Unsigned Orders and Unilateral ECL Debit Invalid; HC Orders Credit Restoration.
Issue
Can the GST department unilaterally debit a taxpayer’s Electronic Credit Ledger (ECL) to recover a demand, especially when the underlying demand orders (DRC-07) are unsigned and legally invalid?
Facts
- The petitioners filed writ petitions challenging both the demand orders (DRC-01 and DRC-07) and the department’s subsequent action of unilaterally debiting their Electronic Credit Ledger (ECL) to recover the demand.
- During the court hearing, it was an admitted fact by both sides that the impugned DRC-01 and DRC-07 were unsigned.
- Crucially, the respondent (department’s counsel) did not dispute the fact of the unilateral debit.
- The department’s counsel further submitted that “there existed no enabling provision” for such an action and that the impugned orders (DRC-01 and DRC-07) could be set aside.
Decision
- The High Court set aside the impugned orders (DRC-01 and DRC-07).
- It directed the respondents to restore (re-credit) the amount that had been unilaterally debited from the petitioner’s Electronic Credit Ledger.
- This restoration was ordered to be completed within fifteen days.
- The department was granted liberty to initiate fresh proceedings against the petitioner, but only “in accordance with law.”
Key Takeaways
- Unsigned Orders are Invalid: The admission by both parties that the orders were unsigned highlights that such documents are legally invalid and cannot be sustained.
- No Unilateral Debit from ECL: The department has no legal power under Section 79 or any other provision to unilaterally debit a taxpayer’s Electronic Credit Ledger to recover a disputed demand. This action is considered illegal.
- Department’s Concession: The department’s own admission in court that there was “no enabling provision” for their action was a critical factor, leading to the case being decided in the assessee’s favor.
- Remedy is Immediate Restoration: When an illegal recovery is made from the ECL, the correct legal remedy is the immediate restoration (re-credit) of the amount to the taxpayer’s ledger.
HIGH COURT OF TELANGANA
Sri Matha Agencies
v.
Assistant Commissioner State Tax
Sujoy Paul, ACJ.
and SMT. RENUKA YARA, J.
and SMT. RENUKA YARA, J.
WP No. 35612 OF 2024
JULY 14, 2025
Karthik Ramana Puttamreddy, Adv. for the Petitioner.
ORDER
1. Sri Karthik Ramana Puttamreddy, learned counsel for the petitioners and Sri Swaroop Oorilla, learned Special Government Pleader for State Tax, for the respondents.
2. Both the writ petitions are taken up for analogues hearing and with the consent of the learned counsel for the parties, heard finally.
3. During the course of hearing, learned counsel for the parties fairly and jointly admitted that the impugned documents DRC-01 and DRC-07 are unsigned documents. In addition, it is not disputed by learned Special Government Pleader for State Tax that some amount from petitioners’ electronic credit ledger has been unilaterally debited and since there exists no such enabling provision, the impugned orders may be set aside. The amount so unilaterally debited be directed to be restored by reserving liberty to the revenue to take appropriate action against the petitioners in accordance with law.
4. In the light of the aforesaid, the impugned unsigned orders are set aside in view of the common order passed in Bigleap Technologies and Solutions Pvt Ltd. v. State of Telangana [WRIT PETITION No. 21101 of 2024, dated 28-2-2025]. The amount unilaterally debited from the petitioners’ electronic credit ledger be restored within fifteen days. Liberty is reserved to the respondents to proceed against the petitioners in accordance with law.
5. Accordingly, the writ petitions are disposed of without expressing any opinion on the merits of the case. No order as to costs.
Miscellaneous petitions pending, if any, shall stand closed.