Illegal GST Recovery: Patna HC Imposes Rs. 10K Costs On SGST Dept.

The Patna High Court has quashed an illegal tax recovery made under the Goods and Services Tax (GST) regime and directed the State GST Department to refund the amount along with 9% simple interest and costs of Rs. 10,000.

The bench of Justice Rajeev Ranjan Prasad and Justice Ashok Kumar Pandey observed that the authorities had acted in contravention of its prior ruling and, taking serious note of this, issued show cause notices to both the Assistant Commissioner and the Appellate Authority. They were asked to explain why contempt proceedings should not be initiated against them for willful disobedience of the Court’s order, and why they should not be held personally liable for the payment of interest and legal costs caused due to their actions. In response, both officers submitted show cause replies along with unconditional apologies.

The petitioner, M/s Great Eastern Hire Purchase Private Limited, a GST-registered private company based in Patna, approached the Patna High Court challenging two specific orders issued under the Goods and Services Tax (GST) regime.

The first order was passed by the Assistant Commissioner of State Tax, Gandhi Maidan Circle, Patna, and the second was an appellate order issued by the Additional Commissioner of State Tax (Appeals), Patna West Division.

The petitioner claimed that these orders, which pertained to a tax demand and recovery process, were illegal, arbitrary, and issued in violation of the law laid down in an earlier decision of the High Court in the case of SIS Cash Services Pvt Ltd vs Union of India (CWJC No. 6514 of 2021).

The petitioner argued that the Assistant Commissioner wrongly invoked provisions of Section 62 of the CGST/BGST Act to initiate recovery without following due process, while the Appellate Authority erroneously rejected their appeal under the government’s amnesty scheme (Notification No. 53/2023 dated 02.11.2023), arguing that the scheme did not cover orders issued under Section 62.

The petitioner contended that the denial of amnesty benefits and the execution of recovery orders were contrary to the binding precedent set by the Court in the SIS Cash Services case, which provided specific guidance on such matters under Sections 62, 73, and 74 of the GST Act.

The Assistant Commissioner claimed she was unaware of the SIS Cash Services ruling as it was not brought to her attention at the time of issuing the order, while the Appellate Authority stated that the petitioner had failed to inform him about the precedent during the appeal proceedings. However, the Court noted that the Assistant Commissioner’s submission was not made under affidavit and expressed concern about the lack of formal explanation. Nonetheless, as these statements went unchallenged by the petitioner, the Court accepted their responses and decided not to proceed with contempt action.

The Court held that the recovery was illegal and that the petitioner had suffered litigation due to the officials' actions.

The High Court directed the State of Bihar to refund the recovered amount with simple interest at the rate of 9% per annum from the date of recovery till the date of refund. It also ordered the payment of ₹10,000 as litigation cost to the petitioner.

The Court further clarified that the State Government is at liberty to recover these amounts from the erring officers if it so desires. This case not only vindicates the rights of taxpayers but also reinforces the importance of adhering to judicial precedent and procedural safeguards under tax law.

Case Detail

Case Title: M/S Great Eastern Hire Purchase Private Limited Versus State of Bihar

Case No.: Civil Writ Jurisdiction Case No.18049 of 2024

Date: 25/06/2025

Counsel For Petitioner: Mr. Bijay Kumar Gupta, Advocate

Counsel For Respondent: P.K. Shahi, AG