In a recent ruling, the Patna High Court slapped a fine of Rs 5,000 on a Goods and Services Tax ( GST ) officer for forcible and illegal recovery of the full tax amount from a man waiting to avail the statutory remedy of appeal before GST tribunal which has not been made functional in Bihar.

The court has directed the department to reimburse the entire collected tax within 2 weeks. The ruling was issued by a division bench led by Chief Justice K Vinod Chandran and Justice Rajiv Roy, granting relief to the National Insurance Company's Patna regional office.

The Court observed, “In the present case, also we direct the entire amounts recovered as on 07.01.2023, be refunded 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 amounts are satisfied within two weeks, as directed hereinabove, it is made clear that if eventually the demand is confirmed against the assessee, there shall not be any interest claimed under the statute between the date on which the amounts were credited by the bank and the date of refund as directed hereinabove; since the State had the benefit of the amounts in its coffers. If the liability is set aside then for the period the assessee was deprived of the amounts peremptorily recovered, the petitioner shall be entitled to claim interest from the department.”

“Following the very same judgment, we also impose a cost of Rs. 5000/- on the Officer, who issued the demand produced as Annexure-16 and appropriated the money from the bank account of the assessee/ petitioner,” the Court added while allowing the writ petition.

The court, responding to the writ application filed by the insurance company, directed the state commercial taxes department to refund the entire forcefully recovered tax amount within a two-week timeframe.

Due to the non-operational status of the GST tribunal in Bihar, the high court permitted individuals seeking recourse to make a bona fide payment of 20% of the total assessed amount, pending the tribunal's resumption.

The petitioner's counsel, Gautam Kejariwal, informed the court that the assistant commissioner of the Patliputra circle of the commercial taxes department had issued an assessment order of Rs 52 crore on February 17, 2022.

Although a first appeal was filed against the excessive assessment, it was dismissed on September 21, 2022. With the GST appellate tribunal unavailable, the petitioner company deposited 20% of the assessed amount, as mandated by GST law, in anticipation of filing an appeal once the tribunal becomes operational in Bihar.

The court's judgment provided relief to the National Insurance Company's Patna regional office, instructing the state commercial taxes department to reimburse the entire forcibly collected tax amount within two weeks.

However, despite the department initially acknowledging the statutory deposit, a fresh demand notice was issued in January of the following year, seeking recovery of the remaining assessed amount.

In response to the petitioner's writ application challenging this demand notice, the department allegedly retaliated by forcibly recovering the outstanding amount of approximately Rs 42 crore, using coercive measures. The court's intervention, along with the imposed penalty, aims to rectify what it perceives as an unjust and coercive action by the GST officer.

Appearance :

For the Petitioner/s: Mr. Gautam Kumar Kejriwal, Advocate, Mr. Alok Kumar Jha, Advocate, Mr. Mukund Kumar, Advocate, Mr. Akash Kumar, Advocate, Mr. Aditya Raman, Advocate

For the Respondent/s: Mr. Vivek Prasad

Case No.: Civil Writ Jurisdiction Case No.777 of 2023

Case Title: National Insurance Co. Lt vs The State of Bihar and Ors

LL Citation: 2024 LiveLaw (Pat) 14

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