No Recovery During Appeal under Section 107(7)

Britannia Industries Ltd. Vs. Assistant Commissioner of Commercial Taxes

Citation – W.P. No. 33963 of 2024

Court –Karnataka High Court

Date – 18.06.2025

The Hon’ble Karnataka High Court has held that the unilateral debit of disputed interest from the electronic cash ledger, during the pendency of an appeal, is not permissible under Section 107(7) of the CGST Act. The Court clarified that once a statutory appeal is filed and the pre-deposit is made as required, recovery proceedings must be kept in abeyance until the appeal is decided.

The Court held,

“5. The authority during the pendency of the appeal and in contravention of Section 107(7) of CGSC Act, 2017 debited the disputed interest amount. Petitioner sought for refund of unilateral debit of the disputed interest, while placing reliance on the order of the 2^nd respondent who has ordered to re-credit on the premise is that amount was debited from cash ledger admittedly towards the disputed interest amount and therefore 2^nd respondent opinioned that petitioner is eligible for re-credit to the Electronic cash ledger of the RTP.

6. However, respondent No.1 by the impugned order has rejected the request made by the petitioner seeking refund of disputed interest amount. Sub-section (7) of Section 107 plainly contemplates that where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed. Therefore, on examining the said provision coupled with the order passed by the 2^nd respondent, this Court is of the view that unilateral debit undertaken by the Assessing Officer from the cash ledger towards the disputed amount of the creditor is not only erroneous and without jurisdiction and contrary to the mandate provided under sub-section(7) of Section 107.

Therefore, this Court is of the view that order of rejection need not be sustainable and liable to be set aside.”

_________________________________________________________________________________________________________________