgment reinforced the principle that taxpayers should not be unduly burdened with recovery proceedings when appellate mechanisms are not available. The Court recognized the necessity of interim measures to protect taxpayers' rights pending the establishment of the Appellate Tribunal.Final Determinations on Each IssueThe Court granted an unconditional stay of the demand for two weeks, with the condition that the petitioner make an additional pre-deposit. The interim order would continue until the disposal of the writ petition or further orders, whichever is earlier. The Court also set timelines for the filing of affidavits in opposition and replies, ensuring procedural progress in the case.