Recovery proceedings without GST Appellate Tribunal under Section 107(6) invalid after 10% deposit compliance
The HC held that since the petitioner complied with Circular No. 224/18/2024 GST dated 11th July 2024 by depositing 10% of the demanded amount, the recovery proceedings initiated without constitution of the GST Appellate Tribunal under Section 107(6) of the CGST Act were invalid. Consequently, the recovery notices dated 28th February 2025, 19th March 2025, and 25th March 2025 were set aside. The petition was disposed of accordingly.
ISSUES:
Whether recovery notices issued despite a pre-deposit made under Section 107(6) and Section 112(8) of the CGST Act are valid when the GST Appellate Tribunal is non-functional.Whether recovery proceedings are stayed under Section 112(9) of the CGST Act when an appeal cannot be filed due to non-operation of the GST Appellate Tribunal.The legal effect of Circular No. 224/18/2024 - GST dated 11th July, 2024, on recovery proceedings initiated during the non-functioning of the GST Appellate Tribunal.
RULINGS / HOLDINGS:
The Court held that recovery notices issued after a valid pre-deposit under the guidelines of Circular No. 224/18/2024 are not sustainable, as the recovery proceedings are deemed stayed under Section 112(9) of the CGST Act despite the non-functioning of the GST Appellate Tribunal.The Court set aside the recovery notices issued on 28th February, 19th March, and 25th March, 2025, on the ground that the Petitioner had made the requisite pre-deposit in compliance with the statutory provisions and the Circular.The Court recognized that taxpayers who have made the pre-deposit "are not liable to further recovery action" during the period the GST Appellate Tribunal remains non-operational.
RATIONALE:
The Court applied the statutory framework under the CGST Act, specifically Sections 107(6), 112(8), 112(9), and 78, which govern pre-deposit requirements and recovery proceedings.The Court relied on Circular No. 224/18/2024 issued by the Central Board of Indirect Taxes and Customs, which clarifies that recovery proceedings should be stayed if the pre-deposit is made, even though the GST Appellate Tribunal is non-functional, thus preventing taxpayers from filing appeals.The Court emphasized that the statutory remedy of appeal under Section 112 is temporarily unavailable, but the protective mechanism of stay on recovery under Section 112(9) continues to apply if the pre-deposit is made.No dissent or doctrinal shift was indicated; the decision aligns with the established statutory scheme and administrative clarifications to protect taxpayers' rights during the Tribunal's non-operation.
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