2025 (1) TMI 1514 - HC - GST

Recovery of outstanding dues in cases wherein first appeal has been disposed of till Appellate Tribunal comes into operation - reliability of Circular No.224/18/2024-GST dated 11th July 2024 issued by the Ministry of Finance - HELD THAT - The petition should be heard. Since the petitioners have been able to make out a prima facie case there shall be an unconditional stay of the demand of the Appellate order dated 18th June 2024 for a period of two weeks from date - In the event the petitioners makes payment of 10% of the balance amount of tax in dispute in addition to the amount already deposited in terms of Section 107(6) of the said Act within two weeks from date the interim order passed herein shall continue till the disposal of the writ petition or until further order whichever is earlier. Let affidavit-in-opposition to the present writ petition be filed within a period of six weeks from date reply if any be filed within one week thereafter.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered in this legal judgment is the challenge against the appellate order dated 18th June 2024, which the petitioners contend is unjust. The core legal questions include:

• Whether the circular issued by the Ministry of Finance impacts the recovery of outstanding dues when the first appeal has been disposed of, and the Appellate Tribunal is not yet operational.
• Whether the petitioners are entitled to a stay of the demand from the appellate order pending the constitution of the Appellate Tribunal.
• The conditions under which the stay of recovery proceedings can be maintained.

ISSUE-WISE DETAILED ANALYSIS

Legal Framework and Precedents

The legal framework primarily involves the Central Goods and Services Tax (CGST) Act, specifically Section 112, which deals with the appeals process and the conditions for stay of recovery. The Circular No. 224/18/2024-GST issued by the Ministry of Finance provides guidelines on how taxpayers can handle outstanding dues when the Appellate Tribunal is not operational.

Court's Interpretation and Reasoning

The Court acknowledges the absence of the Appellate Tribunal and recognizes the petitioners' right to challenge the appellate order. It interprets the Ministry of Finance's circular as providing a mechanism for taxpayers to obtain a stay on recovery by making a pre-deposit and filing an undertaking to appeal once the Tribunal is operational.

Key Evidence and Findings

The Court considers the circular's provisions, which allow taxpayers to make a pre-deposit payment and file an undertaking to stay the recovery of the confirmed demand. The petitioners have shown a prima facie case for relief based on these provisions, as the Tribunal is yet to be constituted.

Application of Law to Facts

The Court applies the provisions of Section 112 of the CGST Act and the circular to the petitioners' case. It finds that the petitioners have complied with the requirements to file an appeal and make a pre-deposit, thus warranting a stay of the demand until the Tribunal is operational or until further orders.

Treatment of Competing Arguments

The State, represented by the Learned Additional Government Pleader, argues for the writ petition to be heard under the usual terms of Section 112(8). However, the Court grants an unconditional stay of the demand, recognizing the petitioners' compliance with the circular's provisions and the absence of the Tribunal.

Conclusions

The Court concludes that the petitioners have established a prima facie case for relief and grants an unconditional stay of the appellate order's demand for two weeks. The stay will continue if the petitioners pay 10% of the disputed tax balance within two weeks, in addition to the amount already deposited under Section 107(6).

SIGNIFICANT HOLDINGS

The Court establishes the principle that in the absence of the Appellate Tribunal, taxpayers can rely on the Ministry of Finance's circular to obtain a stay on recovery proceedings by making a pre-deposit and filing an undertaking. This ensures that taxpayers are not unduly burdened while awaiting the Tribunal's constitution.

Core Principles Established

• The right to appeal and obtain a stay of recovery is preserved even when the Appellate Tribunal is not operational, provided the taxpayer complies with the circular's provisions.
• The Court emphasizes the need for procedural fairness and the protection of taxpayers' rights in the appeals process.

Final Determinations on Each Issue

The Court determines that the petitioners are entitled to an unconditional stay of the appellate order's demand for a specified period, with conditions for extending the stay based on compliance with pre-deposit requirements. The case is set for further proceedings, with timelines for filing affidavits and replies.