HC Upholds Recovery of GST Dues by Debiting Electronic Credit Ledger.

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?

Facts

An assessment order was passed against the petitioner, determining a final GST demand and allowing 30 days for payment.
The petitioner failed to pay the amount within this period.
The department initiated recovery proceedings and recovered a part of the assessed dues by debiting the petitioner’s Electronic Credit Ledger (ECL).
After this recovery, the petitioner filed a statutory appeal against the assessment order.
The petitioner filed a writ petition challenging the department’s right to recover assessed dues by debiting the ECL, asserting that the ECL could not be appropriated in this manner.

Decision

The High Court dismissed the writ petition and ruled decisively in favour of the revenue.
It held that Section 79(1)(a) of the CGST Act authorizes the proper officer to recover payable amounts from “any money owing to” the taxable person.
The court found that the balance available in the Electronic Credit Ledger (ECL) is, in effect, “money owing to” the taxable person and can be used for such recovery.
Since the recovery was effected after the payment deadline had expired and before any appeal was filed (and thus no stay was in operation), the department’s action was neither perverse nor illegal.

Key Takeaways

ECL is Not Immune from Recovery: The Electronic Credit Ledger is not a protected fund. It is considered money available to the taxpayer and is, therefore, available to the department for recovery of confirmed, unpaid tax dues.
Section 79(1)(a) is a Broad Power: The phrase “any money owing to” is interpreted broadly to include the credit balance in the ECL.
Timing of Appeal is Critical: The department was well within its rights to initiate recovery as the taxpayer had neither paid the demand nor filed an appeal within the 30-day window. Had an appeal been filed with the 10% pre-deposit, a statutory stay would have been in effect, preventing such recovery.
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 once a demand becomes payable.

HIGH COURT OF CHHATTISGARH

Shivam Metallurgicals (P.) Ltd.

Assistant Commissioner

Naresh Kumar Chandravanshi, J.

WPT No. 139 of 2025

OCTOBER 6, 2025a

Palash Soni, Adv. for the Petitioner. Ms. Anuradha Jain, Panel Lawyer for the Respondent.

ORDER

1. Heard.

2. This petition has been preferred by the petitioner under Article 226/227 of the Constitution of India seeking following reliefs:-

“a. That, this Hon’ble Court may kindly be pleased to allow the present writ petition.

b. That, this Hon’ble court may kindly be pleased to issue writ/Order/Direction to respondents thereby holding the impugned action of recovery through Electronic Credit Ledger by Respondent no. 1 in Annexure-P/7 as without authority of law & bad in law and/or in violation of fundamental rights and/or in violation of principles of natural justice and quash / set aside the same.

c. That, this Hon’ble court may kindly be pleased to issue writ/Order/Direction to respondents to refund the amount recovered through Electronic Credit Ledger amounting to SGST-Rs 2,87,914/- along with interest.

d. That, this Hon’ble court may kindly be pleased to issue writ/Order/Direction to call for records of the case.

e. That, this Hon’ble Court may kindly be pleased to Award costs of this writ petition in favor of the Petitioner.

f. That, to issue order/s, direction/s, writ/s or any other relief/s as this Hon’ble Court deems fit and proper considering the facts and circumstances of the present case and in the interest of justice.”

3. Learned counsel for the petitioner would submit that vide order dated 25.02.2025 (Annexure-P/3), assessment order against the petitioner for payment of GST payable by him, was passed by the Assistant Commissioner, State Tax Raipur, Circle-9, Raipur (CG), whereby recovery order of Rs. 10,32,672/- was passed against him. Vide that order, the petitioner was directed to pay aforesaid amount within a period of 30 days from the date of order, but that amount was not paid by the petitioner, therefore, amount of Rs.2,87,914/- has been deducted from his Electronic Credit Ledger without any authority, hence, he submits that this petition may be admitted for hearing.

4. Per contra, learned counsel appearing for State/respondents would submit that Section 79 (1) (a) of the Central Goods and Services Tax Act, 2017 (henceforth referred to as “the Act, 2017”) entitled respondent No.1 to recover amount payable by any person from any money owing to such person. Since despite serving assessment order dated 25.02.2025 (Annexure-P/3), the petitioner did not deposit the amount of Rs.10,32,672/- payable by him, therefore, Rs.2,87,914/- was recovered from his Electronic Credit Ledger. She would further submit that objection was raised by the petitioner by filing rectification application to rectify the order dated 25.02.2025, which was rejected by respondent No.1, thereafter, the petitioner has also filed appeal challenging the impugned order (Annexure-P/3) before the Appellate Authority, but prior to filing appeal, recovery of aforesaid amount was made from Electronic Credit Ledger of the petitioner, therefore, she submitted that this petition does not deserve to be admitted.

5. I have heard learned counsel for the parties and perused the material available on record.

6. Section 79 (1) (a) of the Act, 2017 provides as under:-

“79. Recovery of tax – (1) Where any amount payable by a person to the Government under any of the provisions of this Act or the rules made thereunder is not paid, the proper officer shall proceed to recover the amount by one or more of the following modes, namely:—

(a) the proper officer may deduct or may require any other specified officer to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other specified officer;”

7. Perusal of aforesaid provision specifically shows that if any amount is payable by a person to the Government under the aforesaid Act or Rules, the proper officer shall proceed to recover the amount from any money owing to such person.

8. In instant case, vide order dated 25.02.2025 (Annexure-P/3), assessment order was passed by respondent No.1 wherein Rs.10,32,672/- is calculated to be paid by the petitioner as outstanding demand. In that order, 30 days’ time was granted to the petitioner to pay the aforesaid amount, but since he did not pay the amount within specified period, therefore, an amount of Rs. 2,87,914/- has been recovered from his Electronic Credit Ledger under the Authority of provision of Section 79 (1)(a) of the Act, 2017. Respondent No.2 is very much entitled to make such recovery under the aforesaid provision.

9. Though it is said that the petitioner had filed application for rectification, but the same was rejected vide Annexure-P/5 dated 06.08.2025. It is also submitted that the petitioner has challenged the order (Annexure-P/3) by filing appeal on 14.08.2025, but as per the Electronic Credit Ledger, amount of Rs.2,87,914/- was recovered from his Electronic Credit Ledger on 19.06.2025 i.e. prior to filing appeal. Since no stay order was passed in respect of the impugned order (Annexure-P/3) after filing rectification application, which was ultimately rejected, therefore, recovery of the said amount from Electronic Credit Ledger is not found to be perverse and illegal.

10. In view of the above discussion, I do not find any good ground to admit this petition, hence the same is dismissed at motion stage.

11. Pending IA(s), if any, stands disposed of.

12. Parties shall bear their own cost(s).