Madras High Court held in the case of M/s. V.N. Mehta & Company Vs Assistant Commissioner, that Recovery Proceedings under Section 79 cannot be initiated directly without determination of tax liability.

Facts:

1. The present writ challenges the proceedings initiated against the petitioner directing recovery of certain amount from the account maintained by the petitioner.

2. Such recovery was ordered on account of tax, cess, interest & penalty payable by the petitioner as it had failed to pay the same. The petitioned claimed that the proceedings had been initiated straightaway, without framing assessment or initiating proceedings to determine the tax, cess, interest or penalty as claimed.

3. It was claimed that Section 79 of the CGST Act cannot be invoked to recover the sum if such sum is an arrear payable by the petitioner. It was also claimed that though a statement had been obtained from the petitioner to the effect that it had availed ITC on the strength of invoices issued by fake units, such statement had later been retracted.

Decision of the High Court

1. It is seen that except issuing proceedings u/s 79, no other proceedings were ever initiated against the petitioner determining its tax liability as was sought to be recovered.

2. Section 79 of the Act contemplates that any amount payable by a person to the Govt under any of the provisions of the Act and Rules made thereunder is not paid, the proper officer could recover the amount by one or more modes. Hence, it is evident that the term amount payable by a person is to mean that such liability arises only after determining such amount in a manner known to law.

3. In this case, the relevant authority relied on the so-called admission made by the petitioner in its statement. Considering relevant excerpts from the petitioner’s statement, it is seen that some parts of the statement contradict each other. Besides, the statement was retracted as well. Hence such statement which purports to be an admission is not available to the Revenue.

4. It is also for the Revenue to determine the tax liability by resorting to procedures as per law rather than issuing the proceedings straightaway u/s 79, based on such statement later retracted. Hence the proceedings initiated u/s 79 is unsustainable.

5. Moreover, provisional attachment u/s 83 can be resorted to only if proceedings are pending u/s 62, 63, 64, 67, 73 & 74. No proceedings are pending under any such provisions. Hence Section 83 is of no avail to the Revenue. Thus the proceedings are not maintainable and merit being set aside.

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