Tax Recovered Pursuant to a Withdrawn Assessment Order Must Be Verified and Promptly Refunded
Issue
Whether the revenue department is legally obligated to refund tax amounts recovered from an assessee if the underlying assessment order is subsequently withdrawn by the department.
Facts
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The petitioner was assessed for the tax period 2019-20 by the Deputy/Assistant Commissioner of State Tax, Purnea Circle, via an assessment order dated January 12, 2021.
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Pursuant to the initial assessment proceedings, the revenue department successfully executed recovery actions and collected tax amounts from the petitioner.
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The petitioner subsequently invoked the writ jurisdiction of the High Court to challenge the retention of the recovered money, asserting that the department had officially withdrawn the original assessment order.
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The petitioner sought a direct intervention to compel the respondents to return the recovered funds following the collapse of the assessment order.
Decision
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Held, yes: If the petitioner’s assertion regarding the official withdrawal of the assessment order is factually correct, the respondents are legally required to refund the recovered amount.
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Held, yes: The direction to issue the refund is made strictly conditional upon the physical verification of the withdrawal order by the respondent authorities.
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In favour of assessee: The petition is decided in favor of the assessee, ensuring the return of the recovered funds subject to administrative verification.
Key Takeaways
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No Retention Without a Valid Order: The revenue department cannot legally retain tax amounts recovered under an assessment order once that specific order has been withdrawn or cancelled.
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Conditional Relief Pending Verification: While the principle of returning funds is absolute, the High Court will typically make the final refund order contingent on the physical verification of the case records by the tax authorities.
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Restoration of Status Quo: The withdrawal of an assessment order systematically invalidates all consequential recovery actions, forcing a return to the financial status quo that existed prior to the dispute.
HIGH COURT OF PATNA
Asma Automobiles (P.) Ltd.
v.
Mohit Kumar Shah and Arun Kumar Jha, JJ.
Civil Writ Jurisdiction Case No.14210 of 2025
APRIL 29, 2026
D.V. Pathy, Sr. Adv., Sadashiv Tiwari, Hiresh Karan and Ms. Shivani Dewalla, Advs. for the Petitioner.
ORDER
Mohit Kumar Shah, J.-The present writ petition has been filed by the petitioner seeking the following reliefs:-
“1(i) The order dated 12.12.2019 (as contained in Annexure -P1 series) passed by the respondent no.2 for month of October 2019 falling in the Financial Year 2019-20 in Form GST DRC – 07 under section 73 of the Bihar Goods and Services Tax Act, 2017 (hereinafter called the Act) served only on the portal and not served by other modes of service in terms of section 169 of the Act levying tax, amounting to 43,68,668 each under CGST and SGST and cess amounting to 15,94,599 totaling Rs.1,03,31,937 on the solitary ground of non-filing of return in GSTR 3B (in view of filing of return in Form GSTR 3B on 31.12.2019) and payment of tax and late fee within a period of 30 days of the order in view of statutory provisions contained in section 62 (2) of the Act and also interest and being contrary to the said statutory provision and also Article 265 of the Constitution of India and the principles of double taxation be set aside and quashed.
(ii) The respondent no. 2 be directed to refund the amount of tax collected by debiting the electronic credit ledger to recover the tax determined by him under section 62 of the Act after filing of the return for month of October 2019.
(iii) The order dated 12.12.2019 (as contained in Annexure P 1 series) issued by the respondent no.2 in Form GST DRC-07 in terms of Rule 100 (2) and 142 (1) (a) of the Central Goods and Services Tax Rules, 2017 (hereinafter called the Rules) for the Tax Period 2019-20 on the basis of a summary of show cause notice shown only on the portal and not served by other modes of service in terms of section 169 of the Act being contrary to the Rules be set aside and quashed.”
2. At the outset, the Ld. Senior Counsel for the petitioner has submitted, by referring to the rejoinder affidavit filed in the present case, that the assessment order dated 12.01.2021, passed by the Deputy/Assistant Commissioner of State Tax, Purnea Circle, Purnea for the month of October, 2019 falling in the financial year 2019-20 has stood withdrawn, hence the amount which has been recovered by the respondents be directed to be refunded back in case the same has not yet been automatically credited in the account of the petitioner, as has been averred by the Ld. Counsel for the respondents.
3. Having regard to the facts and circumstances of the case, we deem it fit and proper to dispose of the present writ petition with a direction that in case the averment of the Ld. Sr. Counsel for the petitioner to the effect that the assessment order in question has stood withdrawn, is correct, the amount so recovered be refunded back to the petitioner in case the same has not yet been credited in favour of the petitioner.
4. Accordingly, the writ petition stands disposed of.
