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June 14, 2023

Calcutta High Court Stays Recovery Proceedings Citing No Impact on GSTAT’s Non-Formation

Calcutta High Court Stays Recovery Proceedings Citing No Impact on GSTAT’s Non-Formation

Fact and issue of the case

This intra court appeal by the writ petitioners is against the order passed by the learned Single Bench directing the appellants to pay 20% of the disputed tax within a time frame for being entitled to interim protection from recovery.

The question would be whether the appellants could be put on further condition after the appellants had paid 10% of the disputed tax while preferring an appeal before the first appellate authority. Under the Act any person aggrieved by the order passed by the first appellate authority, he is entitled to prefer an appeal to the Tribunal. However, the Tribunal is to be constituted which has necessitated the appellants to file the writ petition.

The issue involved in the writ petition is whether the State and the Central Authorities can proceed parallely with regard to the same set of facts and what would be the effect of Section 6(2)(b) the West Bengal Goods and Services Tax Act, 2017 which states that where a proper officer under the Central Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under the WBGST Act on the same subject matter. Admittedly, in the instant case the DGGI, Kolkata Zonal Unit conducted searches and commenced the investigation as on 13.11.2018. It may be true that show cause notice was issued by the State Authority on 30thSeptember, 2022 but the show cause notice issued by the Central Authority preceded the said show cause notice. Therefore, the assessee had filed a rectification application pointing out this fact and requesting that since the Central Authority has already issued the show cause notice dated 30th September, 2022, before the notice dated 30th November, 2022 issued by the State Authority, requested to drop the proceedings. The said request for rectification was rejected. Admittedly, the investigation/proceedings commenced by the Central Authority is more comprehensive as it covers several other parties as well and the said party has been subject matter of issue with regard to the proceedings initiated by the State Authorities. Therefore, the question would be as to whether the State Authority can be permitted to proceed further.

Observation of the court

The learned advocate for the appellants places reliance on the decision of the Hon’ble Division Bench of the High Court of Bombay in the case of Rochem India Private Limited v. Union of India and Others in Writ Petition No.10883 of 2019 etc. dated 8th February, 2023. Relying upon the said decision which was submitted that affidavit has been filed in the said writ petition by the Chairman of Central Board of Indirect Taxes and in the said affidavit it has been stated that no hardship is caused by the taxpayer due to non-formation of the GST Appellate Tribunal as the period of limitation for filing appeal to the Tribunal is extended by order dated 3rd December, 2019 so that the appeal can be filed within three months after constitution of Tribunal. Ultimately, the writ petitions were disposed of by the High Court of Bombay with the direction that the orders impugned therein will not be given effect to until two weeks after the period prescribed to file an appeal as per the circular dated 18th March, 2020. In the case on hand the writ petition is still pending.

Mr. Debasish Ghosh, learned advocate appearing for the State submitted that the decision rendered by the High Court of Bombay will not bind the respondent/West Bengal State Tax Authorities.

Thus, considering the legal issue involved in this writ petition and also considering the peculiar facts and circumstances, we are of the view that recovery proceedings should remain stayed without imposing any pre-condition. Accordingly, the authorities are restrained from initiating any coercive steps for recovery till the disposal of the writ petition. Consequently, the condition imposed by the learned Single Bench directing deposit of 20% of the disputed tax is set aside. The time for filing affidavit-in-opposition by the respondent is extended by three weeks from date, reply, if any, be filed within two weeks

With the above observation, the writ petition stands disposed of.


In the result, appeal of the assessee is allowed and ruled in favour of the assessee

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