2023 (9) TMI 272 - HC - GST

Refund of the amounts recovered and stay of the assessment order confirmed in appeal till the Appellate Tribunal is constituted under Section 109 of the BGST Act - whether the services provided to Government Polytechnic Institutes would fall under the exemption stipulated in Entry No. 66(b)(iii) of Notification No. 12/2017 dated 28.06.2017 clarifying it to be services provided by or to Educational Institutions up to Higher Secondary School or equivalent? - HELD THAT - The actions of the Tax Authorities, under the taxing statute should be tempered with good conscience and judicious reasoning, which in the instant case was in complete derogation of the established principles of rule of law; reigning supreme even when there is a compulsory extraction of money for the larger good and welfare, which a levy of tax always is. The tax authority should also act as a facilitator of business and economy and not merely as an extortionist, always looking to have the pound of flesh, to satisfy his hierarchical superiors to push his/her personal agendas - there are no doubt that the action complained of, was high handed and arbitrary. The Assessing Authority in the scheme of the enactment could not have made recovery of the entire amount. Section 112 provides for twenty per cent of the tax amount due, in addition to the ten per cent amount paid at the first appellate stage, for maintaining a second appeal before the Appellate Tribunal. On such payment being made under Section 112(8), there is also a requirement that the further recovery proceedings would be stayed. Hence, what was required to be paid by the assessee, for maintaining an appeal before the Appellate Tribunal, if constituted, was Rs. 7,56,644.00 being the twenty per cent of the tax dues under the BGST and CGST Act. Hence, the balance amounts from the total sums forfeited of Rs. 69,88,322.00 recovered shall be paid over to the assessee within a period of two weeks from today, failing which interest shall run at the rate of 12 per cent per annum - If the liability is set aside then for the periods the assessee was deprived of the amounts recovered, she shall be entitled to claim interest from the department. The officer who issued Annexure-3 order, who acted in complete derogation of the statutory provisions and established principles of law, should pay an amount of Rs. 5,000/- (five thousand) as cost to the assessee; a receipt of which shall be filed within two weeks in the instant writ petition - The writ petition is allowed.

Summary

Issues Involved:
1. Arbitrary and surreptitious tax recovery.
2. Applicability of exemption under Entry No. 66(b)(iii) of Notification No. 12/2017.
3. Compliance with statutory provisions and principles of natural justice.
4. Guidelines for tax recovery procedures.

Summary:

1. Arbitrary and Surreptitious Tax Recovery:
The court addressed the issue of a tax executive's overreach by recovering assessed tax due immediately after the dismissal of an appeal, despite the absence of a constituted Tribunal for further appeal. The recovery was deemed arbitrary, especially since notifications extended the period of limitation due to the non-constitution of the Tribunal. The court highlighted the statutory requirement under Section 112(8) of the BGST Act for a 20% payment to stay recovery until the Tribunal's constitution. The court condemned the recovery as high-handed and arbitrary, noting that the reasons recorded by the Recovery Officer were unconvincing and insufficient to justify such expedient action.

2. Applicability of Exemption under Entry No. 66(b)(iii) of Notification No. 12/2017:
The court refrained from dwelling on the legal issue of exemption for services provided to Government Polytechnic Institutes under Entry No. 66(b)(iii) of Notification No. 12/2017, as the appellate remedy was not exhausted. The focus remained on the improper recovery process rather than the exemption's applicability.

3. Compliance with Statutory Provisions and Principles of Natural Justice:
The court emphasized the necessity of adhering to statutory provisions and principles of natural justice. It cited the Constitution Bench decision in Mohinder Singh Gill and another v. The Chief Election Commissioner, New Delhi, asserting that fair hearing is a postulate of decision-making. The court found that the tax authority failed to provide proper notice and reasons to the assessee before recovery, violating the principles of natural justice and statutory requirements under Section 78 of the BGST Act.

4. Guidelines for Tax Recovery Procedures:
The court issued guidelines for tax recovery, emphasizing no recovery within the appeal filing time limit and ensuring reasonable notice and opportunity for the assessee to seek recourse. The guidelines included:
- No recovery of tax within the time limit for filing an appeal and before the stay application is disposed of.
- Initiating recovery only after a reasonable period post-stay application disposal.
- Providing notice to the assessee with reasons before initiating recovery under expedient circumstances.
- Allowing the assessee to make representations before withdrawing amounts from attached bank accounts.
- Balancing the interest of revenue with mitigating hardship to the assessee.

Conclusion:
The court found the tax authority's actions to be in complete derogation of statutory provisions and principles of natural justice. It directed the refund of improperly recovered amounts, with interest if not refunded within two weeks, and imposed a cost of Rs. 5,000 on the officer responsible for the arbitrary recovery. The writ petition was allowed with specified directions and guidelines for future tax recovery procedures.