The Chhattisgarh GST Appellate Tribunal, Raipur Division Bench, has set aside an appellate order confirming a GST demand of ₹4,18,440 against a Bank and remanded the matter for fresh consideration, holding that the recovery of a loan amount may fall within the exemption under Notification No. 12/2017-Central Tax (Rate)where the underlying transaction is established as recovery of a housing loan.
The bench of Pradeep Kumar Vyas (Judicial Member) and Chandra Bhushan Singh (Technical Member) has observed that where ₹11.50 lakh had been deposited into a written-off housing loan account, there should be corresponding records in the possession of the appellant establishing the write-off and subsequent recovery.
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The central dispute before the Tribunal concerned whether the amount received by the housing finance company represented recovery of a written-off housing loan, and consequently whether such recovery was exempt from GST. The Tribunal answered the question of law in favour of the appellant but directed verification of the factual aspects through documentary evidence.
The proceedings originated from scrutiny of the appellant’s GST returns for the period July 2017 to March 2018.
The Proper Officer, exercising powers under Section 61 of the CGST Act read with Rule 142(1A) of the CGST Rules, issued a notice in Form GST ASMT-10 on 13 July 2023 after noticing discrepancies in the returns. The appellant did not submit a reply within the prescribed period, following which a show-cause notice in Form GST DRC-01 was issued under Section 73(1) proposing a total demand of ₹4,11,584, comprising tax, interest and penalty.
Thereafter, an order under Section 73(9) was passed, enhancing the total demand to ₹4,18,440. The total tax component was therefore ₹1,99,220, with interest of ₹1,93,220 and penalty of ₹20,000.
The appellant challenged the order before the First Appellate Authority, but the appeal was dismissed on 24 March 2025 and the assessment order was upheld.
The appellant argued that the disputed amount represented recovery in respect of a written-off housing loan account and therefore was not liable to GST.
The appellant relied upon Notification No. 12/2017-Central Tax (Rate), dated 28 June 2017, contending that the transaction fell within the exemption relating to services by way of extending deposits, loans or advances where the consideration is represented by interest or discount.
It was further argued that the disputed receipt essentially represented the return or recovery of the principal amount of a loan and did not constitute a taxable “supply” under GST.
The appellant also challenged the finding that it had not participated in the appellate proceedings. It submitted that its Chartered Accountant, Yashwant Sharma, had appeared physically before the authority on 8 August 2024 and that material had also been uploaded on the GST portal.
The Department opposed the appeal, arguing that the appellant had not furnished adequate documentary evidence establishing that the disputed receipt actually represented recovery of a written-off housing loan.
According to the Department, the appellant had claimed the benefit of Notification No. 12/2017 for the first time before the Tribunal. It was also contended that the appellant had not produced supporting material such as borrower-wise recovery statements, ledger accounts, resolutions relating to write-off of loans, or other corroborative recordsbefore the lower authorities.
The Department therefore maintained that the exemption had not been substantiated and that the demand was justified.
One of the important legal issues considered by the Tribunal was whether the appellant could raise reliance upon Notification No. 12/2017 at the Tribunal stage.
The Department argued that the appellant had raised the notification-based exemption claim for the first time before the Tribunal and that such a plea should not be entertained.
The Tribunal rejected this objection. It noted that the notification had been issued under Section 11 of the GST Act and constituted law. Referring to the principle laid down in State of M.P. v. Ramcharan, the Tribunal observed that delegated legislation and statutory notifications issued under legislative authority can constitute law.
The Tribunal further relied upon State of Madras v. Rajagopalan for the proposition that a pure question of law can be raised at any stage of proceedings. It consequently held that the Department’s objection was not tenable.
The Tribunal then examined Entry 27 of Notification No. 12/2017-Central Tax (Rate).
The notification covers Heading 9971 services by way of extending deposits, loans or advances insofar as the consideration is represented by way of interest or discount, other than interest involved in credit card services.
The notification came into force from 1 July 2017.
On the question of law, the Tribunal held that services covered by Entry 27 concerning deposits, loans and advances are exempt from GST. It consequently held that the transaction relating to recovery of the loan amount was covered by the exemption, answering the first question of law in favour of the appellant.
Although the Tribunal accepted the legal position favouring the appellant, it did not finally allow the appeal because an important factual question remained: whether the particular amount actually represented recovery of a written-off housing loan account.
The Tribunal held that the appellant was required to establish through reliable documentary evidence that the disputed amount related to the written-off housing loan account of the Raipur branch and that the recovery had occurred during the relevant financial year, 1 April 2017 to 31 March 2018.
This distinction formed the basis for the remand.
During examination of the record, the Tribunal found a significant document concerning housing loan account No. 01102060001944, relating to Vinoj Kumar Jadhav.
The record showed that a cheque of ₹11,50,000, bearing cheque number 174854, had been deposited by Jadhav on 1 January 2018.
The account also contained entries aggregating to ₹43,218, including account closure charges, an amount transferred towards SARFAESI charges receivable from the borrower and an amount recovered from the borrower. After deducting these amounts, the remaining amount was ₹11,06,782. According to the appellant, this amount had been treated as a taxable supply by the Assessing Officer.
The Tribunal also noted an entry of ₹40,157 towards SARFAESI charges receivable, indicating that the appellant had attempted recovery of the loan through proceedings under the SARFAESI Act, 2002.
A significant observation of the Tribunal was that the document was a record of a recognised bank and had not been properly considered by the First Appellate Authority.
The Tribunal observed that the appellate authority could have verified the document with the concerned branch or called for a certified copy from the Branch Manager.
It also referred to Section 4 of the Bankers’ Books Evidence Act, 1891, under which a certified copy of an entry in a banker’s book can be received as prima facie evidence of the existence of the entry and the transactions recorded therein.
The Tribunal therefore found that the lower appellate authority had failed to consider the material document in accordance with law.
The Tribunal considered this material relevant to determining whether the disputed receipt was in fact connected with recovery of the written-off loan.
It also referred to Rule 112(4) of the CGST Rules, 2017, which preserves the power of the Appellate Authority or Appellate Tribunal to direct production of documents or witnesses necessary for disposal of an appeal.
The Tribunal concluded that the matter should be remanded rather than finally decided on the factual issue.
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