The Madras High Court has set aside a GST bank attachment notice issued for recovering an outstanding tax demand after noting that the taxpayer had discharged the entire principal liability. The Court permitted the taxpayer to pay the consequential interest liability of ₹69.72 lakh in 15 monthly installments.

The bench of Justice Senthilkumar Ramamoorthy granted the instalment facility subject to the taxpayer’s undertaking that the underlying assessment order would not be challenged before any forum.

An assessment order dated February 28, 2025, was issued against the petitioner for the assessment period 2020-21, raising a total demand of ₹86,88,622.

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The petitioner initially paid ₹30,13,691. For recovering the remaining amount of ₹56,74,931, the GST department initiated proceedings under Section 79(1)(c) of the applicable GST enactments.

Section 79 provides the mechanism through which the department may recover tax and other amounts payable under the GST law. Clause (c) of Section 79(1) enables the proper officer to require a third party holding money for the taxpayer—including a bank—to remit the amount to the government.

Accordingly, the Assistant Commissioner of CGST and Central Excise, Pallavaram Division, issued a communication dated March 9, 2026, seeking recovery of the outstanding amount through the petitioner’s bank account.

The petitioner approached the High Court seeking the quashing of the Form GST DRC-13 bank attachment notice insofar as it authorised immediate coercive recovery. Alternatively, the petitioner requested that the recovery action be kept in abeyance and that the interest liability be allowed to be discharged through monthly instalments.

The petitioner submitted that the entire outstanding principal amount of ₹56,74,931 under the assessment order had subsequently been discharged. Since the amount was paid belatedly, the petitioner acknowledged that statutory interest remained payable.

The petitioner computed the aggregate interest liability at ₹69,72,534 and offered to discharge it in 15 equal monthly instalments.

Although the payment schedule provided in the writ affidavit proposed instalments between September 2026 and November 2027, the petitioner requested a minor modification so that the payments could begin in October 2026 and conclude in December 2027.

The petitioner further agreed that if the GST authorities calculated a higher amount of interest, the resulting shortfall would also be paid within the same 15-instalment period by proportionately increasing the monthly instalment amount.

Senior Standing Counsel Rajendran Raghavan, representing the CGST department, submitted that the petitioner’s calculation of the interest liability required verification.

The department also submitted that the petitioner should be required to pay any shortfall if the official computation showed that an amount higher than ₹69.72 lakh was payable.

The High Court noted that the impugned recovery communication related to the outstanding principal amount of ₹56,74,931. The petitioner had produced evidence demonstrating that the entire amount had been discharged, although belatedly.

Consequently, the Court held that interest remained payable in accordance with the applicable statutory provisions.

Before considering the request for instalments, the High Court required the petitioner to agree not to challenge the assessment order dated February 28, 2025.

After obtaining instructions, the petitioner’s counsel made an endorsement confirming that the assessment order would not be challenged before any forum.

The Court recorded this undertaking while granting relief to the petitioner.

The High Court set aside the impugned communication dated March 9, 2026, and directed the petitioner to discharge the interest liability of ₹69,72,534 in 15 equal monthly instalments of ₹4,64,837 each.

The first instalment must be paid on or before October 10, 2026. Every subsequent instalment must be paid on or before the tenth day of the following month.

If the GST authorities determine that a higher amount is payable towards interest, the petitioner must discharge the additional liability through the same 15 instalments by correspondingly increasing the monthly payment amount.

The Court clarified that if the petitioner defaults in paying one or more instalments in accordance with the approved schedule, the CGST authority would be entitled to initiate recovery proceedings in accordance with law.

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