Simplified Explanation of the Judgment
In a recent ruling, the Patna High Court has provided significant relief to taxpayers unable to file appeals under the Bihar Goods and Services Tax Act (BGST Act) due to the non-constitution of the GST Appellate Tribunal. The Court addressed a petition filed by a company challenging a tax demand order and seeking protection from coercive recovery until the tribunal becomes functional.
The petitioner had planned to file an appeal before the GST Appellate Tribunal, as permitted under Section 112 of the BGST Act. However, due to the continued delay in setting up the Tribunal, the petitioner was unable to exercise this statutory right. The GST Act allows an automatic stay on recovery proceedings if an appeal is filed and a certain percentage of the tax is deposited. But in the absence of a Tribunal, no such appeal could be filed, leaving the petitioner exposed to recovery action.
Previously, courts were allowing taxpayers to deposit 20% of the disputed tax to claim interim relief. However, the law has now been amended to reduce this pre-deposit requirement to 10%, effective from 1st November 2024.
Taking note of this legal change and the absence of the Tribunal, the Court ruled that if the petitioner deposits 10% of the disputed tax (in addition to any previously deposited amounts under Section 107), the authorities must grant a stay on recovery until the Tribunal is set up. The Court emphasized that taxpayers should not be penalized for the government’s delay in forming the Tribunal.
Importantly, the Court made it clear that this stay is not indefinite. The petitioner must file an appeal before the Tribunal once it becomes functional. Failure to do so within the specified time after the Tribunal’s establishment would allow the authorities to proceed with recovery under the law.
Additionally, the Court directed that if the petitioner has already paid the required 10%, and if the tax authorities have frozen the petitioner’s bank accounts as part of enforcement actions, such attachments must be lifted.
This judgment affirms the principle that administrative delays cannot override statutory rights. The judiciary has intervened to ensure that the lack of a functioning appellate body does not result in irreparable harm to taxpayers.
Significance or Implication of the Judgment
This ruling carries considerable importance for all taxpayers in Bihar facing GST disputes. It ensures that:
- Taxpayers are not disadvantaged due to the government’s failure to constitute GST Tribunals.
- Interim protection from recovery is available by depositing only 10% of the disputed tax amount.
- Rights to file appeals are preserved for future dates, ensuring fairness and due process.
For the government, this judgment highlights the urgent need to operationalize the Tribunal mechanism to avoid repetitive litigation and judicial intervention.
Legal Issue(s) Decided and the Court’s Decision with reasoning
- Issue: Can a taxpayer be denied the statutory benefit of appeal and stay of recovery due to non-formation of the GST Tribunal?
- Court’s Decision: No. The Court held that the taxpayer must be allowed relief, and recovery must be stayed if 10% of the disputed tax is deposited.
- Issue: What is the appropriate percentage of pre-deposit required for such interim protection?
- Court’s Decision: 10% of the disputed amount, as per the amendment effective from 1st November 2024.
- Issue: Is the stay on recovery open-ended?
- Court’s Decision: No. The taxpayer must file the appeal within the time permitted once the Tribunal is constituted.
- Issue: What happens to enforcement actions such as bank account attachments?
- Court’s Decision: If the taxpayer complies with the 10% deposit requirement, any such attachments must be lifted.
Judgments Referred by Parties
- SAJ Food Products Pvt. Ltd. vs. The State of Bihar & Others, CWJC No. 15465 of 2022
Judgments Relied Upon or Cited by Court
- SAJ Food Products Pvt. Ltd. vs. The State of Bihar & Others, CWJC No. 15465 of 2022
Case Title
M/s Jindal Steel vs. The State of Bihar & Others
Case Number
Civil Writ Jurisdiction Case No.192 of 2025
Coram and Names of Judges
Hon’ble Mr. Chief Justice K. Vinod Chandran
Hon’ble Mr. Justice Partha Sarthy
Names of Advocates and who they appeared for
- Mr. Ranjeet Kumar, Advocate — For the Petitioner
- Mr. Santosh Kumar, Advocate — For the Petitioner
- Mr. Kanishk Kaustabh, Advocate — For the Petitioner
- Mr. Ankesh Kumar Sinha, Advocate — For the Petitioner
- Mr. Vikas Kumar, Standing Counsel (11) — For the Respondents
Link to Judgment
e475a2fb-3f33-44aa-aba9-b8d90f4d2c35.pdf
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