Case Law Details
Phoenix Spaces (Guntur) Private Limited Vs Additional Commissioner of Central Tax (Telangana High Court)
Telangana High Court Directs Consideration of Refund of Amount Recovered Through Garnishee Proceedings Before Expiry of GST Appeal Period
The Telangana High Court directed the GST authorities to consider the taxpayer’s refund application where the entire tax demand had been recovered through garnishee proceedings before the expiry of the statutory period available for filing a second appeal before the GST Appellate Tribunal (GSTAT). The Court observed that the amount recovered had already been re-credited to the taxpayer’s Electronic Cash Ledger and therefore the refund request deserved consideration in accordance with law.
Introduction
In Phoenix Spaces (Guntur) Private Limited v. Additional Commissioner of Central Tax & Others, the petitioner challenged the recovery of GST dues through attachment and debit of its bank account while the statutory remedy of second appeal remained available.
The dispute centered on whether the amount recovered by the department and subsequently re-credited to the Electronic Cash Ledger could be refunded to the taxpayer pending exercise of appellate remedies.
Facts of the Case
The petitioner was subjected to an Order-in-Original dated 24.12.2024, whereby:
- GST liability of ₹1,11,71,740/- was imposed.
- Interest and penalty were also levied.
Subsequently:
- A garnishee notice in Form GST DRC-13 dated 13.02.2026 was issued to the petitioner’s bank.
- The notice was received by the bank on 21.02.2026.
- The entire amount of ₹1,11,71,740/- was debited from the petitioner’s bank account.
The petitioner contended that:
- A statutory appeal had already been pursued.
- The appeal was rejected and Form GST APL-04 was issued on 19.01.2026.
- The statutory period for filing a second appeal before the GST Appellate Tribunal under Section 112 of the CGST Act, 2017 had not expired.
- The GSTAT filing window remained available till 30.06.2026.
Petitioner’s Contentions
The petitioner argued that:
- Recovery was effected even though the statutory appellate remedy was still available.
- The amount recovered from the bank account caused severe business hardship.
- The department had subsequently re-credited the recovered amount to the petitioner’s Electronic Cash Ledger.
- Since the amount originally came from the petitioner’s bank account, it ought to be refunded directly rather than merely remaining in the Electronic Cash Ledger.
Revenue’s Position
The Revenue repeatedly sought time to obtain instructions regarding the matter.
No substantive explanation was placed before the Court despite multiple opportunities.
Court’s Observations
The High Court noted that:
- The controversy was limited to the refund or release of the amount recovered from the petitioner’s bank account.
- The recovered amount had already been re-credited to the petitioner’s Electronic Cash Ledger.
- The petitioner continued to have time available for filing a second appeal before GSTAT.
- In these circumstances, the refund request required consideration by the competent authority.
The Court found it unnecessary to keep the writ petition pending merely for further instructions from the Revenue.
Final Decision
The Telangana High Court:
- Granted liberty to the petitioner to file a refund application concerning the amount re-credited to its Electronic Cash Ledger.
- Directed that such application be filed within one week.
- Ordered that the competent authority consider and decide the refund application within one week thereafter, in accordance with law.
- Disposed of the writ petition.
- Passed no order as to costs.
Key Takeaways
1. Recovery During Available Appellate Period Can Be Judicially Scrutinized
The Court took note of the fact that recovery had been effected while the statutory remedy of second appeal before GSTAT remained available.
2. Re-credit to Electronic Cash Ledger Does Not Automatically Resolve the Issue
Where money is recovered directly from a taxpayer’s bank account, the question of refund may still arise even if the amount is later re-credited to the Electronic Cash Ledger.
3. Refund Applications Must Be Considered Expeditiously
The Court directed a time-bound decision on the taxpayer’s refund request, emphasizing administrative fairness.
4. Availability of GSTAT Remedy Remains Relevant
The decision recognizes that taxpayers should not be unduly prejudiced while still entitled to pursue statutory appellate remedies.
Conclusion
In Phoenix Spaces (Guntur) Private Limited v. Additional Commissioner of Central Tax, the Telangana High Court provided relief by directing the GST authorities to examine the taxpayer’s refund claim after the department had recovered over ₹1.11 crore through garnishee proceedings and subsequently re-credited the amount to the Electronic Cash Ledger. The ruling highlights judicial concern over recoveries made before exhaustion of available appellate remedies under the GST framework.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Heard Mr. P.Venkat Prasad, learned counsel representing M/s.P V Prasad Associates, appearing for the petitioner and Mr. K.Prashant, learned counsel appearing for respondent Nos.1 to 3 through video conferencing.
2. Reference is made to the order dated 31.03.2026 which reads as under:
“Mr. P. Venkat Prasad, learned counsel represents M/s. P.V. Prasad Associates, for the petitioner.
Mr. Dominic Fernandes, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs (CBIC) appears for respondent Nos.1 to 3.
The order-in-original dated 24.12.2024 imposed tax liability of Rs.1,11,71,740/- together with penalty and applicable interest on the petitioner. Before the appeal period was expired, garnishee notice in Form GST DRC-13 was issued on 13.02.2026, but it appears from Annexure-P1 that the said notice was received on 21.02.2026 by respondent No.4 Bank.
According to the petitioner, the entire amount was debited on the same date from its account.
On the other hand, petitioner has preferred an appeal against the order-inoriginal on 22.03.2025, which was rejected. The summery of the demand in Form APL-04 was issued on 19.01.2026. The period for preferring an appeal under Section 112 of the Central Goods and Services Tax Act, 2017 before the learned Goods and Services Tax Appellate Tribunal (GSTAT) has not expired. Learned counsel for the petitioner submits that in the meantime, the entire tax liability has been recovered in an illegal and arbitrary manner though the petitioner had made a pre-deposit by filing its first appeal and is inclined to avail its second appeal, the window period for which is available till 30.06.2026.
Learned Senior Standing Counsel for CBIC is allowed one week time to get instructions.
List the matter on 09.04.2026.”
3. The matter was once again adjourned to 09.04.2026 to enable the learned counsel for respondent Nos.1 to 3 to seek instructions. However, on the next date i.e., 23.04.2026, further time was sought by learned counsel for respondent Nos.1 to 3 to obtain instructions.
4. Learned counsel for the petitioner brought to the notice of this Court that after the previous order, the tax liability recovered from the petitioner had been re-credited to the E-Cash ledger of the petitioner though ideally it ought to have been refunded to the petitioner as it was recovered from the Bank account.
5. Today when the matter has been taken up, learned learned Senior Standing Counsel for CBIC seeks further time to obtain instructions.
6. Learned counsel for the petitioner submits that the time for filing Second Appeal is still there. Petitioner, due to recovery of an amount of Rs.1,11,71,740/- from its Bank account, has been unable to undertake business transactions. Therefore, if the Department has chosen to re-credit the amount recovered from its Bank account to the E-Cash ledger, there should not be any impediment for the Department to refund it to the petitioner’s Bank account.
7. In the aforesaid facts and circumstances and the fact that the issue is confined to re-credit or refund of the amount recovered by the Revenue before the appeal period under Section 112 of the Central Goods and Services Tax Act, 2017, this Court, instead of granting further adjournments to the Revenue, feels inclined to dispose of the writ petition with liberty to the petitioner to file an application for refund of the amount re-credited to the E-Cash ledger after recovery from its Bank account. If such an application is made within a week, respondent No.2-Assistant Commissioner of Central Tax, Appeals-I Commissionerate, Hyderabad, would take a decision thereupon in accordance with law in the light of the observations made hereinabove within a period of one week thereafter.
8. The Writ Petition is, accordingly, disposed of. However, there shall be no order as to costs.
Miscellaneous applications pending, if any, shall stand closed.
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