• Dated 31^th October, 2025

The Apex Court did not interfere with HC order allowing release of recovery on condition of maintaining minimum balance

Brief Facts:

The case arose out of a dispute concerning recovery proceedings initiated under the GST law. The assessee was subjected to an assessment order raising a substantial tax demand. Pursuant to the said order, the Department provisionally attached the assessee's bank accounts and proceeded to recover a significant portion of the disputed amount under Section 79 of the GST Act. Contending that the recovery was effected prematurely before expiry of the statutory period for filing an appeal and that such coercive action deprived it of the funds necessary for making the statutory pre-deposit, the assessee approached the Andhra Pradesh High Court. It sought refund of the recovered sum and lifting of the attachment, asserting that once the pre-deposit under Section 107(6) is made, further recovery stands stayed by operation of law.

Assessee's Contention:

The assessee contended that recovery beyond the statutory pre-deposit threshold was contrary to Section 107 of the GST Act, which grants a deemed stay on recovery upon payment of 10% of the disputed tax. It argued that the Department's insistence on maintaining a large minimum balance was arbitrary and without legal foundation. The assessee voluntarily offered to furnish an undertaking to retain the refunded amount and maintain sufficient balance in its bank account until final disposal of the appeal.

Department's Contention:

The Department defended its action, asserting that the attachment and recovery were justified to secure the Government's revenue and prevent diversion of funds. It maintained that refund of the recovered sum could jeopardize recovery prospects if the appeal was decided against the assessee, and hence, the requirement to maintain a minimum balance was a reasonable safeguard.

High Court's Decision:

The Andhra Pradesh High Court held that once the statutory pre-deposit contemplated under Section 107(6) is made, a statutory stay operates on further recovery, making additional coercive measures impermissible. However, balancing the competing interests, the Court directed the Department to refund the recovered amount after retaining the pre-deposit, subject to the assessee furnishing an undertaking to retain the funds and maintain a specified minimum balance until disposal of the appeal. The writ petition was disposed of in favour of the assessee.

Supreme Court's Decision:

The Supreme Court declined to interfere with the High Court's decision, holding that the conditions imposed adequately protected both the revenue's interest and the assessee's statutory rights. Recording the assessee's undertaking to maintain the balance as directed, the Court observed that the amount in the bank account shall remain unaltered.

BTA Comment:

This ruling reaffirms the protective intent embedded in Section 107 of the GST Act and underscores that recovery mechanisms cannot be exercised beyond the statutory framework. The Supreme Court's refusal to interfere with the High Court's conditional relief signifies judicial recognition of the balance between safeguarding taxpayer rights and preserving revenue interests. By holding that recovery beyond the 10% pre-deposit is impermissible once an appeal is instituted, the Court has reinforced the deemed stay principle and curtailed arbitrary departmental recoveries often undertaken prior to appellate adjudication.

At the same time, the Court's acceptance of a conditional refund mechanism anchored in the assessee's undertaking to retain the funds illustrates a pragmatic approach that ensures fiscal security without impeding the taxpayer's right to appeal. This decision thus serves as an important precedent restraining overreach in recovery proceedings under the GST regime while promoting procedural fairness and revenue neutrality.

Ref- DEPUTY COMMISSIONER ST Versus WINGTECH MOBILE COMMUNICATIONS (INDIA) PVT. LTD. SLP Appeal (C) No. 27302 of 2025.

Author: Aindrila Ghosh

Edited by: Shaily Gupta