Case Background
The matter arose from a tax dispute under the Bihar Goods and Services Tax Act, 2017. The petitioner is a proprietorship firm engaged in business at Station Road, Fatwah, Patna.
An order was passed against the petitioner under the BGST Act. The petitioner wanted to challenge that order before the Appellate Tribunal under Section 112 of the Act. This is the normal legal remedy provided by the GST law after the first appeal under Section 107.
However, at the time of this case, the GST Appellate Tribunal under Section 109 of the BGST Act had not yet been constituted. Because of this, the petitioner could not file the statutory appeal under Section 112. As a result, the petitioner was also unable to obtain the automatic stay on recovery that usually follows when an appeal is filed and the prescribed amount of tax is deposited under Section 112(8) and (9).
Feeling aggrieved, the petitioner approached the Patna High Court under Article 226 of the Constitution of India in Civil Writ Jurisdiction Case No. 1153 of 2024, seeking various reliefs including protection from coercive recovery of the disputed tax.
What the Court Examined and Decided
The Division Bench of the Patna High Court, led by Hon’ble the Chief Justice and Hon’ble Mr. Justice Rajiv Roy, focused on a narrow but important question: what protection should be given to a taxpayer who wants to file an appeal before the GST Appellate Tribunal, when that Tribunal itself has not yet been constituted?
The Court first recorded that the petitioner was “desirous of availing statutory remedy of appeal” against the impugned order before the Tribunal under Section 112 of the BGST Act. The difficulty was not a lack of remedy in law, but the fact that the forum meant to hear the appeal did not exist at the time.
The Bench noted that, due to the non-constitution of the Tribunal, the petitioner was deprived of the statutory remedy available under sub-sections (8) and (9) of Section 112. These provisions are significant because they provide for stay of recovery of the balance amount of tax when an appeal is filed and the appellant deposits the specified percentage of the disputed tax.
In simple terms, under the normal scheme of the BGST Act, once a taxpayer files an appeal before the Tribunal and deposits the amounts required under Section 107(6) and Section 112(8), the law gives an automatic stay on recovery of the remaining disputed tax. Here, the petitioner was willing to avail this mechanism but could not do so because the appellate forum was missing.
The Court also took note of a step already taken by the State to deal with this structural gap. The respondent State authorities had acknowledged the non-constitution of the Tribunal and issued Order No. 09/2019-State Tax, S.O. 399 dated 11.12.2019 under Section 172 of the BGST Act, which empowers the State to remove difficulties.
Under that notification, it was provided that the period of limitation for filing an appeal before the Tribunal under Section 112 would begin only from the date on which the President or State President of the Tribunal enters office after the Tribunal is constituted under Section 109. This meant that taxpayers would not lose their right to appeal due to the Tribunal not being functional; the clock for limitation would start only after it became operational.
However, this notification did not by itself grant any stay on recovery of tax. It only protected the limitation period. The petitioner was still facing immediate recovery of the disputed demand without being able to file the appeal that would have triggered a statutory stay.
In this background, the Court fashioned a balanced solution.
First, the Bench held that, subject to the petitioner depositing 20 percent of the remaining amount of tax in dispute (if not already deposited), in addition to the amount already deposited earlier under Section 107(6), the petitioner “must be extended the statutory benefit of stay” under Section 112(9).
The Court was clear that the petitioner could not be deprived of this benefit merely because the State itself had failed to constitute the Tribunal. Any recovery proceedings for the balance amount of tax and any steps already taken for such recovery were directed to be deemed to be stayed once this deposit condition is fulfilled.
The Bench referred to the fact that similar relief had already been granted by the Patna High Court in an earlier case, SAJ Food Products Pvt. Ltd. vs. The State of Bihar & Others in C.W.J.C. No. 15465 of 2022. Thus, the Court was continuing a consistent line of relief in comparable situations.
Second, the Court clarified that this statutory relief of stay could not be “open ended”. It stressed the need to balance equities: while the taxpayer must not be punished for the State’s delay in constituting the Tribunal, the tax dispute itself should still move forward once the Tribunal becomes operational.
Therefore, the Court required the petitioner to present or file the appeal under Section 112 of the BGST Act once the Tribunal is constituted and functional and once the President or State President assumes office. At that stage, the petitioner will have to meet all statutory requirements for filing the appeal, including limitation as may be prescribed from that point.
Third, the Court addressed what would happen if the petitioner did not file an appeal once the Tribunal starts functioning. It held that if the petitioner chooses not to avail the remedy of appeal within the period that may be specified after constitution of the Tribunal, the respondent authorities would then be at liberty to proceed further in accordance with law. In other words, the protection from recovery is linked to the petitioner’s willingness to pursue the statutory appeal when the forum becomes available.
Fourth, the Court also provided immediate relief against coercive measures. It ruled that if the petitioner complies with the order and deposits 20 percent of the remaining disputed tax, then any attachment of the petitioner’s bank account that had been made pursuant to the demand must be released.
By doing so, the Court ensured that the business of the petitioner would not be paralysed by attachment of accounts, as long as the petitioner complied with the deposit condition and later filed the appeal when it became possible.
Finally, with these directions and observations, the writ petition was disposed of. The Court did not go into the merits of the underlying tax dispute, leaving those issues to be decided by the Tribunal once it is constituted and the appeal is filed. The focus remained only on protecting the petitioner’s right to appeal and connected stay benefits in the interim period.
Why This Judgment Matters
This judgment is important for all GST-registered businesses and individuals in Bihar who have tax disputes at the Tribunal stage.
Many taxpayers are stuck because the GST Appellate Tribunal has not yet been set up, but recovery proceedings for disputed tax amounts are moving ahead. This decision of the Patna High Court makes it clear that such taxpayers should not be left without protection merely because the Tribunal is not functional.
The Court has created a practical arrangement: if a taxpayer is ready to deposit the required percentage of the remaining disputed tax, as the law demands for filing an appeal, then the benefit of stay on recovery under Section 112(9) should still be given even in the absence of the Tribunal.
At the same time, the Court has balanced the interest of the State by making it clear that this protection is temporary. Once the Tribunal is created and starts working, the taxpayer must file an appeal there. If the taxpayer does not do so within the prescribed period, the State is free to resume recovery.
This judgment therefore serves as a clear guide for similarly placed taxpayers, tax officers, and lawyers on how to deal with GST disputes at the Tribunal stage until the Tribunal becomes fully functional.
Legal Issues and Answers
- Issue: Can a GST taxpayer be denied the statutory stay on recovery under Section 112(9) of the BGST Act only because the GST Appellate Tribunal has not been constituted?
Answer: No. The Patna High Court held that, upon deposit of 20 percent of the remaining disputed tax (in addition to the amount already deposited under Section 107(6)), the taxpayer must be granted the same stay benefit as under Section 112(9), and all recovery steps for the balance amount will be deemed stayed. - Issue: Is this interim stay on recovery unlimited in time?
Answer: No. The Court held that the stay cannot be open ended. The taxpayer must file an appeal under Section 112 once the Tribunal is constituted and functional. If the appeal is not filed within the period specified after constitution of the Tribunal, the authorities are free to proceed with recovery in accordance with law. - Issue: What happens to existing bank account attachment if the taxpayer complies with the Court’s conditions?
Answer: If the taxpayer deposits 20 percent of the remaining disputed tax as directed, any attachment of the taxpayer’s bank account made pursuant to the demand must be released.
Cases Cited by the Court
- The Court referred to and relied on its earlier decision in SAJ Food Products Pvt. Ltd. vs. The State of Bihar & Others, C.W.J.C. No. 15465 of 2022, where similar relief had been granted.
Case Details
Case Number: Civil Writ Jurisdiction Case No. 1153 of 2024
Case Title: M/s Surbhi Enterprises v. The Union of India & Ors.
Citation: 2024 (2) PLJR 517
Court: High Court of Judicature at Patna
Coram: Hon’ble the Chief Justice; Hon’ble Mr. Justice Rajiv Roy
Date of Judgment: 22.01.2024
Advocates: For the petitioner – Mr. Pawan Kumar Singh, Advocate. For the Union of India – Mr. K.N. Singh, Additional Solicitor General; Mr. Anshman Singh, Senior Standing Counsel, CGST & CX. For the State of Bihar – Mr. Vivek Prasad, GP-7.
Nature of the Case: Writ petition under Article 226 of the Constitution of India seeking relief against recovery of GST dues in view of non-constitution of the GST Appellate Tribunal and to enable availing of the statutory appeal remedy under Section 112 of the BGST Act.
Statutory Provisions Involved: Article 226 of the Constitution of India; Sections 107(6), 109, 112(8), 112(9), and 172 of the Bihar Goods and Services Tax Act, 2017.
Link to Judgment: View full judgment on the Patna High Court website
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