V N Mehta And Company VS The Assistant Commissioner

This writ petition challenges the action taken by the first respondent, which was communicated to the fourth respondent on August 7, 2019. Through this communication, the fourth respondent was instructed to recover an amount of Rs. 53,28,645 from the petitioner’s account. This amount is alleged to be owed by the petitioner under the Goods and Services Tax (GST) Act, encompassing tax, cess, interest, and penalties. The recovery order was issued due to the petitioner’s failure to make the required payment in accordance with the provisions of the GST Act.

This writ petition challenges a directive issued by the first respondent on August 7, 2019, which ordered the recovery of Rs. 53,28,645 from the petitioner’s account. The sum in question includes tax, cess, interest, and penalties allegedly owed by the petitioner under the Goods and Services Tax (GST) Act. The petitioner contends that this recovery order was issued prematurely, without prior assessment or initiation of proceedings to determine the tax, cess, interest, or penalties due.

The petitioner argues that no formal proceedings were conducted to establish the amount claimed, and therefore, Section 79 of the Central Goods and Services Tax Act, 2017, which allows for the recovery of arrears, should not be applied in this case. The petitioner’s counsel also highlighted that while a statement was obtained from the petitioner on June 19, 2019, suggesting the petitioner had availed input credit from fake invoices, this statement was later retracted on June 26, 2019. The retraction clarified that the petitioner had indeed claimed input tax credit (ITC) of Rs. 53,28,645 for genuine goods received with valid invoices.

The writ petition challenges the validity of a proceeding dated August 7, 2019, initiated by the first respondent, which directed the fourth respondent to recover ₹53,28,645 from the petitioner. This amount, according to the proceeding, represents outstanding tax, cess, interest, and penalties payable under the GST Act due to the petitioner’s failure to make the payment.

The petitioner argues that this recovery action was unjustified because it was taken without first conducting an assessment or even initiating any formal assessment proceedings. The petitioner claims that no official proceedings were issued to determine the tax, cess, interest, or penalty amounting to ₹53,28,645 as alleged in the notice.

Furthermore, the petitioner asserts that Section 79 of the Central Goods and Services Tax Act, 2017, which was invoked for the recovery, is not applicable in this case as the procedural prerequisites were not met. The petitioner’s counsel highlighted that, although a statement was initially obtained from the petitioner on June 19, 2019, indicating that input credit was claimed based on invoices from fake units, this statement was later retracted on June 26, 2019. The retraction clarified that the petitioner had legitimately claimed input tax credit (ITC) of ₹53,28,645 for goods received with valid invoices.

The petitioner also referred to their response to a specific query, where it was affirmed that goods were received and payments were made through bank transactions, thus challenging the basis of the recovery proceeding. The petitioner’s stance is that the impugned recovery action cannot be justified based solely on a retracted statement.

This writ petition challenges a directive issued on August 7, 2019, by the first respondent, which instructed the fourth respondent to recover ₹53,28,645 from the petitioner’s account. The amount in question is claimed to be due as tax, cess, interest, and penalties under the Goods and Services Tax (GST) Act. The petitioner argues that this recovery order was issued prematurely, without a prior assessment or initiation of formal proceedings to determine the liability.

The petitioner contends that there were no prior proceedings to establish the specific tax, cess, interest, or penalties totaling ₹53,28,645. They argue that Section 79 of the Central Goods and Services Tax (CGST) Act, 2017, which governs recovery of arrears, cannot be applied in this case without a proper assessment.

Further, the petitioner points out that although a statement was obtained from them on June 19, 2019, suggesting that they had claimed input credit based on invoices from fake units, this statement was retracted on June 26, 2019. The retraction clarified that the petitioner had actually received goods along with valid invoices and paid the corresponding amount through their bank account.

The petitioner’s counsel emphasizes that the recovery order was based on a retracted statement and not on any definitive assessment. The petitioner asserts that mere admission of liability through a statement should not suffice to invoke Section 79 for recovery purposes.

In response, the first and second respondents have filed a counter affidavit, asserting that the petitioner admitted liability in their statement, thereby justifying the recovery under Section 79 of the CGST Act. They argue that a formal show cause notice is not necessary when the liability is admitted, and the recovery action was warranted based on this admission.

In the writ petition, the petitioner challenges an order dated August 7, 2019, issued by the first respondent, which directed the fourth respondent to recover a sum of Rs. 53,28,645 from the petitioner’s account. This amount, according to the order, pertains to taxes, cess, interest, and penalties under the Goods and Services Tax (GST) Act, which the petitioner allegedly failed to pay.

The petitioner argues that this order was issued without first conducting an assessment or initiating any proceedings to determine the tax, cess, interest, or penalties due. The petitioner asserts that no formal assessment or notification was issued prior to this demand. Consequently, the petitioner contends that Section 79 of the Central Goods and Services Tax Act, 2017, which allows recovery of arrears, cannot be applied in this case.

Furthermore, the petitioner points out that although a statement was obtained from them on June 19, 2019, suggesting that they had claimed input credit based on invoices from fake units, this statement was later retracted. The petitioner clarified on June 26, 2019, that the credit claimed was for goods received with legitimate invoices. The petitioner argues that recovery proceedings should not be based on this retracted statement.

In response, the first and second respondents argue in their counter affidavit that the petitioner’s admission of liability through their initial statement justifies the recovery action under Section 79 of the GST Act. They assert that a show cause notice is not necessary when liability is admitted and that the recovery provisions can be invoked in such cases.

Additionally, the respondents refer to Section 83 of the GST Act, which allows for protective measures to safeguard revenue interests. Despite this, when queried by the court, the respondents confirmed that no formal proceedings were currently pending against the petitioner.

The writ petition challenges the validity of a directive issued on August 7, 2019, by the first respondent to the fourth respondent, instructing the recovery of Rs. 53,28,645 from the petitioner’s account. This amount, as per the directive, represents unpaid tax, cess, interest, and penalties under the Goods and Services Tax (GST) Act. The petitioner’s primary grievance is that this directive was issued without prior assessment or any form of proceeding to determine the tax liabilities. The petitioner argues that Section 79 of the Central Goods and Services Tax Act, 2017, which allows for recovery of arrears, should not have been invoked in this case as no assessment or proceeding had been conducted to substantiate the claimed amount.

The petitioner contends that although a statement was initially obtained from them on June 19, 2019, suggesting they claimed input credit based on invoices from non-existent units, this statement was retracted on June 26, 2019. The retraction clarified that the petitioner had indeed taken input credit for goods received with legitimate invoices. The petitioner emphasizes that the impugned recovery action was based on this retracted statement, which should not justify such drastic measures.

In response, the first and second respondents argue through a counter affidavit that the petitioner’s admitted liability, as evidenced by their statement, justifies the recovery action under Section 79 of the GST Act. They assert that issuing a show cause notice is not necessary if the liability is admitted. Additionally, they reference Section 83 of the GST Act, which allows for protective measures for revenue interests, though they acknowledge that no formal proceeding is currently pending against the petitioner.

The Court must determine whether the recovery action taken under these circumstances is legally sustainable.

This writ petition challenges the proceedings issued by the first respondent on August 7, 2019, which instructed the fourth respondent to recover an amount of Rs. 53,28,645 from the petitioner. This sum allegedly represents unpaid tax, cess, interest, and penalties under the Goods and Services Tax (GST) Act. The petitioner contends that this recovery order was issued prematurely, without any prior assessment or initiation of proceedings to determine the tax liability.

The petitioner asserts that there were no formal proceedings or assessments conducted to ascertain the amount of Rs. 53,28,645 as claimed. The petitioner’s argument is that Section 79 of the Central Goods and Services Tax Act, 2017, which allows for recovery of amounts due, cannot be applied in this case without a prior determination of liability.

The petitioner also notes that while a statement was obtained from them on June 19, 2019, suggesting they had claimed input credit based on invoices from fictitious entities, this statement was retracted by the petitioner on June 26, 2019. The retraction clarified that the input credit of Rs. 53,28,645 was for legitimate goods received with proper invoices.

In response, the first and second respondents argue in their counter-affidavit that the petitioner had admitted their liability in their statement, thus justifying the invocation of Section 79 for recovery. They contend that it is not necessary to issue a show-cause notice if the liability is admitted. Additionally, they argue that Section 83 of the GST Act allows for measures to protect revenue interests, even if no formal proceedings are pending against the petitioner.

The court must determine whether the proceedings under Section 79 are lawful given that no other proceedings or assessments were conducted to determine the tax liability of Rs. 53,28,645. Section 79 stipulates that recovery of amounts payable can only occur after the liability is determined in accordance with the law. 

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