2025 (10) TMI 487 - HC - GST

Section 79(1)(a) CGST permits recovery from taxpayer electronic credit ledger after assessed demand and nonpayment

Shivam Metallurgicals Private Limited and Mr. Virendra Kumar Agrawal Versus Assistant Commissioner Circle-9, Division-II, State Goods And Services Tax, Raipur, Chhattisgarh, Joint Commissioner Division- II, State Goods And Services Tax, Raipur, Commissioner State Goods And Services Tax, Naya Raipur, Chhattisgarh.

HC dismissed the petition, holding that Section 79(1)(a) CGST empowers the proper officer to recover amounts payable to the Government from money owing to ... Entitlement of Revenue to recover amount payable by any person from any money owing to such person - petitioner did not deposit the amount payable by him - Section 79 (1) (a) of the Central Goods and Services Tax Act, 2017 - HELD THAT:- Perusal of Section 79 specifically shows that if any amount is payable by a person to the Government under the aforesaid Act or Rules, the proper officer shall proceed to recover the amount from any money owing to such person. In instant case, vide order dated 25.02.2025 (Annexure-P/3), assessment order was passed by respondent No. 1 wherein Rs. 10,32,672/- is calculated to be paid by the petitioner as outstanding demand. In that order, 30 days’ time was granted to the petitioner to pay the aforesaid amount, but since he did not pay the amount within specified period, therefore, an amount of Rs. 2,87,914/- has been recovered from his Electronic Credit Ledger under the Authority of provision of Section 79 (1) (a) of the Act, 2017. Respondent No. 2 is very much entitled to make such recovery under the aforesaid provision. Though it is said that the petitioner had filed application for rectification, but the same was rejected vide Annexure-P/5 dated 06.08.2025. It is also submitted that the petitioner has challenged the order (Annexure-P/3) by filing appeal on 14.08.2025, but as per the Electronic Credit Ledger, amount of Rs. 2,87,914/- was recovered from his Electronic Credit Ledger on 19.06.2025 i.e. prior to filing appeal. Since no stay order was passed in respect of the impugned order (Annexure-P/3) after filing rectification application, which was ultimately rejected, therefore, recovery of the said amount from Electronic Credit Ledger is not found to be perverse and illegal. There are no good ground to admit this petition, hence the same is dismissed at motion stage. ISSUES PRESENTED AND CONSIDERED 1. Whether the proper officer was entitled under Section 79(1)(a) of the Central Goods and Services Tax Act, 2017 to recover an assessed tax demand by deducting amounts from the petitioner's Electronic Credit Ledger. 2. Whether recovery effected from the Electronic Credit Ledger prior to the filing of an appeal and in the absence of any stay order or interim injunction was ultra vires, without authority of law, violative of principles of natural justice or of fundamental rights. 3. Whether the pendency of a rectification application and subsequent rejection affects the validity of recovery already made under Section 79(1)(a). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Entitlement to recover from Electronic Credit Ledger under Section 79(1)(a) Legal framework: Section 79(1)(a) of the Act, 2017 authorises the proper officer to recover any amount payable to the Government by deducting the amount from any money owing to such person which may be under the control of the proper officer or a specified officer. Precedent Treatment: No precedents were cited or applied by the Court in the judgment. Interpretation and reasoning: The provision is unambiguous in permitting deduction from any money owing to the person. The Electronic Credit Ledger constitutes an account under the control of the revenue authority from which sums may be deducted to satisfy tax liabilities. Where an assessment has fixed an outstanding demand and the assessee fails to pay within the prescribed period, the statutory mode of recovery available to the proper officer includes deduction from such ledger. Ratio vs. Obiter: Ratio - The Court treats the statutory language of Section 79(1)(a) as directly authorising deduction from the Electronic Credit Ledger to satisfy an unpaid tax demand. Conclusion: The proper officer was entitled under Section 79(1)(a) to recover the assessed amount by deducting Rs. 2,87,914/- from the petitioner's Electronic Credit Ledger. Issue 2 - Validity of recovery when appeal/rectification are pending and absence of stay Legal framework: Procedural remedies such as rectification applications and appeals under the statutory scheme do not by themselves operate as stays of recovery unless a specific stay or interim relief is granted by the authority/tribunal/court. Precedent Treatment: No earlier authorities were relied upon; the Court applied statutory logic and procedural principles. Interpretation and reasoning: The petitioner had been served with an assessment order granting 30 days' time to pay. The petitioner did not pay. A rectification application was filed but ultimately rejected. An appeal was filed after the impugned deduction had already been made. No stay or injunction was sought or obtained to restrain recovery. In these circumstances, the revenue's action of deduction pursuant to the statutory recovery provision is not rendered unlawful merely because the assessee pursued post-decision remedies. Recovery prior to the filing of an appeal is permissible in absence of a stay; procedural remedies available to the taxpayer do not automatically suspend the operation of the assessment or the revenue's statutory powers of recovery. Ratio vs. Obiter: Ratio - Recovery under Section 79(1)(a) is not per se barred by the pendency of rectification proceedings or the subsequent filing of an appeal where no stay has been granted. Conclusion: The deduction from the Electronic Credit Ledger made prior to the filing of appeal and in absence of any stay was not illegal, perverse, or in violation of natural justice or fundamental rights. Issue 3 - Effect of rectification application and its rejection on lawfulness of earlier recovery Legal framework: A rectification application is a statutory remedy to correct clerical or arithmetical errors or to address certain mistakes in orders; its filing does not automatically suspend the operation of the order unless the statute or a competent authority provides for suspension. Precedent Treatment: No authorities were cited; the Court relied on the chronology and the fact of rejection of rectification. Interpretation and reasoning: The rectification application was filed but ultimately rejected. The deduction from the Electronic Credit Ledger occurred before the appeal was filed and when there was no stay. Because the rectification was not stayed and no interim order restrained recovery, the prior deduction stands. The subsequent rejection of rectification confirms that there was no continuing impediment to recovery. Ratio vs. Obiter: Ratio - Filing of a rectification application, followed by its rejection, does not invalidate a recovery made lawfully under Section 79(1)(a) in the interim where no stay is in place. Conclusion: The pendency and rejection of the rectification application do not render the earlier deduction from the Electronic Credit Ledger unlawful; the recovery remains valid. Cross-references and integrated conclusion Issues 1-3 are interrelated: the statutory entitlement to recover (Issue 1) and the procedural effect of pending remedies (Issues 2 and 3) together determine lawfulness of the deduction. The Court's reasoning establishes that (a) Section 79(1)(a) authorises deduction from the Electronic Credit Ledger; (b) absent a stay or interim order, pendency of rectification or appeal does not bar such recovery; and (c) consequently, the deduction of Rs. 2,87,914/- from the petitioner's Electronic Credit Ledger was lawful and not perverse, illegal, violative of natural justice, or of fundamental rights. Disposition (ratio applied to reliefs sought) The petition seeking quashing of the recovery, refund of amounts deducted, and other ancillary reliefs is not maintainable on merits because the recovery was effected under authority of Section 79(1)(a) and in the absence of any stay; therefore, the petition is dismissed and parties to bear their own costs.