Tax Vista

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Edn. 277 - 2nd March 2026

Kasi Viswanathan V

HC re-directs challenge to recovery notice to GSTAT

An appeal was filed before GSTAT on 05.02.2026. An intimation notice dated 03.02.2026, followed by a recovery notice dated 06.02.2026.

In the present matter, the petitioner, a banking company, filed a writ petition seeking quashing of the intimation and recovery notice as being without authority of law and in contravention of Section 112(9) and/or Section 75(12) of the CGST Act.

The Revenue's response was straightforward. An efficacious alternate remedy before the Tribunal was available, including the power to grant interim protection. It was further contended that in terms of Section 112(9), the question of deemed stay could also be urged before the Tribunal.

The petitioner, however, contended that there is no express provision empowering the Tribunal to grant interim stay of recovery proceedings and, in that absence, the remedy before the Tribunal could not be treated as efficacious. Therefore, it was argued that they were constrained to approach Writ Court.

The High Court examined Sections 111, 112 and 113 of CGST Act 2017 conjointly and held that the power to grant interim relief is inherent and incidental to the appellate jurisdiction conferred on the Tribunal. The Court referred to Rules 10, 29, 49 and 59 of the Goods and Services Tax Appellate Tribunal (Procedure) Rules, 2025, noting that the procedural framework recognises inherent powers to pass orders to meet ends of justice and enables filing and disposal of interlocutory applications.

It observed that accepting the proposition that the Tribunal is powerless to grant interim protection would render the appellate remedy illusory. The consequence of such an argument, as the Court explained, would be that while the Tribunal could ultimately set aside the impugned order, the authority to grant interim protection would vest only with the High Court under Article 226. That construction, in the Court's view, would not align with the legislative scheme.

The writ petition was therefore disposed of with liberty to the petitioner to file an interim application before the Tribunal within two weeks. Since the electronic portal had not enabled online filing of interim applications, manual filing was permitted. Coercive recovery was restrained for a limited period till disposal of the application by the Tribunal.

At one level, the recognition of the Tribunal's incidental powers is welcome. However, the context in which this principle was applied, namely in relation to statutory stay, requires a re-look.

The petitioner had filed its appeal well within time. The recovery notice was issued on 06.02.2026, one day after the appeal was filed. The records do not clearly indicate whether this recovery action was taken after taking cognizance of the appeal. In terms of Section 112(9), once the prescribed pre-deposit is made, recovery of the balance amount stands stayed by operation of law. No separate stay or injunction is contemplated by the statute. The matter itself was e-filed before the High Court as early as 07.02.2026.

The real question, therefore, was not whether the Tribunal is an efficacious alternate remedy. It was whether, once an appeal is filed and the statutory pre-deposit conditions are met, recovery of the balance demand is automatically stayed by operation of law. If the statute itself grants a deemed stay upon compliance with fixed pre-deposit, any recovery action contrary to that statutory consequence would lack jurisdiction. Action taken in disregard of a statutory bar on recovery raises a jurisdictional issue. Such questions have traditionally justified invocation of writ jurisdiction. The fact that the main appeal is before the Tribunal has no bearing on recovery proceedings that the statute deems stayed. In that situation, there is no alternate remedy because there is no recoverable demand once Section 112(9) operates.

With the introduction of mandatory pre-deposits under GST, the stay by the Tribunal would primarily relate to stay of the operation of the impugned order for other consequences. Insofar as recovery of the balance demand is concerned, the statute itself defines the condition and the consequence.

The conflict becomes clear if one poses a simple hypothetical. Can the Tribunal, in exercise of its incidental or inherent powers, direct a lower pre-deposit than what the statute mandates? The answer would be an emphatic no. The Tribunal cannot dilute a statutory condition. If that is so, the converse also merits attention. Once the statutory condition is fulfilled and the statute itself grants a stay of recovery, where is the requirement of seeking interim protection before the Tribunal? If the stay flows automatically from the statute, there is nothing left for the Tribunal to grant in respect of recovery. [2026-VIL-209-BOM]

Natural Justice - Uniform to Taxpayer and Department

In a customs matter, the first appellate authority had set aside the demands confirmed against the taxpayer. The Department carried the matter in appeal before the Tribunal on the ground that it had been denied proper opportunity of personal hearing. Though an intimation of personal hearing had been issued, no online link was provided to enable participation in the virtual hearing.

The Tribunal examined the appellate order, which recorded that letters were sent to both the taxpayer (Respondent) and the Department (Appellant) for personal hearing, but no representative from the Department appeared. It was further observed that the representative of the Department could have presented their side by appearing. The Department's grievance, however, was that in the context of virtual hearings, mere issuance of an intimation without facilitation of access did not amount to a meaningful opportunity of being heard.

The Tribunal also referred to Section 128(1A) of the Customs Act, dealing with adjournments. This provision uses the expression 'any of them', clearly indicating that the right is vested not only in the private party but equally in the Department. On that basis, the Tribunal set aside the appellate order and remanded the matter to the Commissioner (Appeals) for de novo consideration after providing due opportunity of hearing to both sides.

At one level, the ruling is unexceptionable. Natural justice is not confined to the taxpayer. The principle applies uniformly to both parties.

The record indicates that intimation of personal hearing was issued, though the number of such occasions is not clear. Ordinarily, such intimation letters call upon the party to furnish details of the authorised representative, proof/supporting thereof, and the email address for sharing the online link. In the case of the Department, the identity of the representative and official communication channels are generally known or readily ascertainable.

The order does not record whether the Department responded to the intimation or sought the link for joining the virtual hearing. The absence of any enquiry or articulated test as to whether a party must demonstrate follow-up efforts suggests that, in the Tribunal's view, non-facilitation of access alone, particularly in the absence of disclosure regarding the number of hearing opportunities granted, was sufficient to constitute a violation of the principles of natural justice. It is this aspect that may assume significance in appropriate cases for taxpayers as well. [2026-VIL-370-CESTAT-HYD-CU]

Read previous edition dated 23/02/2026

(The views expressed are personal. The author can be reached for feedback or queries on v.k.vishwa@gmail.com)