Mandatory Refund of Recovered Tax Dues Beyond Pre-Deposit Where GST Tribunal Is Not Operational

1. The Core Dispute: Recovery vs. Right to Appeal

The petitioner’s tax dues were recovered by the Revenue department following a “Summary of Demand” (Annexure-C). The petitioner intended to challenge this order before the GST Appellate Tribunal (GSTAT) under Section 112, but could not do so because the Tribunal had not yet been constituted.

Assessee’s Stand: Relying on Circular No. 224/18/2024-GST, the petitioner argued that once an intimation/declaration of intent to appeal is filed, the Revenue cannot proceed with recovery beyond the statutory pre-deposit.
Revenue’s Stand: The amount was recovered through statutory powers as the appeal was not technically “filed” (since the forum didn’t exist).

2. Legal Analysis: Protection Under Circular 224/18/2024

The court examined the specific relief provided by the CBIC to address the “limbo” caused by the delay in setting up Tribunals.

I. Guidelines for Stay on Recovery

Circular No. 224/18/2024-GST clarifies the procedure for taxpayers to stay recovery in the absence of a functional Tribunal:

Declaration of Intent: The taxpayer must file an undertaking/declaration with the jurisdictional officer stating their intention to file an appeal once the GSTAT is operational.
Payment of Pre-Deposit: An amount equal to the required pre-deposit (typically 20% of the disputed tax) should be paid through the Electronic Liability Register (ELL) Part-II or via Form GST DRC-03A.
Deemed Stay: Upon satisfying these conditions, recovery for the balance 80% is deemed to be stayed as per Section 112(9).

II. Sufficient Compliance

The court noted that the petitioner had furnished an intimation (Annexure-D) within seven days of the recovery, signifying their intent. The court held this as “sufficient compliance” with the spirit of the Circular.

3. Final Ruling: Direction to Refund

The High Court allowed the writ petition, emphasizing that the lack of judicial infrastructure (GSTAT) should not lead to the deprivation of a taxpayer’s right to a stay.

Verdict: The Revenue was directed to refund the balance amount recovered from the petitioner.
Withholding Provision: To protect the interests of the Revenue, the department was permitted to withhold the statutory pre-deposit (the amount that would have been paid at the time of filing the appeal).
No Interest: Since the petitioner voluntarily waived interest to expedite the refund, the court ordered the refund without any interest component.

Key Takeaways for Taxpayers

Declaration is Crucial: If you intend to appeal to the GSTAT, immediately file the “Declaration of Intent” with your jurisdictional officer to block recovery attempts.
Pre-Deposit Verification: Ensure the 20% pre-deposit is paid via the approved modes (ELL Part-II or DRC-03A) to invoke the automatic stay under Section 112(9).
Refund Precedent: If the department has already recovered the full amount during this “tribunal-less” period, you can cite this Karnataka High Court ruling and the 2024 Circular to demand a refund of the excess 80%.

HIGH COURT OF KARNATAKA

Divyasree Tarbus Builders (P.) Ltd.

Deputy Commissioner of Commercial Taxes^*

S Sunil Dutt Yadav, J.

WRIT PETITION NO. 39323 OF 2025 (T-RES)

JANUARY 21, 2026

P B Harish, Adv. for the Petitioner. Smt. Jyothi M Maradi, HCGP for the Respondent.

ORDER

1. Petitioner has sought for issuance of writ of mandamus to direct respondent no. 1 to sanction refund as sought by the petitioner as per the letter dated 13.11.2025 at Annexure-J.

2. It is submitted that the order of the appellate authority was sought to be challenged under Section 112 of the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’) and in light of non-constitution of the Tribunal and in terms of the Circular No.224/18/2024-GST, the question of recovery ought not to have been resorted to. It is submitted that in terms of para 6 of the circular, once there is a declaration to file appeal, recovery proceedings ought not to be initiated. It is submitted that in the present case without reference to the benefit granted under para 6 of the Circular, amount due pursuant to the summary of demand as per Annexure-C has been recovered in its entirety. Accordingly, petitioner has sought for refund.

3. Learned High Court Government Pleader would vehemently submit that the petitioner has not made request to the proper officer as per the circular. Further, it is submitted that the assessing officer has rightly recovered the amount. It is also submitted that the question of payment of interest would not arise as the assessee has not complied with Para No.6 of the Circular. Learned HCGP would further point out that even otherwise, question of extending benefit in terms of para 6 would be subject to payment of amount of pre-deposit as contemplated under Section 112 of the CGST Act.

4. Para 6 of the circular reads as follows:

“In case, the taxpayer does not make the payment of the amount equal to amount of predeposit or does not provide the undertaking / declaration to the proper officer, then it will be presumed that taxpayer is not willing to file appeal against the order of the appellate authority and in such cases, recovery proceedings can be initiated as per the provisions of law. Similarly, when the Tribunal comes into operation, if the taxperyer does not file appeal within the timelines specified in Section 112 of the CGST Act read with Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 dated 03.12.2019, the remaining amount of the demand will be recovered as per the provisions of law.”

5. It is to be noticed that Para No.6 of the circular does provide for refund in the event the assessee furnishes an undertaking to file an appeal and upon filing of such appeal, recovery proceedings are not to be initiated.

6. In light of the submission of the petitioner that for the present he is willing to forego refund with respect to the pre-deposit amount and would not insist for interest at present, it would be appropriate to direct the revenue to refund the amount recovered pursuant to Annexure C after withholding the pre-deposit amount as contemplated under Section 112 of the CGST Act.

7. Though the petitioner would contend that the tax liability cannot be enforced by way of recovery by virtue of Para No.6 of the Circular, learned HCGP would contend that for the circular to be made applicable, two preconditions that required to be fulfilled are that (i) the taxpayer must make a deposit of an amount of pre-deposit as contemplated under Section 112 of the CGST Act and (ii) must provide an undertaking to the proper officer. It is only when these two conditions are fulfilled, the condition in para No.6 would come into play.

8. Learned counsel for the petitioner submits that the undertaking has been furnished to the appellate authority and the Court may take a lenient view keeping in view the objective of the circular.

9. Learned HCGP would insist that the declaration unless made to a proper officer, benefit of the circular cannot be extended. However, she submits that in the peculiar facts of the case, the Court may pass an appropriate order taking note of the assertion of the petitioner while clarifying that the order passed in the present case may not be taken to be a position of law as regards interpretation of para No.6 of the circular.

10. Taking note of the submissions made by both sides, it is not in dispute that the petitioner has furnished an intimation to the appellate authority as per Annexure-D within a period of 7 days from the communication of summary of demand at Annexure-C. Insofar as the question of pre-deposit, though certain contentions have been raised, petitioner submits that keeping open the legal question of requirement of pre-deposit, in the present case he would concede for the amount of pre-deposit to be retained with the revenue and would accept an order whereby the remaining amount is refunded.

11. Taking note of the facts as well as the contents of Annexure-D, it would be appropriate to dispose of the writ petition by treating the intimation at Annexure-D to be sufficient for the purpose of para No.6 in the peculiar facts of the present case.

12. Accordingly, the respondent – Authorities are directed to refund the amount recovered pursuant to summary of demand at Annexure-C after withholding the pre-deposit amount as contemplated under Section 112 of the CGST Act. It is clarified that insofar as the amount directed to be refunded, petitioner foregoes the claim of any interest on the same. Such refund to be made within a period of 4 weeks from the date of receipt of certified copy of this order.

13. The writ petition is accordingly allowed. All legal contentions are kept open.