The Bombay High Court has granted interim relief to the assessee by restraining the State GST department from proceeding with recovery based on a tentative tax liability in the absence of a formal adjudication order. The ruling underscores the principle that coercive recovery measures cannot ordinarily precede the determination of tax liability through due legal process.
The bench of Justice Suman Shyam and Justice Advait M. Sethna has passed an ad-interim order directing that no further recovery proceedings shall be undertaken pursuant to the impugned Tentative Tax Liability without the leave of the Court.
The department had initiated recovery proceedings not only against the company but also against its debtors and even the debtors of those debtors, despite there being no formal adjudication order determining any tax dues. The petitioner argued that such coercive action was contrary to law since the tax liability had not yet been finally determined.
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The petitioner submitted that the department had commenced recovery proceedings solely on the basis of a Tentative Tax Liability. No adjudication order quantifying the alleged tax demand had been passed. Recovery against third parties, including the petitioner’s debtors, was therefore legally unsustainable. The petitioner sought an immediate stay on all recovery proceedings pending adjudication.
The State Government, represented by the Additional Government Pleader, sought four weeks’ time to obtain instructions and respond to the allegations made in the writ petition. The High Court accepted the request.
The interim protection effectively restrains the tax authorities from continuing coercive recovery actions until the next hearing.
The High Court has listed the matter for 5 August 2026, when the State is expected to place its instructions and the Court will consider the legality of the recovery proceedings in greater detail.
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