Simplified Explanation of the Judgment

In a significant decision delivered on January 8, 2025, the Patna High Court addressed a pressing concern faced by many taxpayers under the Bihar Goods and Services Tax (BGST) Act. The case involved a taxpayer (petitioner) who was aggrieved by an order passed by tax authorities but was unable to file an appeal before the Appellate Tribunal simply because the Tribunal had not been constituted yet.

The petitioner approached the High Court under Article 226 of the Constitution seeking relief against the enforcement of tax recovery orders. Normally, the law provides for a statutory appeal under Section 112 of the BGST Act to the Goods and Services Tax Tribunal. However, since the Tribunal is not yet functional, the petitioner was left without a remedy.

Earlier, courts had been allowing temporary relief to aggrieved taxpayers by permitting them to deposit 20% of the disputed tax amount and stay recovery proceedings until the Tribunal becomes operational. This practice followed a precedent set in the case SAJ Food Products Pvt. Ltd. vs. State of Bihar.

However, a recent amendment to the Central Goods and Services Tax (CGST) Act reduced this required pre-deposit from 20% to 10%, effective from November 1, 2024. The petitioner in this case requested the court to grant relief in line with the amended provision.

The Patna High Court agreed with the petitioner’s plea and issued directions that effectively protect taxpayers from adverse recovery actions until the Tribunal is set up. The Court recognized that it is unfair for taxpayers to suffer because of the government’s delay in establishing the appellate body.

The judgment grants interim relief by staying recovery proceedings if the petitioner deposits 10% of the disputed tax amount. Additionally, any attachments made to the petitioner’s bank account due to recovery actions are to be lifted once this deposit is made.

However, the Court emphasized that this relief is not open-ended. Once the GST Tribunal is constituted and functional, the petitioner must file a formal appeal under Section 112 of the BGST Act. If the petitioner fails to do so within the time prescribed after the Tribunal becomes operational, the authorities will be free to take further legal steps, including recovery actions.

This ruling aligns with constitutional fairness and helps ensure that taxpayers are not penalized due to the State’s administrative delay in setting up the Tribunal, which is a critical component of the GST dispute resolution system.

Significance or Implication of the Judgment

This judgment has substantial implications for taxpayers across Bihar and possibly other states where the GST Tribunal is not yet functional. It:

• Prevents unjust recovery of taxes from taxpayers who are legally entitled to appeal.
• Provides clarity on the revised 10% pre-deposit requirement.
• Reinforces that citizens cannot be penalized for administrative shortcomings of the State.
• Offers a roadmap for similar litigants who find themselves caught between tax demands and non-functional appellate mechanisms.

The decision underscores judicial sensitivity toward preserving access to justice and upholding taxpayer rights in transitional periods under tax laws.

Legal Issue(s) Decided and the Court’s Decision with Reasoning

• Issue: Whether a taxpayer should be forced to face recovery actions despite being denied the right to appeal due to the non-constitution of the GST Tribunal.
  • Court’s Decision: No. Taxpayers cannot be penalized for the government’s failure to constitute the Tribunal. Interim relief must be provided.
• Issue: Whether the reduced 10% pre-deposit rule (effective from 01.11.2024) applies.
  • Court’s Decision: Yes. The petitioner is allowed to deposit 10% of the disputed tax amount in line with the amended law.
• Issue: Should the relief be indefinite?
  • Court’s Decision: No. The petitioner must file a formal appeal once the Tribunal becomes functional. Failure to do so within the prescribed period would allow authorities to resume proceedings.
• Issue: What about existing recovery actions like bank account attachment?
  • Court’s Decision: If the petitioner pays the 10% deposit, any attachment shall be lifted.

Judgments Referred by Parties

• SAJ Food Products Pvt. Ltd. vs. The State of Bihar & Others, C.W.J.C. No. 15465 of 2022

Judgments Relied Upon or Cited by Court

• SAJ Food Products Pvt. Ltd. vs. The State of Bihar & Others, C.W.J.C. 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 the 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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