Recovery from Electronic Credit Ledger upheld as sec. 79(1)(a) authorises recovery.

Issue

Can the GST department, under Section 79 of the CGST Act, legally recover confirmed tax dues by debiting the amount from the taxpayer’s Electronic Credit Ledger (ECL) if the taxpayer fails to pay the demand within the stipulated time and before a statutory appeal is filed?

Facts

• An assessment order was passed against the petitioner, determining a final GST demand and granting 30 days for payment.
• The petitioner failed to pay the amount within the stipulated period.
• The department initiated recovery proceedings and recovered part of the assessed dues by debiting the petitioner’s Electronic Credit Ledger (ECL).
• The recovery action (debiting the ECL) occurred before the petitioner filed a statutory appeal and, consequently, before any automatic stay was in effect.
• The petitioner filed a writ petition, challenging the department’s legal authority to appropriate funds from the ECL for recovery of dues.

Decision

• The High Court dismissed the writ petition at the admission stage.
• It held that the department’s action was legally permissible and neither illegal nor perverse.
• The court ruled that Section 79(1)(a) of the CGST Act empowers the department to recover dues from “any money owing to” the taxable person.
• It was held that the credit balance available in the taxpayer’s Electronic Credit Ledger (ECL) falls within the definition of “money owing” and can be attached for recovery.
• Since the recovery was made lawfully—after the payment deadline had expired and in the absence of any stay on the assessment order—the court found no reason to interfere.

Key Takeaways

• ECL is Not Immune from Recovery: The Electronic Credit Ledger is not a protected fund. The tax department can legally recover confirmed, unpaid tax demands from the balance in the ECL.
• “Money Owing” is Broadly Defined: The court has interpreted “any money owing to” the taxable person under Section 79(1)(a) to include the balance in the ECL.
• Timing of Appeal is Critical: This case underscores the importance of filing an appeal (with the mandatory pre-deposit) within the stipulated time. Had the appeal been filed, an automatic stay on recovery would have been in effect, preventing the department from debiting the ECL.
• No Stay, No Bar on Recovery: In the absence of a stay order (either statutory from filing an appeal or specific from a court), the department is free to use all modes of recovery under Section 79 as soon as a demand becomes payable.