Facts of the Case

M/s Royal Enterprises, through its proprietor Pawan Kumar Mishra, approached the Patna High Court challenging coercive GST recovery proceedings initiated pursuant to a demand reflected in FORM GST DRC-07 dated 31 December 2021 for the tax period April 2018 to March 2019.

The petitioner sought quashing of DRC-13 bearing No. 2123 dated 23 August 2022, issued to the State Bank of India, CSTPPA Branch, Bhagalpur, for recovery of Rs. 1,33,53,723 from the petitioner’s bank account.

The petitioner also challenged DRC-13 bearing No. 2124 dated 23 August 2022, issued for third-party recovery to:

  1. Executive Engineer, Rural Works Department, Works Division, Babu Tola, Kahalgaon;
  2. NTPC Ltd., Fraser Road, Dak Bunglow Chowk, Patna; and
  3. Rural Works Department, Works Division, Bhagalpur.

Through these proceedings, recovery of Rs. 1,33,53,723 was sought by deduction from amounts payable by such third parties to the petitioner against the demand arising from FORM GST DRC-07 dated 31 December 2021.

The petitioner further sought a direction restraining the respondents from proceeding with third-party recovery through DRC-13 against the demand for the tax period April 2018 to March 2019.

The petitioner requested that an opportunity be granted to discharge the outstanding demand in installments under Section 80 of the GST Act, 2017. The petitioner also claimed adjustment/deduction of an alleged excess paid or refundable amount of Rs. 25,70,729.

The petitioner additionally sought release of its bank account maintained with the State Bank of India, CSTPPA Branch, Bhagalpur, and contended that the manner of recovery of tax, interest, and penalty through DRC-13 violated the principles of natural justice.

Issues Involved

The principal issues before the Patna High Court were:

  1. Whether the petitioner could be permitted to discharge the outstanding GST demand of Rs. 1,33,53,723 along with accrued statutory interest in installments.
  2. Whether coercive recovery proceedings through FORM GST DRC-13, including attachment of the petitioner’s bank account, should continue while the petitioner was making payment under the installment arrangement.
  3. Whether third-party recovery directions should remain operative during the period in which the petitioner complied with the agreed payment schedule.
  4. Whether relief concerning payment in installments could be granted in the factual circumstances where the petitioner did not intend to challenge the underlying demand order.
  5. What protection should be granted against bank account attachment and third-party recovery until complete payment of the outstanding liability.

Petitioner’s Arguments

The petitioner sought protection against recovery proceedings initiated through DRC-13 and requested permission to pay the outstanding amount in installments.

During the proceedings, the petitioner clarified that it did not intend to challenge the impugned demand order.

The petitioner requested permission to pay the outstanding sum of Rs. 1,33,53,723, together with interest accrued thereon, in six equal installments.

The petitioner also undertook to deposit Rs. 20 lakh on or before 31 October 2022.

The petitioner’s broader case was that immediate recovery through attachment of the bank account and binding third parties would cause prejudice and that an installment facility should be permitted for discharge of the outstanding GST liability.

Respondent’s Arguments

The State initially resisted the petitioner’s request for payment in installments.

However, since the petitioner expressed readiness to pay interest on the outstanding amount, the State ultimately raised no objection and, in principle, agreed to the arrangement proposed by the petitioner.

Thus, the matter came to be resolved on mutually agreeable terms concerning payment of the outstanding amount together with statutory interest.

Court Order / Findings

The Patna High Court disposed of the writ petition on mutually agreeable terms and issued the following operative directions:

  1. Payment of Outstanding GST Demand:
    The petitioner was directed to pay Rs. 1,33,53,723 together with interest at the rate prescribed under the statute, accruing with effect from 31 December 2021.
  2. Payment in Six Equal Installments:
    The amount was permitted to be paid in six equal installments commencing from 1 November 2022.
  3. Upfront Deposit of Rs. 20 Lakh:
    The petitioner undertook to deposit Rs. 20 lakh on or before 31 October 2022.
  4. Bank Account Attachment Kept in Abeyance:
    The order dated 23 August 2022, insofar as it related to attachment of the petitioner’s bank account, was directed to remain in abeyance.
  5. Third-Party Recovery Suspended:
    The order binding third parties was also directed to remain suspended until the petitioner completed payment in all respects.
  6. Disposal of Proceedings:
    The writ petition was disposed of on the above mutually agreeable terms. Any pending interlocutory application was also disposed of.

Important Clarification

A significant clarification arising from the judgment is that the petitioner did not intend to challenge the underlying demand order. The controversy before the Court ultimately centered on the mode and schedule of payment and the continuation of coercive recovery measures during such payment.

The High Court’s relief was based on mutually agreeable terms between the parties. Therefore, the decision should not be read as a general declaration that every taxpayer has an unconditional or automatic right to obtain six installments for payment of a GST demand.

The Court specifically required payment of the outstanding sum of Rs. 1,33,53,723 along with interest at the statutory rate accruing from 31 December 2021. The suspension of bank account attachment and third-party recovery was linked to the petitioner making payment completely in accordance with the arrangement.

The judgment is particularly relevant in cases involving severe recovery action where the taxpayer does not challenge the substantive demand but seeks a structured payment mechanism and temporary protection against coercive recovery.

Sections and GST Provisions Involved

·         Section 80 of the GST Act, 2017 – Payment of Tax and Other Amounts in Installments

·         Section 79 of the GST Act, 2017 – Recovery of Tax

·         Section 79(1)(c) – Recovery from Third Persons

·         Rule 145 of the GST Rules – Recovery from a Third Person

·         FORM GST DRC-07 – Summary of Order Creating Demand

·         FORM GST DRC-13 – Notice to a Third Person

Link to download the order -

https://www.mytaxexpert.co.in/uploads/1783420276_1455compressed.pdf

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