The writ petition challenged the action of the tax authorities in forcibly recovering the demand amount from the petitioner’s Electronic Credit Ledger and Electronic Cash Ledger under Section 79 of the CGST Act, 2017.

The demand was originally raised on 29.04.2024. Against the said demand, the petitioner preferred an appeal under Section 107 of the Act after making the prescribed pre-deposit. The appeal was dismissed on 24.01.2025. However, within a short span of four days, on 29.01.2025, the department proceeded to recover an amount of ₹1,55,079/- from the petitioner’s Electronic Credit Ledger/Electronic Cash Ledger without issuing any prior intimation or initiating formal recovery proceedings.

The petitioner contended that a statutory remedy of second appeal under Section 112 of the Act was available, with a limitation period of three months, and upon deposit of 10% of the disputed tax, the remaining demand stands automatically stayed under Section 112(9). It was further submitted that the recovery effected within four days was arbitrary, high-handed, and contrary to the CBIC Circular dated 11.07.2024, particularly when the appellate tribunal had not yet been constituted.

The High Court examined Section 78 of the CGST Act and observed that recovery proceedings can ordinarily be initiated only after the expiry of three months from the date of service of the order, unless reasons are recorded in writing for invoking the proviso. In the present case, no such reasons were recorded.

The Court further held that permitting recovery immediately after dismissal of the first appeal would render the statutory protection under Section 112(9) illusory, as the assessee is legally entitled to file the second appeal within three months along with a 10% pre-deposit.

Relying upon the CBIC Circular dated 11.07.2024, the Court noted that even in the absence of a constituted GST Appellate Tribunal, taxpayers are entitled to make the statutory pre-deposit and secure a stay of the remaining demand.

Accordingly, the Allahabad High Court allowed the writ petition and quashed the recovery effected on 29.01.2025. The respondents were directed to re-credit the amount recovered in excess of the mandatory 10% pre-deposit within a stipulated period.

LINK TO DOWNLOAD THE ORDER
https://mytaxexpert.co.in/uploads/1767853617_MsS.A.B.EnggWorksv.StateofU.P.WTAXA22542025.pdf 

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