A 10% pre-deposit for a GST appeal stays further recovery action.

Issue

Once a taxpayer has made the mandatory 10% pre-deposit of a disputed tax demand in order to file a statutory appeal under Section 107 of the CGST Act, can the tax authorities legally continue to attach or freeze the taxpayer’s bank accounts to recover the balance disputed amount while the appeal is pending?

Facts

A taxpayer, against whom a GST demand was raised, decided to challenge the demand by filing an appeal.
As required by the law, they duly complied with the pre-condition for filing the appeal and deposited 10% of the disputed tax amount as a pre-deposit.
Despite the taxpayer having fulfilled this condition and filed the appeal, the GST authorities continued to attach or restrain the taxpayer’s funds and bank accounts. Their aim was to recover the remaining 90% of the disputed demand even though the matter was now under appeal.
The taxpayer challenged this coercive action in the Andhra Pradesh High Court. The High Court ruled in their favour, holding that the attachment was illegal once the pre-deposit was made.
The Revenue department, not satisfied with the High Court’s judgment, then filed a Special Leave Petition (SLP) in the Supreme Court.

Decision

The Supreme Court dismissed the Revenue Department’s Special Leave Petition (SLP).

This dismissal by the nation’s highest court effectively upholds and gives its final stamp of approval to the judgment of the Andhra Pradesh High Court.
The final and binding legal position is that once a taxpayer makes the mandatory 10% pre-deposit as required under Section 107 of the GST Act, a statutory stay on the recovery of the balance disputed amount automatically comes into effect. The department cannot take any further coercive action, such as attaching bank accounts, for that demand while the appeal is pending.

Key Takeways

A Pre-deposit Triggers an Automatic Stay: The payment of the 10% pre-deposit is not just a procedural fee to file an appeal; it is the legal trigger for an automatic and statutory stay on the recovery of the remaining 90% of the disputed demand. The taxpayer does not need to file a separate application for this stay.
No Further Coercive Action is Permitted: Once the pre-deposit is paid and the appeal is properly filed, the tax department is legally barred from continuing or initiating any coercive recovery measures like freezing bank accounts, attaching other assets, or adjusting refunds against that specific disputed demand.
The Purpose of the Pre-Deposit Provision: The pre-deposit provision in the law is a carefully designed balancing act. It ensures that the government’s interest is partially secured by getting a portion of the disputed tax upfront. At the same time, it protects the taxpayer from the undue hardship of having to pay the full disputed amount before their case has been fairly heard by an independent appellate authority.
This is Now a Settled and Binding Law: The Supreme Court’s dismissal of the department’s SLP on this issue provides clear and binding certainty for all taxpayers and tax authorities across the country. The law is now unambiguously settled.

HIGH COURT OF BOMBAY

Globe Mobility (P.) Ltd.

Union of India

M.S. Sonak and Advait M. Sethna, JJ.

WRIT PETITION NO. 10284 OF 2025

SEPTEMBER 16, 2025

Bharat Raichandani and Dhanistha Kawale for the Petitioner. Ms. S. D. Vyas, Additional G.P and M.M. Pabale, AGP for the Respondent.

ORDER

1. Heard learned Counsel for the parties.

2. The Petitioner challenges the order dated 24 February 2025, passed by the First Appellate Authority. As against this order, the Petitioner has a remedy before the GST Tribunal, which is presently not constituted.

3. Mr. Raichandani submits that since there is no Tribunal constituted, the Petitioner has no other alternate or efficacious remedy. Besides, he submits that the Petitioner has challenged the constitutional validity of Section 16(2)(c) of the CGST Act/MGST Act as violative of Articles 14, 19(1)(g), and 21 of the Constitution of India. He points out that, according to him, the order in the original or even the impugned order contains no findings on the several contentions raised by the Petitioner. He submits that these are good enough reasons for this Court to entertain this Petition.

4. Ms Vyas refers to a Trade Circular dated 13 August 2024, which outlines the guidelines for recovering outstanding dues in cases where the First Appeal has been disposed of until the Appellate Tribunal is constituted and begins functioning. She submits that the Petitioner can simply complete a form in Annexure I, and once this form is submitted, no recoveries will be effected. Additionally, the limitation period for filing an Appeal before the Tribunal will start from the date of its constitution and commencement of operations, which will be communicated to the party/assesee.

5. Ms. Vyas submitted that the constitutional validity of Section 16(2)(c) of the CGST Act/MGST Act has already been upheld by the Gujarat, Kerala, and Patna High Courts and, to the best of her knowledge, there are no decisions of any other High Court striking down this provision. She submitted that the validity is now challenged only as a ploy to defeat the objection about exhaustion of the alternate remedy.

6. Mr Raichandani has submitted that the Petitioner is entitled to succeed in this matter even without going into the issue of the constitutional validity of Section 16(2)(c) of the CGST/MGST Act. The argument about there being no findings, prima facie, does not appeal to us. Therefore, this is not a case where we must deviate from the practice of exhaustion of alternate remedies. Suppose the Petitioner fails in the Appeal, in that case, it will always be open to the Petitioner to challenge the constitutional validity of Section 16(2)(c) of the CGST/MGST Act together with a challenge to the Tribunal’s order. As it is, where a case can be disposed of on a ground not involving a challenge to the constitutional validity of a statutory provision, such a course must be preferred. Therefore, it is not necessary to entertain this Petition at this stage on such a ground.

7. The Trade Circular dated 13 August 2024 substantially protects the Petitioner. The Petitioner had instituted this Petition on 17 April 2025, i.e., within the timeline prescribed for filing the necessary form in terms of the Trade Circular dated 13 August 2024. Therefore, if the Petitioner now files the necessary form prescribed in Annexure-1 to this Trade Circular, we are sure that the Petitioner will secure all the benefits granted by this Circular. This position is also not disputed by Ms. Vyas, the learned Counsel for the Respondents.

8. The required form in Annexure-1 to the Trade Circular must now be submitted within four weeks of uploading this order if the Petitioner wishes to claim the benefits under the said Trade Circular. Once the Tribunal is constituted and begins functioning, the Petitioner will be entitled to appeal the impugned order dated 24 February 2025. If the petitioner’s appeal fails, they retain the liberty to challenge the Constitutional validity.

9. All contentions of all parties on merits are left open to be decided by the Tribunal in accordance with law and on their own merits.

10. With the above liberties, we dispose of this Petition. No costs.