Case Law Details
Bhawya Enterprises Vs Assistant Commissioner State Taxes & Excise (GST/Allied Taxes) & another (Himachal Pradesh High court)
Violation of Section 78 of CGST Act – High Court Directs Immediate Refund of Illegally Recovered GST with Interest, Upholds Right to Appeal
In a significant ruling, Bhawya Enterprises vs. Assistant Commissioner [CWP-11694-2025], the Division Bench of the Hon’ble Himachal Pradesh High Court, comprising Justice Vivek Singh Thakur and Justice Sushil Kukreja, has directed the Assistant Commissioner, State Taxes & Excise, Sataun, to refund or reverse Goods and Services Tax (GST) amounts illegally recovered from petitioners, along with applicable interest. The order, issued on July 24, 2025, underscores the importance of adhering to legal provisions regarding recovery procedures and safeguarding the taxpayer’s right to appeal.
The case involved three petitions, all aggrieved by the premature recovery of demanded GST from their Electronic Credit Ledgers (in the form of ITC). The recovery was made in violation of Section 78, before the expiry of the three-month period allowed for filing an appeal under Section 107, against a demand raised under Section 74 of the CGST Act.
Background of the Case:
The petitioners contended that an adjudication order dated May 1, 2025, was passed by the Assistant Commissioner (CGST), confirming a GST demand and imposing a penalty. According to Section 107 of the CGST Act, they had a three-month window to either deposit the demanded amount or file an appeal. However, the recoveries were effected by Assistant Commissioner (SGST) within just five days of the order, and critically, without recording any reasons for such an expedited recovery in terms of proviso to Section 78.
A key issue highlighted by the petitioners was that despite more than 10% of the demanded amount being recovered, the departmental portal for filing appeals was not accepting their appeals. This was because the recovered amount was being treated as an “admitted amount” rather than a “disputed amount” deposited at the time of filing an appeal, a precondition for which is depositing at least 10% of the tax demanded.
High Court’s Observations and Directions:
During the proceedings, the Assistant Commissioner (SGST), present in person, endorsed that the recovery was indeed made prematurely. The Court emphasized that an amount recovered by mistake must be refunded or reversed to the account from which it was recovered.
Considering the admitted mistake and the provisions of law, the High Court directed Assistant Commissioner, State Taxes & Excise to take necessary action to rectify the mistake and refund/reverse the mistakenly recovered amount to the petitioners’ accounts, along with interest as permissible under the Statute. It was further directed that this rectification must be completed within Two Days.
Implications for Taxpayers:
This ruling serves as a crucial reminder for tax authorities to strictly adhere to legal procedures for recovery and to respect the statutory rights of taxpayers, particularly the right to appeal within the prescribed limitation period.
For taxpayers, this judgment reinforces their ability to seek judicial intervention when their rights are prejudiced by erroneous actions of tax authorities.
FULL TEXT OF THE JUDGMENT/ORDER OF HIMACHAL PRADESH HIGH COURT
These petitions have been filed by the petitioners, being aggrieved by recovery of demanded CGST from the account of the petitioners before expiry of three months, causing prejudice to the right of the petitioners to assail the demand, raised by the Assistant Commissioner under Section 74 of CGST Act, by filing an appeal under Section 107 of CGST Act.
2. As already stated in the certificate issued by the Assistant Commissioner, placed on record as Annexure P-5 in all petitions, it is an admitted fact that demanded GST has been recovered by the Assistant Commissioner by mistake.
3. Considering the provisions of law and the material placed on record, we had passed following common order on previous date 22.07.2025:-
“Notice. Mr. Navlesh Verma, learned Additional Advocate General, appears, waives and accepts service of notice on behalf of respondent No.1/State and Ms. Aastha Kohli, learned counsel, on behalf of respondent No.2.
2. Main grievance of the petitioner in present petition is that after passing of final order dated 01.05.2025 (Annexure P-3) passed by respondent No.2 under Section 74 of CGST Act confirming the demand of GST and imposing penalty, petitioner was having three months’ time to deposit the same or file an appeal assailing the said order under Section 107 of CGST Act and further for non deposit of amount in compliance of order dated 01.05.2025, recovery on the basis of order could have also been made prior to expiry of three months, but for recording the reasons, but in present case, recovery has been effected by respondent No.1 within just five days, that too, without recording any reason, and the recovery so made is more than 10% of the liability fixed vide order dated 01.05.2025.
3. It is further case of petitioner that petitioner intends to file an appeal against order dated 01.05.2025, for which limitation period is three months, but for filing an appeal, it is precondition to deposit at-least 10% of the amount of tax determined payable in order dated 01.05.2025, despite recovery of more than 10% of demand raised, portal of the department available for filing appeal is not accepting the appeal for want of deposit of at-least 10% of the demand created, vide order dated 01.05.2025 and thus the petitioner is not able to file an appeal by referring the amount recovered as amount deposited at the time of filing of the appeal because the amount so recovered is being treated as admitted amount of tax deposited by or recovered from the petitioner instead of disputed amount.
4. It is further case of petitioner that on approaching, respondent No.1 has issued certificate dated 19.06.2025, dispatch No.709 (Annexure P-5), wherein he has admitted that amount in terms of order dated 01.05.2025 has been debited for the financial year 2018-19 and 2019-20 inadvertently, despite admitting mistake in debiting/recovering the amount, respondent No.1 has not reversed the same to the account of petitioner. Therefore, in aforesaid circumstances, petitioner is constrained to file present petition.
5. It has also been submitted by learned counsel for the petitioner that limitation to file appeal is going to expire on 31.07.2025.
6. In aforesaid circumstances, prima facie, case is made out to pass an interim order against the respondents. However, for request made by learned Additional Advocate General, matter is adjourned to enable him to have instructions.
7. Prayer of learned Additional Advocate General is accepted with caution that it is expected from the respondents to act in accordance with law and in case some mistake has been committed by an officer, appropriate steps must be taken for rectifying the mistake instead of litigating unnecessarily causing loss of time, energy and resources of the public, State and Courts, resulting in delay in adjudicating other matters of importance.
8. As in present case, officer concerned has himself admitted that amount has been debited inadvertently, therefore, for just and fair play, the amount should have been reversed to the account of the petitioner.
9. Without passing any positive direction at this stage, leaving it to the wisdom of concerned officer to decide next course of action, as prayed for by learned Additional Advocate General, matter is adjourned to enable him to have complete instructions in the matter by next date.
List for further orders on 24.07.2025.”
4. Today, Assistant Commissioner, present in person, has endorsed that recovery in reference was made by mistake. It is obvious that amount recovered by mistake has to be refunded/reversed to the account wherefrom it was recovered.
5. In view of above, we direct respondent No.1 to take necessary action for rectification of mistake and to refund/reverse the amount so recovered by mistake to the account wherefom it was recovered, alongwith interest as provided/permissible under the Statute. Needful be done on or before 26.07.2025.
6. We are not expressing any opinion with respect to the merit of the demand raised by the Assistant Commissioner, vide order dated 01.05.2025, and in case any appeal or other statutory remedy is filed/opted by the petitioners, then the demand in reference, definitely, shall be subject to final outcome of such proceedings. In absence of filing any appeal or availing statutory remedy, the Assistant Commissioner concerned shall be entitled to recover the amount as permissible under law.
7. As the grievance of the petitioners stands redressed and nothing survives to be adjudicated further and, accordingly, these petitions are disposed of with aforesaid direction.
Pending miscellaneous application(s), if any, shall stand disposed of.
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