Patna High Court Quashes ₹1.12 Crore GST Grab – Officers Asked to Show Cause!
Introduction
In a landmark verdict dated 06 May 2025, the Hon’ble Patna High Court strongly rebuked Bihar State GST officials for unlawfully recovering ₹1.12 crore from M/S Great Eastern Hire Purchase Pvt. Ltd., despite the taxpayer’s timely compliance. The Court emphasized that the assessment order stood withdrawn under Section 62(2) of the BGST/CGST Act once the GSTR-3B was filed within 30 days.
The decision reaffirms the importance of procedural compliance, natural justice, and accountability within India’s GST administration.
Legal Background at a Glance
| Element | Details |
|---|---|
| Petitioner | M/S Great Eastern Hire Purchase Pvt. Ltd. |
| Respondents | State Tax Department (Bihar) & Union of India |
| Writ Case No. | CWJC No. 18049 of 2024 |
| Date of Judgment | 06 May 2025 |
| Issue | Unlawful GST recovery despite return being filed |
| Applicable Provision | Section 62(2), BGST/CGST Act, 2017 |
| GSTR-3B Return Filed On | 19 September 2019 |
| Demand Order Date | 12 September 2019 |
| Recovery Order Date | 24 August 2023 |
| Recovery Amount | ₹1,12,15,944 (Credit + Cash Ledger) |
| Appeal Rejected On | 11 July 2024 (citing delay) |
| HC Decision | Recovery and appeal orders set aside, show cause notices to officials |
Core Legal Issue
What Went Wrong?
| Issue | Observation by Court |
|---|---|
| Recovery made despite GSTR-3B being filed within 30 days (under Section 62(2)) | Illegal. Once return is filed, demand order is deemed withdrawn. |
| Officials claimed assessment order was emailed (without proof) | Unsupported by evidence. False affidavit suspected; Court noted “cut, copy, paste” content. |
| ₹1.12 crore debited without show-cause or hearing | Violation of natural justice. No verification or opportunity provided before action. |
| Appeal rejected citing limitation despite special circular and precedent | In prima facie contempt of court’s ruling in SIS Cash Services Pvt. Ltd. v. UOI. |
| Authorities ignored their own internal GST portal (GST-BO) data | Dereliction of duty. Return filing proof was already in their system. |
Court’s Verdict
The Hon’ble Justices Rajeev Ranjan Prasad and Ashok Kumar Pandey ruled:
- Recovery Order dated 24.08.2023: Set aside
- Appellate Rejection dated 11.07.2024: Set aside
- Refund of ₹1.12 crore: Directed with applicable interest
- Show-cause Notices:
- To Respondent No. 5 (Assistant Commissioner): Why recovery was made despite withdrawn demand?
- To Respondent No. 6 (Appellate Officer): Why appeal was rejected contrary to judicial direction?
“Once the assessment order lost its existence and efficacy in the eye of law, there was no reason for the Respondent No. 5 to go for recovery…”
— Hon’ble Justice Rajeev Ranjan Prasad
Key Legal Provision – Section 62(2) of CGST/BGST Act
“Where the registered person furnishes a valid return within 30 days of the service of the assessment order under sub-section (1), the said assessment order shall be deemed to have been withdrawn.”
✅ Petitioner filed return on time
❌ Authorities still proceeded with demand
Therefore, entire recovery was illegal.
What Businesses Should Learn
| Mistake to Avoid | Why It Matters |
|---|---|
| Ignoring Section 62(2) implications | It can save you from illegal demands if return is filed within 30 days. |
| Not documenting return filing with proof | Always retain ARN and filing receipts. |
| Relying on verbal updates from GST officials | Insist on written communication or official acknowledgment. |
| Ignoring appeal timelines or recent circulars | Follow latest judgments and departmental updates like Circular No. 53/2023. |
| Allowing recovery without being heard | Always demand a hearing notice before recovery or enforcement actions. |
Conclusion
This judgment is not just a relief for one taxpayer — it sets a precedent for every GST-registered business in India. It upholds the rule of law, procedural fairness, and judicial oversight over bureaucratic power. Businesses facing similar unlawful recovery actions should consider this case a beacon of their legal rights.
FAQs
Q1. What is the significance of Section 62(2)?
It acts as a safeguard, nullifying demand orders if the return is filed within 30 days.
Q2. Can a refund be claimed after such illegal recovery?
Yes, as ordered in this case, the taxpayer is entitled to full refund with interest.
Q3. Can GST officers be held personally accountable?
Yes. The Court has issued show cause notices and can direct recovery of costs from the officer.
Q4. What if I missed the appeal deadline?
You may still file if covered by special circulars or judgments like SIS Cash Services, cited here.
Q5. Is email a valid form of serving assessment order?
Only if proper attachments and proofs of delivery are available. Otherwise, it’s contestable.
Disclaimer
This blog is for informational purposes only. It is based on the judgment dated 06.05.2025 by the Hon’ble Patna High Court in CWJC No. 18049 of 2024. It does not constitute legal advice. For any specific GST or legal dispute, consult a qualified lawyer. The website and author disclaim any liability for decisions based on this content.
