Calcutta HC Grants Stay on Demand Due to Non-Constitution of GSTAT

Rockfield Mining and Minerals Pvt. Ltd. & Anr. Vs State of West Bengal & Ors. (Calcutta High Court)

In the case of Rockfield Mining and Minerals Pvt. Ltd. & Anr. Vs State of West Bengal & Ors., the Calcutta High Court issued an unconditional stay on the demand arising from an appellate order for two weeks. The order was issued in light of the non-constitution of the Goods and Service Tax Appellate Tribunal (GSTAT). Justice Rajarshi Bharadwaj observed that if the petitioner deposits 10% of the balance tax amount in dispute, in addition to the pre-deposit under Section 107(6) of the CGST Act, the stay would remain effective until the disposal of the writ petition or further orders.

The petitioners challenged the appellate order dated March 19, 2024, arguing that enforcement of the demand is premature since GSTAT, the designated appellate body for such disputes, is yet to be operational. They relied on Circular No. 224/18/2024 issued by the Ministry of Finance on July 11, 2024. The circular clarifies that recovery of outstanding dues should remain suspended in cases where a first appeal has been disposed of, provided the taxpayer plans to appeal before GSTAT once constituted.

The circular outlines a clear process for taxpayers to make pre-deposit payments under Section 112(8) of the CGST Act. Taxpayers can navigate through their dashboards to allocate pre-deposit payments against specific outstanding demands. This payment method facilitates an automatic stay on the remaining demand, subject to filing a declaration to appeal before GSTAT when it becomes functional. The court noted this guidance as a critical factor in staying the demand.

The High Court recognized that the petitioner had established a prima facie case for relief. The bench also instructed both parties to file necessary affidavits within specified timelines, emphasizing the importance of procedural compliance. Additionally, the state government’s counsel requested adherence to Section 112(8) of the CGST Act for the interim stay to continue.

This judgment reinforces prior precedents emphasizing procedural fairness when statutory tribunals are non-functional. It highlights the judiciary’s role in balancing taxpayer rights against revenue recovery, particularly when institutional gaps impede the appellate process. The interim stay underscores the pressing need for the timely establishment of GSTAT to address similar disputes effectively.

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

Affidavit of service filed today be kept with the record.

In this writ petition the writ petitioners challenges the impugned appellate order dated 19^th March, 2024 passed by the respondent no.3.

Learned Counsel appearing for the petitioners further relies on Circular No.224/18/2024-GST dated 11^th July, 2024 issued by the Ministry of Finance debarring the guidelines for recovery of outstanding dues in cases wherein first appeal has been disposed of, till Appellate Tribunal comes into operation. The said circular inter alia says:

“4. In order to facilitate the taxpayers to make the payment of the amount of pre-deposit as per sub­section (8) of Section 112 of CGST Act, and to avail the benefit of stay from recovery of the remaining amount of confirmed demand as per sub-section (9) of Section 112 of CGST Act, it is hereby clarified that in cases where the taxpayer decides to file an appeal against the order of the appellate authority and wants to make the payment of the amount of pre-deposit as per sub­section (8) of Section 112 of CGST Act, he can make the payment of an amount equal to the amount of pre-deposit by navigating to Services >> Ledgers>> Payment towards demand, from his dashboard. The taxpayer would be navigated to Electronic Liability Register (ELL) Part-II in which he can select the order, out of the outstanding demand orders, against which payment is intended to be made. The amount so paid would be mapped against the selected order and demand amount would be reduced in the balance liability in the aforesaid register. The said amount deposited by the taxpayer will be adjusted against the amount of pre-deposit required to be deposited at the time of filing appeal before the Appellate Tribunal.

5. The taxpayer also needs to file an undertaking/declaration with the jurisdictional proper officer that he will file appeal against the said order of the appellate authority before the Appellate Tribunal, as and when it comes into operation, within the timelines mentioned in Section 112 of the CGST Act read with Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 dated 03.12.2019. On providing the said undertaking and on payment of an amount equal to the amount of pre- deposit as per the procedure mentioned in para 4 above, the recovery of the remaining amount of confirmed demand as per the order of the appellate authority will stand stayed as per provisions of sub- section (9) of Section 112 of CGST Act.

6. In case, the taxpayer does not make the payment of the amount equal to amount of pre- deposit or does not provide the undertaking/declaration to the proper officer, then it will be presumed that taxpayer is not willing to file appeal against the order of the appellate authority and in such cases, recovery proceedings can be initiated as per the provisions of law. Similarly, when the Tribunal comes into operation, if the taxpayer does not file appeal within the timelines specified in Section 112 of the CGST Act read with Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 dated 03.12.2019, the remaining amount of the demand will be recovered as per the provisions of law.”

Mr. Siddiqui, Learned Additional Government Pleader representing the State submits that the writ petition may be heard on the usual terms provided under Section 112(8) of the said Act.

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, I am of the view that 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 19^th March, 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.

Liberty to mention after expiry of the period of exchange of affidavits as mentioned hereinabove.