Refund of Excess Recovery: High Court Orders Refund of Amounts Recovered in Excess of Statutory Pre-Deposit (30%); Recovery Proceedings Deemed Stayed on Payment of Pre-Deposit

ISSUE

Whether the GST Authorities are entitled to retain the entire tax amount recovered from an assessee during the pendency of an appeal, or if they are obligated to refund any amount that exceeds the mandatory pre-deposit (10% for First Appeal + 20% for Tribunal) required by the statute to stay recovery.

FACTS

The Recovery: The GST Authority recovered the entire tax determined by the adjudication order from the petitioner.
The Excess: The petitioner contended that the amount recovered was far in excess of the statutory pre-deposit required to file appeals.
The Argument: Under Section 107(6), an appellant must deposit 10% of the disputed tax to file the first appeal. Under Section 112(8), to appeal to the Tribunal, an additional 20% of the remaining disputed tax is required.
The Stay: The petitioner argued that once these amounts are paid (cumulatively approx. 30%), the law mandates that recovery proceedings for the balance amount are deemed to be stayed. Therefore, the Department cannot hold onto the remaining 70%.

HELD

Statutory Cap: The High Court held that an appellant is only required to put in a pre-deposit of:
1. 10% of the disputed tax before the Appellate Authority (Section 107(6)).
2. 20% of the remaining disputed tax before the Appellate Tribunal (Section 112(8)), in addition to the amount already paid.
Deemed Stay: Upon making these pre-deposits, Section 112(9) explicitly states that recovery proceedings for the balance amount shall be deemed to be stayed.
Illegal Retention: Consequently, the GST Authority could not proceed to recover (or retain) any sum in excess of these cumulative pre-deposit amounts. Retaining the full tax amount when the statute only requires a partial deposit to trigger a stay is legally unsustainable.
Verdict: The Authorities were directed to refund to the petitioners any sum recovered in excess of the sum required to be deposited. [In Favour of Assessee]

KEY TAKEAWAYS

The 30% Rule: To fight a GST case all the way to the Tribunal, you effectively need to deposit 30% of the disputed tax (10% at Level 1 + 20% at Level 2). Once this is done, the Department cannot touch the remaining 70%.
Refund of Coercive Recovery: If the Department recovered 100% of the demand (e.g., by freezing bank accounts) before you could file your appeal, you can file a writ petition citing this judgment to get a refund of the 70% excess. You do not have to wait for the final case verdict to get this money back.
Deemed Stay is Automatic: The moment the pre-deposit is paid, the stay is automatic. The officer does not need to pass a separate “Stay Order.”

HIGH COURT OF CALCUTTA

Vidya Trading Co.

Senior Joint Commissioner of State Tax Kolkata North Circle^*

Om Narayan Rai, J.

W.P.A. No. 20695 of 2025

NOVEMBER 24, 2025

Anil Kumar Dugar for the Petitioner. Tanoy Chakraborty, Ms. Sumita Shaw, Saptak Sanyal, Rajesh Kumar Shah, Ms. Manasi Mukherjee and Anurag Roy for the Respondent.

ORDER

1. As prayed for, the Central GST Authorities may be added as parties to the writ petition. A copy of the writ petition may be served upon the added respondents within a week from date.

2. Mr. Anurag Roy who usually appears on behalf of the CGST authorities submits that he has instruction to appear in this matter. In such view of the matter service may be effected upon Mr. Roy.

3. Since notifications issued by the Central Board of Indirect Taxes and Customs and by the State Government have also been challenged in the writ petition, a notice of this writ petition may also be served upon the learned Attorney General and the learned Advocate General.

4. The petitioners are aggrieved by an order dated March 12, 2025 passed by the Appellate Authority under Section 107 of the WBGST Act, 2017 / CGST Act, 2017 (hereafter the said Act of 2017) whereby the petitioners’ appeal against the order dated December 27, 2023 passed under Section 73 of the said Act of 2017 has been dismissed.

5. Mr. Dugar, learned advocate appearing for the petitioners submits that the adjudicating proceeding itself is barred by limitation inasmuch as notification no. 9/2023-Central Tax dated March 31, 2023 issued by the Central Board of Indirect Taxes and Customs and notification no.599-F.T. dated April 12, 2023 issued by the Department of Finance, State of West Bengal, on the strength whereof the said proceeding has been initiated, have been issued in violation of the provisions of Section 168A of the said Act of 2017. It is submitted that the provisions of Section 168A of the said Act of 2017 can be invoked only in case of a force majeure situation and the said notifications have been issued without there being any force majeure situation. It is submitted that since the condition precedent for invoking the provisions of Section 168A of the said Act of 2017 is absent, the said two notifications are ultra vires the provisions of Section 168A of the said Act of 2017 and should be quashed.

6. It is further submitted that the appellate order impugned in the writ petition is erroneous on various other grounds as well. Mr. Dugar further submits that although the order impugned herein is appealable under Section 112 of the said Act of 2017 yet since the Tribunal before which such appeal could be carried has not yet become confessional, therefore the petitioners have no avenue to assail the said order.

7. In view of the aforesaid facts, this writ petition is entertained.

8. Learned advocate appearing for the petitioners further submits that the respondent GST authorities have gone ahead and recovered the entire tax determined by the said authorities by order dated December 27, 2023 that was affirmed by the order impugned herein despite the fact that time to prefer appeal before the Appellate Tribunal is still there in terms of a notification dated September 17, 2025 issued by the Government of India. It is submitted that in terms of the said notification, the petitioners would be entitled to file an appeal against the Appellate Authority’s order passed under Section 107 of the said Act of 2017 till June 30, 2026 and that in such view of the matter the excess amount recovered should be refunded to the petitioners. In support of his submissions, he relies upon the following judgments.

AEW Technologies LLP v. Asstt. Commissioner of Revenue, Bureau of Investigation GST 781/77 GSTL 176 (Calcutta)

ii.

Supreme Infotrade (P.) Ltd. v. Assistant Commissioner of State Tax GST 484/102 GSTL 53 (Calcutta)/WPA 11681 of 2025 dated 06.08.2025

9. Having heard the learned counsel appearing for the respective parties and having considered the material on record, this Court is of the view that since an appellant before the first appellate authority under Section 107 of the said Act of 2017 is only required to put in a pre-deposit equivalent to 10 per cent of the tax in dispute in terms of Section 107(6) of the said Act of 2017 and an appellant before the Tribunal is required to put in 10 per cent of the remaining amount of tax in dispute (in addition to the amount paid) under Section 107(6) of the said Act of 2017 in terms of the provisions of Section 112(8) of the said Act of 2017 and since upon aforesaid pre-deposits being made in terms of Sections 107(6) and 112(8) of the said Act of 2017, recovery proceedings for the balance amount is deemed to have been stayed, therefore the respondent GST authority could not have proceeded to recover the sum in excess of the cumulative sums (amounts) required to be deposited by an appellant before the said two authorities in terms of Section 107(6) and Section 112(8) of the said Act of 2017.

10. In such view of the matter the authorities shall refund to the petitioners any sum that they may have recovered in excess of the sum that was required to be deposited by the petitioners in terms of Section 107(6) and Section 112(8) of the said Act of 2017 by re-crediting the same to the petitioner no.1’s electronic credit ledger within a period of two weeks from the date of communication of this order.

11. As prayed for by Mr. Chakraborty, let affidavit-of-opposition be filed within four weeks from date. The petitioners shall be at liberty to file affidavit-in-reply, if any, within one week thereafter.

12. List this writ petition for hearing immediately after filing of the same.