INITIATION OF RECOVERY PROCEEDINGS UNDER SECTION 78 OF THE ACT

[Mr. M. GOVINDARAJAN]

Section 78 of the Tamil Nadu Goods and Services Tax Act, 2017 provides the procedure for the initiation of recovery proceedings.  The said section provides that any amount payable by a taxable person in pursuance of an order passed under this Act shall be paid by such person within a period of 3 months from the date of service of such order failing which recovery proceedings shall be initiated.  Where the proper officer considers it expedient in the interest of revenue, he may, for reasons to be recorded in writing, require the said taxable person to make such payment within such period less than a period of three months as may be specified by him.

The above said section provides that once the assessment order is passed by the Adjudicating Authority and any amount is to be recovered from the assessee, the proper officer may initiate recovery proceedings if the assessee does not pay the said amount within three months from the date of service of such order.  The three months’ time is given for giving an opportunity to the assessee for filing appeal to the appellate authority.  According to Section 107(1) of the Act any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within 3 months from the date on which the said decision or order is communicated to such person.

If the proper officer considers it necessary may require the taxable person to make such payment within such period which is less than the period of 3 months as may be specified by him.  For this purpose, the proper office is required to record the reasons for early recovery in writing.

The said view has been confirmed by Madras High Court in TVL. CARGOTEC INDIA PRIVATE LIMITED VERSUS ASSISTANT COMMISSIONER (ST) , CHENNAI AND OTHERS - 2024 (6) TMI 112 - MADRAS HIGH COURT.   In the said case, the assessment orders for three financial years were passed by the Proper Officer on 28.12.2022.  The Department initiated recovery proceedings even before the limitation of 3 months prescribed for filing appeal before the First Appellate Authority by the taxable person. Amounts were debited from the petitioner's Electronic Cash and Credit Ledgers in February 2023. Being aggrieved by the said attitude of the Revenue the assessee filed a writ petition before the High Court.

The petitioner submitted the following before the High Court-

• The proviso to Section 78 of the Tamil Nadu Goods and Service Tax Act, 2017, may be invoked only if the proper officer records in writing the reason as to why he considers it expedient in the interest of the revenue to require the taxable person to make payment even before the expiry of the prescribed three-month period.
• In this case no material has been placed on record to justify invoking the proviso to Section 78 of the applicable GST enactments.

The Revenue contended that the action of the respondents in initiating recovery measures is justified.  However the Revenue is ready to issue the refund of recovered amount by way of re-credit to Credit Ledger and Cash Ledger respectively if the petitioner preferred a refund application in the GST portal.

The High Court observed that the Department has failed to satisfactorily explain the recourse to the proviso to Section 78, the petitioner is entitled to a refund. The High Court, therefore, directed the Department either refund the recovered amount or recredit the same to the petitioner's Electronic Cash or Credit Ledgers, as the case may be, within one month from the date of receipt of a copy of this order.