2025 (7) TMI 134 - HC - GST

Assessing Authority's unilateral interest debit during appeal pendency violates Section 107(7) CGST Act statutory stay provisions

Karnataka HC allowed writ petition challenging rejection of refund claim for interest debited during appeal pendency under Section 107(1) of CGST Act, ... Declination to refund of unilateral debit of the disputed interest - pending consideration of the appeal filed by the petitioner - HELD THAT:- Sub-section (7) of Section 107 plainly contemplates that where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed. Therefore, on examining the said provision coupled with the order passed by the 2nd respondent, this Court is of the view that unilateral debit undertaken by the Assessing Officer from the cash ledger towards the disputed amount of the creditor is not only erroneous and without jurisdiction and contrary to the mandate provided under sub-section (7) of Section 107. Therefore, this Court is of the view that order of rejection need not be sustainable and liable to be set aside. The impugned order dated 03.09.2024 passed by the respondent No. 1, is hereby set aside - Petition allowed. The Karnataka High Court, through Justice Sachin Shankar Magadum, allowed the writ petition challenging the Assessing Authority's rejection of a refund claim for interest debited during the pendency of an appeal under Section 107(1) of the Central Goods and Services Tax Act, 2017 ('the Act'). The key issue was whether the Assessing Authority could debit the disputed interest amount contrary to Section 107(7) of the Act. The Court held emphatically 'No,' finding that the unilateral debit was 'erroneous and without jurisdiction' and violated the statutory stay on recovery proceedings during appeal as mandated by Section 107(7). The Court noted that the 2nd respondent had ordered re-crediting the disputed amount, supporting the petitioner's entitlement. Consequently, the impugned order rejecting the refund was set aside, and the 2nd respondent was directed to re-credit Rs. 13,92,041/- to the petitioner's electronic cash ledger.