National Insurance Co. Ltd. vs The State of Bihar

Everyone knows that the GST Tribunal is yet to be formed, EXCEPT GST OFFICERS! I’m not telling a lie but that is what I understood after reading the latest Patna High Court judgment (15-Jan-2024) in case of National Insurance Co. Ltd. This judgment is useful, please bookmark. 17-Feb-2022: An Assessment Order is passed against the petitioner 21-Sep-2022: The First Appeal is rejected against the Order. 10% of the tax in dispute was deposited before filing appeal The Petitioner deposited 20% of the tax in dispute i.e. Rs. 5.70 Crores as per Sec. 112(8) 05-Jan-2023: A Demand Order is issued by the GST Department to deposit the disputed tax as First Appeal is rejected. The Petitioner is Public Sector Undertaking (PSU). 06-Jan-2023: Apprehending coercive action, the petitioner, filed Writ before the High Court. 07-Jan-2023: The tax authorities, presumably, in retaliation, recovered the entire balance remaining payable, under Section 79.

If the Tribunal was constituted and an appeal is filed, there could be no further proceedings taken for recovery of the balance amounts till the appeal is disposed of. Hence, when a Tribunal is not constituted, obviously no such recovery could have been made. The entire amount recovered shall be refunded to the petitioner within a period of two weeks, failing which interest shall run at the rate of 12% pa. Cost of Rs.5000/- imposed on the Officer who issued the demand and appropriated the money from the bank account of the petitioner.

1.We are again faced with the problem of ‘valiant tax executives clothed with judicial powers remembering their former capacity at the expense of the latter’ (sic)- as stated in R.S Joshi, Sales Tax Officer, Gujarat and Others v. Ajit Mills Limited and Another; (1997) 4 SCC 98.

2. Bereft of the facts leading to the writ petition, we have to only notice that on 21.09.2022, an appeal filed by the assessee/petitioner against the order of assessment dated 17.02.2022 was rejected. There was no Appellate Tribunal constituted as provided under Section 109 of the Bihar Goods and Services Tax Act.

3. Even in that circumstance, the assessee paid up 20% of the tax in dispute being Rs. 5.70 crores as per Section 112(8) of the Central Goods and Services Tax Act, 2017 on 21.10.2022. At the time of filing of the appeal, admittedly, 10% of the tax in dispute was paid, which is mandated for the institution of a proper appeal before the first Appellate Authority. Despite the payment of 20% of the tax in dispute having been made after the first Appellate Authority rejected the appeal, a demand was issued at 05.01.2023. Apprehending coercive action, the petitioner, a public sector undertaking filed the above writ petition on 06.01.2023. The tax authorities, presumably, in retaliation recovered the entire balance remaining payable, under Section 79 of the Central Goods and Services Tax Act, 2017 on 07.01.2023.

4. In a similar circumstance we deprecated the manner in which such recovery is made, even when 20% of the tax is paid up after the first appeal is rejected. In fact, if the Tribunal was constituted and an appeal is filed there could be no further proceedings taken for recovery of the balance amounts till the appeal is disposed off. Hence, when a Tribunal is not constituted, obviously no such recovery could have been made.

5. We have in C.W.J.C. No. 5407 of 2023 titled as Sita Pandey v. State of Bihar and Ors. by decision on 23.08.2023, held so in paragraph nos. 8 to 15:-

8. The CGST Act provides for constitution of Appellate Tribunal for hearing appeals against the orders passed by the Appellate Authority or the Revisional Authority and Section 109 of the BGST Act provides for the said Appellate Tribunal constituted under the CGST Act to also hear the appeals under the BGST Act. Section 112 enables any person aggrieved by an order passed against him under Section 107 or Section 108 of the BGST Act or the CGST Act to appeal to the Appellate Tribunal against such order within three months from the date on which the order sought to be appealed against is communicated to the person preferring the appeal. Sub-section (8) of Section 112 makes it mandatory for an appeal to be instituted; that the appellant pays in full the amount of tax, interest, fine, fee and penalty arising from the impugned order as admitted by him and a sum equal to twenty per cent of the remaining amount of tax in dispute, in addition to the amount paid under Section 107(6).

Hence, the admitted amount of tax and other dues have to be satisfied along with twenty per cent of the tax in dispute; in addition to the ten per cent paid under Section 107 (6). On such payment being made, not only is the instituted appeal maintainable; under sub-section (9) of Section 112, there is a deemed stay of the recovery proceedings for the balance amount till the disposal of the appeal. Hence, when a proper appeal is instituted before the Appellate Tribunal, with the payments as required for maintaining the appeal, then there is a statutory embargo from making any recovery based on the assessment order or the first appellate order.

9. It is in this context that the proviso to Section 78 has to be looked at. Section 78 has the nominal heading “Initiation of recovery proceedings” and requires a taxable person to satisfy an order passed under the BGST Act by paying up the amounts due within a period of three months from the date of service of such order. The proviso enables the proper officer in expedient situations, in the interest of revenue, for reasons recorded in writing, to require the taxable person to make such payment within such period, less than a period of three months, as may be specified by him. In the present case, admittedly there is no notice issued specifying the time within three months, within which time the assessee was supposed to pay the amounts as per the order.

10. The contention of the learned Government Advocate is also that there is no requirement for a notice and reasons alone are to be recorded, which is available in the files, an extract of which is produced as Annexure-D along with the supplementary counter affidavit dated 10.05.2023 filed on behalf of Respondent Nos. 2 and 3. The reasons stated, as evident from the extract of the file which is also dated 27.03.2023 is that the financial year 2022-23 is coming to an end and there are bank holidays on the immediate days following. We cannot but express our deep anguish and dissatisfaction in the reasons recorded by the officer. The imminent bank holidays of 2 or 3 days and the close of the financial year, we are afraid, cannot be termed valid reasons to justify an expedient recovery under the proviso to Section 78 and it is not clear as to how the interest of the revenue would suffer, if the recovery is kept in abeyance for three months or at least a notice is issued to the assessee before the recovery is effectuated from the banks, behind the back of the assessee. The counter affidavit does not speak of any notice having been given to the assessee before recovery. Notices were issued to the banks of the assessee and the amounts remaining in the various accounts forcefully forfeited and paid over to the Tax Department.

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National Insurance Co. Ltd. 

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Patna High Court

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