• Dated 20^th April, 2026

HC Questions Recovery Without Considering Reply; Delay Proves Costly For Assessee

BRIEF FACTS:

The petitioner received a notice dated 25.03.2025 demanding payment of tax and interest within seven days, failing which recovery proceedings under Section 79 of the MGST Act, 2017 would be initiated. Instead of making payment, the petitioner submitted a detailed representation dated 11.04.2025 explaining that it had issued credit notes under Section 34 of the CGST Act for goods returned and rate differences, which were duly reported in GST returns and on the GST portal. It was contended that such adjustments did not result in any short payment of tax and that any negative liability was duly reflected in the GST portal's negative liability statement for adjustment in subsequent periods. However, the department failed to consider the said representation and proceeded with coercive recovery action under Section 79, including issuance of notices to banks such as ICICI Bank and State Bank of India. Aggrieved by such recovery without adjudication or consideration of its reply, the petitioner approached the Bombay High Court by way of a writ petition challenging the recovery proceedings.

ASSESSEE'S CONTENTION:

The Assessee, contended that it had duly issued credit notes in accordance with Section 34 of the CGST Act on account of goods returned and rate differences, and that such credit notes were properly reported on the GST portal, including through the e-invoice system, and reflected in its returns and tax liability reports. It was argued that the consequent reduction in output tax liability did not result in any short payment of tax and was duly recognized by the system through the negative liability statement, which is adjustable against future tax liabilities. The petitioner further submitted that all relevant details were already available on the GST portal, and therefore, no demand could be sustained. Despite this, the department failed to consider the petitioner's representation dated 11.04.2025 and subsequent follow-ups, and proceeded to initiate coercive recovery proceedings under Section 79 without any proper adjudication.

DEPARTMENT'S CONTENTION:

The Department issued a demand notice requiring the petitioner to pay the alleged tax and interest within seven days and, upon non-payment, proceeded to initiate recovery proceedings under Section 79 of the MGST Act. Without addressing or considering the petitioner's detailed explanation and representations, the authorities directly undertook coercive measures by issuing bank attachment and recovery notices to institutions such as ICICI Bank and multiple branches of the State Bank of India. The implicit stand of the department was that the liability was validly determined and recoverable, and that the petitioner's failure to make payment justified immediate initiation of recovery proceedings.

DECISION:

The Bombay High Court observed that the petitioner had indeed submitted representations explaining its position, which prima facie were not considered by the authorities before initiating recovery proceedings. However, the Court declined to grant interim relief to the petitioner on the ground of delay, noting that the petitioner ought to have approached the Court promptly in April or May 2025 instead of waiting until recovery actions were initiated. Accordingly, while issuing notice to the respondents for further hearing, the Court refused to stay the recovery proceedings and sought an explanation from the department as to why the petitioner's representation was not considered and why recovery action was not taken immediately after the expiry of the initial notice period.

BTA's COMMENT:

This case highlights a recurring tension in GST administration between system-driven tax adjustments and coercive recovery mechanisms. While the petitioner demonstrated that its tax position was transparently reflected in the GST portal (including negative liability adjustments through credit notes), the department proceeded with recovery without addressing the substantive explanation. The Bombay High Court signaled concern over this procedural lapse by questioning the non-consideration of representations. At the same time, it reinforced an equally important principle - equitable relief is time-sensitive, and unexplained delay can weaken even a meritorious case.

Case Reference- Best Agrolife Limited vs State of Maharashtra & Ors. [WP-2548 of 2026 Dated 27 March 2026]

Author-Madhurima Bose