GST recovery stayed as High Court holds that taxpayers cannot be compelled to pay demand when Tribunal is not constituted, provided pre-deposit conditions are met

Case Details

Case Title: AD Well International Private Limited vs. State of West Bengal & Ors.
Court: Calcutta High Court
Petition No.: WPA 30236 of 2024
Judgment Date: 05.02.2025
Category of Dispute: Recovery proceedings / Stay of demand pending Appellate Tribunal constitution
Relevant Sections: Section 107(6), Section 112(8) & (9) of the CGST Act, 2017; Circular No. 224/18/2024-GST dated 11.07.2024

Facts (Para 23–24)

The petitioner challenged the appellate order dated 24th July 2024 confirming demand under GST. The grievance was that recovery proceedings had been initiated despite the non-constitution of the Appellate Tribunal. The petitioner relied upon Circular No. 224/18/2024-GST dated 11th July 2024, which clarified that once pre-deposit under Section 112(8) is paid and an undertaking to appeal before the Tribunal is furnished, the balance demand recovery must be stayed until the Tribunal becomes operational.

Questions before the Court

1. Whether recovery of demand arising from an appellate order can be pursued when the Appellate Tribunal has not yet been constituted?

2. Whether payment of additional pre-deposit safeguards the taxpayer from coercive recovery in line with Section 112(9) read with Circular 224/18/2024?

Observations (Paras 4–6, 23–24)

The Court observed that the Central Government itself had clarified through Circular 224/18/2024 that recovery cannot proceed once the taxpayer deposits the prescribed pre-deposit and files the undertaking to appeal before the Tribunal when constituted. The legislative intent of Section 112(9) of CGST Act is to grant automatic stay of recovery subject to compliance with pre-deposit. Since the Tribunal is not yet functional, compelling recovery would defeat the statutory protection granted.

Judgement (Paras 23–24)

The High Court held that the petitioner had made out a prima facie case. An unconditional stay on recovery of the appellate order dated 24th July 2024 was granted for two weeks. The Court further directed that if the petitioner deposits 10% of the balance disputed tax (over and above the Section 107(6) deposit) within two weeks, the stay would continue till final disposal of the writ petition or until further orders. Affidavit timelines were also fixed.

Table of Cases Referred

Between Fine Lines

For industry, this ruling is a major relief: recovery cannot be enforced if the taxpayer has complied with pre-deposit and is willing to file appeal before the Appellate Tribunal once it is functional. Businesses facing demand orders need not fear coercive recovery in this transition period, provided they act promptly with payment and undertakings.

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