GST demand and appellate order set aside as recovery was premature and voluntary payments under Section 73(5) required proper adjudication

Case Summary

Case Title: Dharmendra Singh v. Deputy Commissioner of Revenue, Bally & Salkia Charge & Ors.
Court: Calcutta High Court
Petition No.: WPA 3965 of 2025
Date of Judgment: 14 July 2025
Relevant Sections: Section 73(5), Section 74, Section 107, Section 29(2)(e) of the CGST/WBGST Act, 2017
Category of Dispute: Input Tax Credit (ITC) and Delay in Appeal

Facts (Paras 1–5)

The petitioner, a registered dealer, availed ITC on purchases from Balaji Trading Co. during June–November 2019. Later, Balaji Trading’s registration was cancelled under Section 29(2)(e). Based on this, proceedings under Section 74 were initiated. The petitioner made voluntary payments on 24 March 2022 and 27 May 2022 through DRC-03, claiming these under Section 73(5). However, without contesting the SCN or appearing for hearing, the proper officer passed an adverse order dated 17 February 2023, treating the ITC claim as fictitious. Before expiry of the statutory appeal period, the department recovered the balance tax from the petitioner’s Electronic Credit Ledger in April–May 2023. An appeal filed later was dismissed on 23 February 2024 as barred by limitation.

Questions Before Court (Paras 1, 6–7)

1. Whether voluntary payments made under Section 73(5) could be treated as compliance to the SCN without proper explanation.

2. Whether recovery of demand before expiry of the appeal period was lawful.

3. Whether dismissal of appeal due to delay, despite Tribunal not being constituted, justified writ interference.

Court’s Observations (Paras 6–7)

The Court noted that the petitioner had indeed made payments voluntarily under Section 73(5). Such payments ought to have been clarified and explained before treating them as admissions. Importantly, the department recovered tax even before expiry of the statutory appeal period. Since the appellate tribunal was not constituted, the writ petition was the only remedy available. The Court emphasized that natural justice required remanding the matter to allow the petitioner to explain circumstances of payment.

Judgment (Paras 7–9)

The Court set aside the appellate order dated 23 February 2024 and the adjudication order dated 17 February 2023. The matter was remanded back to the proper officer for fresh adjudication on merits. The petitioner was directed to file a response to the SCN within two weeks. If no response was filed, the officer could decide in accordance with law.

Cases Referred (Tabular Summary)

Between Fine Lines

For trade and industry, the ruling highlights that voluntary payments under Section 73(5) cannot automatically be treated as admissions of liability. Departments cannot recover dues prematurely before appeal timelines expire. Taxpayers must, however, ensure timely contesting of SCNs and filing of appeals to safeguard rights.

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