Tax Vista

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Edn. 285 - 13th July 2026

Kasi Viswanathan V

Before Recovery comes Rule 88C

The Explanation to Section 75(12) was brought into force only from 01.01.2022. The present case involved differences pertaining to April to September 2021. While the dispute appeared to centre on the applicability of the Explanation, the High Court ultimately decided the matter on a different aspect altogether. Recovery under the Explanation to section 75(12) may dispense with adjudication, but the statutory setting within which it operates still envisages an opportunity before recovery.

An email pointing out the discrepancy had been sent on 25.04.2024. Thereafter, the Department nevertheless proceeded to recover the amount by issuing garnishee notice in Form GST DRC-13 dated 06.11.2025. The petitioner relied upon Instruction No. 01/2022-GST dated 07.01.2022, which itself records that the Explanation to Section 75(12) was inserted with effect from 01.01.2022. The Revenue, however, contended that the Explanation was merely clarificatory and therefore applicable even to the earlier period.

The High Court observed that the Explanation did not impose any additional liability beyond what otherwise arose because of the mismatch between GSTR-1 and GSTR-3B. It, however, noticed that the procedure prescribed under Rule 88C had not been followed. Since the petitioner had not been issued the prescribed intimation in Form GST DRC-01B, the recovery proceedings were set aside with liberty to the Department to proceed afresh after complying with Rule 88C.

An important aspect of the decision is its emphasis on Rule 88C. Immediately after the Explanation to section 75(12) was brought into force, Instruction No. 01/2022-GST itself envisaged an opportunity to the registered person before recovery. That procedural safeguard was subsequently codified through Rule 88C. While the judgment does not clearly indicate the extent of opportunity afforded through the email dated 25.04.2024, once Rule 88C had come into force, insistence on following the prescribed procedure before initiating recovery can hardly be doubted.

Readers may recall the discussion in the 281st edition of TaxVista, "Are Liabilities Reported in GSTR-1 Self-Assessed Tax?". The emphasis there was that recovery under Section 75(12) does not operate in isolation. Rule 88C introduces a structured process requiring the taxpayer to either pay the differential tax or explain the mismatch before recovery under Section 79 is initiated. The present decision reiterates the same procedural discipline.

The question regarding applicability of the Explanation to periods prior to 01.01.2022, however, remains unanswered. While the Court observed that the Explanation does not create any additional liability, it did not directly deal with whether the provision, though brought into force from 01.01.2022, could nevertheless apply to an earlier period. Instruction No. 01/2022-GST certainly supports prospective operation. Equally, the discussions before the 39th GST Council while proposing the amendment reveal that the proposal was influenced by the decision in Kabeer Reality Private Limited [2019-VIL-584-MP] and the then existing section 43A(5). These background materials also deserve attention while examining the issue.

The controversy regarding the applicability of the Explanation to earlier periods may therefore await another day. What the present decision makes clear is that, once Rule 88C became part of the statutory framework, recovery based on differences between GSTR-1 and GSTR-3B cannot bypass the opportunity contemplated therein before proceeding under Section 79 [Re: 2026-VIL-666-TEL]

Assessment Deemed Withdrawn: Why the Writ?

Section 62 provides for best judgment assessment where returns are not furnished. Equally, the statute itself provides a way out. Once the pending return is furnished within the prescribed time together with applicable interest and late fee, the assessment is deemed to be withdrawn. Yet, as the present case shows, taxpayers may still have to approach the High Court to give effect to that statutory consequence.

The petitioner had failed to furnish GSTR-3B for the month of January 2024. A notice under Section 46 was issued on 20.04.2024, followed by a best judgment assessment under Section 62 on 20.06.2024. The pending return was furnished on 24.07.2024 along with applicable interest and late fee. The petitioner contended that once the return had been filed, the assessment stood deemed to have been withdrawn under Section 62(2) and consequently the demand raised therein could no longer be insisted upon.

The High Court referred to its earlier decision in Brothers Engineering [2025-VIL-1383-AP], which had followed the Madras High Court decision in Helmet House [2024-VIL-1566-MAD], and held that the benefit of Section 62(2) had to be extended to the petitioner. Accordingly, the assessment was treated as deemed to have been withdrawn and assessment order was set aside.

The present case stands on a slightly different footing. It relates to a tax period after the amendment extending the period from thirty to sixty days had come into force. Since the return was furnished within the prescribed sixty days, the deeming fiction under Section 62(2) applied without any difficulty. The decision, therefore, is a straightforward application of the amended timeline, unlike the decisions relied upon, which arose in relation to periods prior to the amendment.

The order does not indicate whether recovery proceedings had actually commenced. Since no recovery action is recorded in the proceedings, it appears that the petitioner approached the High Court because the demand under the assessment order continued to be insisted upon even after the return had been furnished, apprehending that recovery would follow. Once Section 62(2) came into operation, the assessment itself ceased to exist in the eye of law. Ordinarily, there would be no basis to continue recovery founded on such an assessment.

One aspect deserves mention. While the judgment records that the notice under section 46 was issued on 20.04.2024 and the assessment order under section 62 on 20.06.2024, both the recording of the petitioner's submissions and the operative portion refer to the assessment order as dated 20.04.2024. This appears to be an inadvertent reference to the date of the notice instead of the assessment order.

The issue is less about interpreting section 62(2) and more about giving effect to what the provision itself declares. Once the return is furnished within the prescribed period together with applicable interest and late fee, the statute itself withdraws the assessment. If the GSTN portal could automatically reflect this consequence, or generate an alert to the proper officer for withdrawal of the demand reflected in the portal, it would benefit both taxpayers and the authorities by reducing avoidable litigation. [Re: 2026-VIL-661-AP]

[Read previous edition dated 06.07.2026]

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