The Calcutta High Court has restrained the West Bengal GST authorities from taking any further coercive steps to recover the balance of an assessed tax demand after finding that more than 10% of the demand had already been recovered and an additional amount had been deposited towards the statutory pre-deposit for filing an appeal. 

The bench of Justice Smita Das De lifted the attachment of the taxpayer’s bank account, permitting its operation for business purposes subject to safeguards to protect the revenue.

The proceedings originated with a show-cause notice dated December 21, 2023, issued under Section 73 of the West Bengal GST Act for the period 2018-2019. The notice was issued after the GST authorities detected discrepancies in the returns furnished by the taxpayer.

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Subsequently, an adjudication order was passed ex parte on May 31, 2024. The taxpayer challenged the assessment before the Appellate Authority by filing an appeal on February 3, 2026.

However, before the appeal could be decided, the authorities initiated garnishee proceedings on January 15, 2026, resulting in recovery of Rs.11,68,316 against the total assessed demand of Rs.59,88,150.

The taxpayer contended before the High Court that the recovery proceedings had been initiated even though an appeal had subsequently been filed against the assessment order. It therefore sought protection from further recovery until the appeal reached finality.

The total demand raised against the taxpayer comprised tax of Rs.30,05,934, interest of Rs.26,81,622 and penalty of Rs.3,00,594, aggregating to Rs.59,88,150.

According to the taxpayer, Rs.3,00,594 had already been deposited towards the pre-deposit required for filing the appeal. The amount was paid by way of adjustment from Input Tax Credit.

In addition, Rs.11,68,316 had been adjusted and recovered by the authorities towards Input Tax Credit already claimed. The taxpayer therefore argued that the revenue had already received a substantial portion of the demand and that further coercive recovery during the pendency of the appeal was unwarranted.

The State authorities opposed the taxpayer’s plea for protection from further recovery.

It was argued that the appeal had been filed only after the initiation of garnishee proceedings. The authorities also contended that the taxpayer had not availed Input Tax Credit that was available to it, which, according to the State, had caused prejudice to the revenue.

The State further submitted that permitting the taxpayer to freely operate the bank account could adversely affect recovery of the substantial outstanding demand. It therefore argued that the balance amount should remain secured until the appeal was finally decided.

After considering the rival submissions and examining the records, the High Court concluded that the taxpayer had made out a prima facie case warranting interference at that stage.

The Court consequently directed the Appellate Authority to dispose of the pending appeal as expeditiously as possible, preferably on or before October 31, 2026. The Appellate Authority was directed to provide the taxpayer an opportunity of hearing and pass a reasoned and speaking order in accordance with law.

The Court also directed that the decision be communicated to the taxpayer within one week after the appeal was decided.

A significant aspect of the ruling was the Court’s direction preventing the GST authorities from undertaking further coercive recovery while the appeal remained pending.

The Court noted that more than 10% of the assessed demand had already been recovered by the authorities and that Rs.3,00,594 had additionally been deposited towards the pre-deposit for the appeal.

In these circumstances, the Court restrained the authorities from taking any further coercive steps to recover the balance assessed demand until the Appellate Authority finally decided the appeal.

Importantly, the Court did not finally determine the taxpayer’s entitlement to Input Tax Credit. It expressly left the question concerning non-availment of Input Tax Credit open for consideration by the Appellate Authority at the time of hearing the appeal.

The Appellate Authority was also directed to decide the matter on its merits without being influenced by the observations made by the High Court in the writ proceedings.

The Court also granted immediate relief concerning the taxpayer’s bank account.

Since the taxpayer was carrying on a proprietorship business, the Court considered it appropriate, in the interests of justice, to permit operation of the attached bank account.

The attachment over the taxpayer’s State Bank of India account at the Contai Branch in Purba Medinipur was therefore lifted. However, the Court imposed a safeguard requiring the taxpayer to maintain sufficient balance in the account to satisfy the revenue’s claim if the demand was ultimately upheld.

While allowing the taxpayer to operate the account, the Court directed the banking authorities to continuously monitor the balance in the account until the GST appeal attained finality.

The Court clarified that such monitoring would not prevent the taxpayer from operating the account for the purpose of running its business.

This arrangement sought to balance two competing considerations: the taxpayer’s need to continue its business operations and the revenue’s interest in preserving the ability to recover the outstanding demand if the assessment was ultimately sustained.

The High Court made it clear that its interim protection did not extinguish or finally determine the revenue’s recovery rights.

The GST department expressly permitted to take appropriate steps for recovery in accordance with law if the taxpayer’s appeal was dismissed and the demand was ultimately upheld.

Thus, the Court’s intervention was limited to protecting the taxpayer from further coercive recovery during the pendency of the statutory appeal. It did not adjudicate the underlying tax liability on merits.

The High Court ultimately disposed of the writ petition with the above directions and observations, specifically without entering into the merits of the underlying assessment.

The order therefore primarily addresses the balance between enforcement of a GST demand and the taxpayer’s statutory right to pursue an appellate remedy, particularly where a portion of the demand has already been recovered and the taxpayer has complied with the applicable pre-deposit requirement.

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