Simplified Explanation of the Judgment
In a significant judgment, the Patna High Court has granted relief to a contractor who was penalized and subjected to recovery proceedings by the Bihar State Tax Department for filing his GST returns late during the Covid-19 pandemic.
The petitioner, a proprietorship firm, had undertaken a government construction contract and was registered under the GST Act in Jehanabad, Bihar. The dispute began when the firm filed its GSTR-3B return for March 2020 belatedly in December 2020. Along with the return, the petitioner claimed Input Tax Credit (ITC) of ₹24,45,934 each under CGST and SGST. However, the tax authorities disallowed this credit on the grounds that it was filed beyond the statutory deadline mentioned in Section 16(4) of the GST Act.
Subsequently, the Assistant Commissioner of State Tax demanded ₹55.64 lakh (inclusive of tax, penalty, and interest). Despite the petitioner’s explanation that the delay was due to Covid-related illness, his appeal was rejected by the Additional Commissioner (Appeals), who held that he had no power to extend the statutory time limit.
However, a major legal development occurred when a new provision—Section 16(5)—was inserted into the CGST/BGST Act via the Finance Act (No. 2) of 2024, with retrospective effect from 01.07.2017. This amendment allowed registered persons to file returns up to 30 November 2021 for the financial years from 2017-18 to 2020-21 and still claim ITC.
This crucial change was not considered by the appellate authority since the amendment came after the appellate order. The High Court recognized this and remanded the case back for reconsideration in light of the new provision.
Additionally, the Court took serious note of the illegal recovery of ₹50.75 lakh directly from the petitioner’s bills without waiting for the statutory 3-month window allowed under Section 78 of the GST Act. The Tax Department had not even issued a notice to the petitioner, and directly recovered the amount from his employer within 28 days of the appellate order.
The Court held this recovery to be a clear violation of statutory provisions and judicial discipline. It ordered the immediate refund of the recovered amount with 6% interest, and warned the authorities against such premature enforcement in future.
Significance or Implication of the Judgment
This judgment is a critical intervention for small businesses and government contractors who often face procedural bottlenecks under GST laws. It reinforces the principles of natural justice, due process, and statutory timelines. The Court’s decision also affirms the retrospective benefits of recent legislative amendments, thus ensuring that taxpayers are not penalized unfairly for delays beyond their control—especially during a public health crisis like Covid-19.
Furthermore, the judgment places necessary checks on arbitrary recoveries by tax officers and sets a precedent for refunding amounts illegally recovered. It also underscores the responsibility of tax officers to act judiciously and fairly, especially in cases involving government payments.
Legal Issue(s) Decided and the Court’s Decision with reasoning
- Whether the claim of Input Tax Credit (ITC) for FY 2019-20 filed in December 2020 was valid?
- Decision: The Court remanded the matter to the appellate authority for fresh consideration in light of Section 16(5) of the GST Act, inserted with retrospective effect allowing such ITC claims up to 30 November 2021.
- Whether recovery of ₹50.75 lakh was legal under Section 78 and 79 of the GST Act?
- Decision: The Court held the recovery illegal since it was made within 28 days of the appellate order and without providing the mandatory 3-month window. It directed the refund with 6% interest.
- Should cost or penalty be imposed on the officer for premature recovery?
- Decision: The Court accepted the officer’s unconditional apology and refrained from imposing costs, while recording strong disapproval of the conduct.
Judgments Referred by Parties (with citations)
- Sita Pandey v. State of Bihar, (2024) 128 GSTR 137 : 2023 SCC OnLine Pat 2827
- UTI Mutual Fund v. Income-Tax Officer, (2012) 345 ITR 71 (Bom)
- Mohinder Singh Gill v. Chief Election Commissioner, (1978) 1 SCC 405
Judgments Relied Upon or Cited by Court (with citations)
- R.S. Joshi, STO v. Ajit Mills Ltd., (1977) 4 SCC 98
- Sita Pandey v. State of Bihar, (2024) 128 GSTR 137
- UTI Mutual Fund v. Income-Tax Officer, (2012) 345 ITR 71 (Bom)
- Mohinder Singh Gill v. Chief Election Commissioner, (1978) 1 SCC 405
Case Title
Proprietorship Firm v. State of Bihar & Ors.
Case Number
Civil Writ Jurisdiction Case No. 17860 of 2024
Coram and Names of Judges
Hon’ble Mr. Justice Rajeev Ranjan Prasad
Hon’ble Mr. Justice Ashok Kumar Pandey
Names of Advocates and who they appeared for
• Mr. Akshansh Ankit, Advocate (for Petitioner)
• Mr. Rudra Pratap Singh, Advocate (for Petitioner)
• Mr. Aditya Prakash, Advocate (for Petitioner)
• Mr. Prakash Kumar, Advocate (for Petitioner)
• Mr. Vikash Kumar, SC-11 (for Respondents 1 to 3)
• Ms. Rushali, Advocate (for Respondent No. 4)
Link to Judgment
78a8f0d3-f66e-4f3a-8b54-ee3d57e58e4f.pdf
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