Procedural Inconsistencies in GST Recovery for Unfiled Returns

Consequently, taxpayers may be unable to discharge their GST liability by the due date, although they usually make the payment — along with applicable interest and late fee — before the end of the month and file the GSTR-3B thereafter.

During this interim period, tax authorities often begin pressuring taxpayers to file returns and clear liabilities. In doing so, various recovery mechanisms under the Central Goods and Services Tax Act, 2017 (CGST Act) are triggered. However, in many cases, the departmental actions are procedurally flawed or legally untenable.

This article critically examines the statutory mechanisms adopted by the department and evaluates their legality and procedural propriety, supported by relevant case law.

1. Notice under Section 46 – Valid Initiation

Section 46 of the CGST Act provides for issuance of a notice to a registered person who fails to furnish a return under Section 39 (GSTR-3B), requiring them to file the return within 15 days.

This notice is typically auto-generated by the GSTN system without manual intervention and serves as the legitimate starting point for initiating recovery proceedings for non-filers.

Legally Valid – This is the correct procedure for initiating compliance from a return defaulter.

2. Recovery under Section 75(12) read with Section 79 – Legally Flawed if Return is Not Filed

In practice, many officers invoke Section 75(12) read with Section 79 to initiate recovery even when the GSTR-3B is not yet filed.

• Section 75(12) deals with recovery of self-assessed tax that remains unpaid as reflected in filed GSTR-3B and GSTR-1.
• Section 79 lays down various modes for recovery, such as attachment of bank accounts or deduction from receivables.

However, a plain reading of Section 75(12) makes it clear that it applies only to self-assessed tax in “filed” returns. The use of the term “filed” is crucial — if the return is not filed, the liability is not yet crystallized for the purposes of this provision.

Therefore, invoking Section 75(12) in such cases is bad in law.

Additionally, issuing notices under Section 75(12) either:

• before a notice under Section 46, or
• during the 15-day period granted under Section 46

…violates the procedural sequence laid down in the statute.

3. Best Judgment Assessment under Section 62 – Valid Only After Lapse of Section 46 Timeline

Section 62 allows the proper officer to pass a best judgment assessment order in case of non-filing of returns, based on available data (e.g., GSTR-1, GSTR-2B).

However, this can only be done after the expiry of the 15-day period from issuance of notice under Section 46. Premature action under Section 62 renders the order procedurally invalid.

This principle has been upheld in multiple judicial pronouncements:

Xestion Advisor Pvt. Ltd. v. Additional Commissioner Grade II

Writ Tax No. 1465 of 2024 (Allahabad High Court, decided on 09-04-2025)

“Where an order was passed under Section 62 creating demand against the assessee, but the notice under Section 46 was issued four days after the assessment order, such order suffered from serious infirmity due to non-compliance with principles of natural justice and statutory procedure. Accordingly, both the assessment and appellate orders were set aside.”

Vinman Constructions Ltd. v. State of Jharkhand

W.P. (T) No. 786 of 2021 (Jharkhand High Court, decided on 22-02-2022)

“Where an assessment order under Section 62 was passed without issuance of notice under Section 46, such order was quashed due to procedural irregularity.”

Conclusion

Taxpayers and tax professionals must exercise heightened vigilance while responding to recovery notices or assessment orders where statutory procedures are not followed. Recovery mechanisms must be invoked only after the due process — particularly notice under Section 46 — has been properly completed.

Any deviation from the statutory procedure violates natural justice and exposes the department’s actions to judicial scrutiny. Knowing these procedural safeguards empowers taxpayers to challenge arbitrary recovery and uphold legal compliance.