2021 (11) TMI 581 - HC - GST

Service of notice for initiation of recovery proceedings of tax - Section 73 (1) of GST Act, 2017 - HELD THAT - Perusal of Notice (Annexure P-10) would show that in two of the notices i.e. Recovery No.34 of 2021 and 35 of 2021, order date is mentioned as 18.8.2021. Under Section 78 of the Act of 2017, the period of three months is provided for making payment of the tax assessed/ascertained by the Proper Officer but the letter/notice Annexure P-10 to third party under Section 79 (1) (c) of the Act of 2017 was issued on 1.10.2021 which is less than three months period from the date of the recovery order No.34 of 2021 and 35 of 2021. It is not disputed by learned counsel for the respondents that no specific reasons have been assigned for issuing notice under Section 79 (1) (c) of the Act of 2017 for initiating proceedings under Section 78 of the Act before lapse of three months period. Considering the entirety of the facts and circumstances of the case, submission made by learned senior counsel for the petitioner that no order was served upon the petitioner as required under Section 78 of the act of 2017, as an interim measure, it is directed that effect and operation of order /notice dated 01.10.2021 (Annexure P-10) shall remain stayed till the next date of hearing subject to petitioner depositing 50% of the total payable tax amount within a period of three weeks from today, adjusting amount which is already paid by the petitioner, pursuance to the notice. List this case in the week commencing 6th December 2021.

Issues:
1. Validity of recovery proceedings under the Central Goods and Services Tax Act, 2017.
2. Compliance with procedural requirements for initiating recovery of tax liability.
3. Service of orders under Sections 78 and 79 of the Act of 2017.
4. Timeliness of recovery proceedings and notice issuance.

Analysis:

1. Validity of Recovery Proceedings:
The petitioner challenged the initiation of recovery proceedings under the Central Goods and Services Tax Act, 2017 (the Act of 2017), contending that the order in Annexure P-10 was issued without following the prescribed procedures. The petitioner argued that the respondents failed to issue the necessary notice under Section 73(1) of the Act of 2017 and did not serve the order of adjudication determining the GST liability. The petitioner emphasized the mandatory requirements for initiating recovery proceedings, including providing notice under Section 73(1) and specifying the tax liability, interest, and penalties under Section 78 of the Act of 2017. The petitioner also raised concerns about the timeliness of the proceedings, highlighting discrepancies in the dates mentioned in the recovery notices and the actual initiation of recovery orders.

2. Compliance with Procedural Requirements:
The State, representing the respondents, argued that proper notices were issued under the Act of 2017, starting with a notice under Section 61, followed by notices under Sections 73 and 78. The State contended that the petitioner's liability to pay GST was not disputed, as evidenced by documents submitted with the writ petition. The State maintained that the petitioner could not dispute the recovery proceedings initiated against them, given the non-deposit of the assessed tax. The State also pointed out specific order details mentioned in the recovery notices to counter the petitioner's claims regarding the timing of the proceedings.

3. Service of Orders under Sections 78 and 79:
During the proceedings, the petitioner asserted that the recovery order in Annexure P-9 was never served upon them, challenging the legality of the recovery proceedings under Sections 78 and 79 of the Act of 2017. The petitioner argued that the initiation of proceedings by the respondents was illegal and arbitrary due to the lack of proper service of orders.

4. Timeliness of Recovery Proceedings and Notice Issuance:
The Court examined the timeline of events, noting discrepancies in the dates mentioned in the recovery notices and the actual issuance of recovery orders. The Court observed that the notice under Section 79(1)(c) was issued before the lapse of the three-month period specified under Section 78 of the Act of 2017. The Court acknowledged the petitioner's partial payment of the taxable amount and, considering the facts and circumstances of the case, directed that the operation of the recovery notice dated 01.10.2021 (Annexure P-10) would remain stayed until the next hearing, provided the petitioner deposited 50% of the total payable tax amount within three weeks.

In conclusion, the Court addressed the procedural irregularities in the initiation of recovery proceedings under the Act of 2017 and granted interim relief to the petitioner, emphasizing the importance of complying with statutory requirements and ensuring due process in tax recovery matters.

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