Case Title: M/s S.A.B. Engg Works v. State of U.P. & Another
Court: High Court of Judicature at Allahabad
Petition Number: Writ Tax No. 2254 of 2025
Category of Dispute: Recovery Without Tribunal Appeal Opportunity
Date of Judgment: 15 May 2025
Relevant Sections: Section 78, Section 79, Section 107, and Section 112(8) & (9) of the CGST Act, 2017
Relevant Circular: CBIC Circular dated 11.07.2024
Between Fine Lines
The court held that tax authorities cannot recover dues within the 3-month period unless reasons are recorded. Also, when appellate tribunals are not constituted, the taxpayer must be allowed to pre-deposit 10% and submit an undertaking. Any early deduction without opportunity violates statutory protection and must be reversed.
Facts of the Case [¶1–4]
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Petitioner challenged recovery of ₹1,55,079 from their Electronic Credit and Cash Ledgers under Section 79 of the CGST Act, 2017.
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A demand was raised on 29.04.2024, and the petitioner filed an appeal under Section 107 with the required pre-deposit.
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The appellate authority rejected the appeal on 24.01.2025, and within just 4 days, recovery was initiated on 29.01.2025 without notice.
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The petitioner contended this was contrary to Section 78 and CBIC Circular dated 11.07.2024 which allows 3 months to file appeal before Tribunal with 10% deposit, and provides for stay on balance recovery.
Questions in Consideration [¶2–4, 6–7]
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Whether recovery under Section 79 can be initiated within 3 months of appellate rejection without recorded reasons under Section 78?
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Whether the petitioner should have been allowed to pre-deposit 10% and submit an undertaking in light of Section 112(8)-(9) when the Tribunal is not yet functional?
Observations of the Court [¶7–10]
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Section 78 provides a clear mandate that recovery cannot commence until 3 months after the amount becomes payable unless reasons are recorded in writing.
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Since the appeal was rejected on 24.01.2025, recovery initiated on 29.01.2025 violated Section 78.
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Section 112(9) provides for automatic stay upon 10% pre-deposit when appealing to Tribunal. As Tribunals were not constituted, CBIC Circular dated 11.07.2024 permitted deposit and undertaking to preserve rights.
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Recovery within 4 days rendered the statutory appeal remedy infructuous, defeating the intent of Section 112(9) and the Circular.
Judgment of the Court [¶11–12]
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The court quashed the recovery dated 29.01.2025 as being in violation of Section 78 and CBIC Circular.
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Respondents were directed to credit back the amount recovered (except 10% already deposited) within two weeks.
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Petitioner was allowed to proceed under Circular dated 11.07.2024 by filing an undertaking for Tribunal appeal.
Summary of Referred Cases
| Name | Citation | Summary | Verdict |
|---|---|---|---|
| No external cases referred explicitly in judgment | – | – | – |
