Neutral Citation No. - 2025:AHC:80116-DB Chief Justice's Court Case :- WRIT TAX No. - 2254 of 2025 Petitioner :- M/s S.A.B. Engg Works Respondent :- State of U.P. and another Counsel for Petitioner :- Ajay Kumar Kashyap,Ravindra Kumar Rastogi Counsel for Respondent :- C.S.C. Hon'ble Arun Bhansali,Chief Justice Hon'ble Kshitij Shailendra,J. 1. This writ petition is directed against the action of the respondents in recovering the amount from the Electronic Credit Ledger/Electronic Cash Ledger of the petitioner under Section 79 of the Goods and Services Taxes Act, 2017 ('the Act'). 2. Submissions have been made that demand was raised against the petitioner on 29.04.2024, against which, the petitioner filed appeal under Section 107 of the Act by making the requisite pre-deposit and on 24.01.2025, the appeal was rejected and within a period of four days on 29.01.2025, a sum of Rs.1,55,079/- was deducted from the Electronic Credit Ledger/Electronic Cash Ledger of the petitioner without intimation/initiating the recovery proceedings. 3. Submissions have been made that under the provisions of Section 112 of the Act, the petitioner has a remedy of filing appeal before the appellate tribunal wherein the limitation is three months and on a pre-deposit of 10%, the rest of the demand would remain stayed. Further submissions have been made that without permitting the petitioner to avail the remedy as provided under Section 112 of the Act, the deduction of the amount within a period of four days by the respondents is wholly high-handed and contrary to their own circular dated 11.07.2024 (Annexure-9). 4. Submissions have been made that though the appellate tribunals have not been constituted so far to hear appeal under Section 112 of the Act, the circular provides for a pre-deposit in terms of the said provision on the portal of the department and specifically indicates that on the pre-deposit made and undertaking filed regarding filing of the appeal on constitution of the Tribunal, the rest of the demand would remain stayed. It is submitted that no outer limit has been indicated for the pre- deposit and if pre-deposit could have been made by the petitioner within a period of three months, there was no necessity for the respondents to have recovered the amount within a period of four days rendering the opportunity available to the petitioner under Section 112 (8) of the Act infructuous and, therefore, the action of the respondents deserves to be quashed and set aside. 5. Learned counsel for the respondents attempted to make submissions that in absence of any interim order against the recovery, once the appeal of the petitioner stands dismissed, the respondents were justified in recovering the amount from the Electronic Credit Ledger/Electronic Cash Ledger and no interference is required. 6. We have considered the submissions made by counsel for the parties and have perused the material available on record. 7. Section 78 of the Act deals with initiation of recovery proceedings, which reads as under: "78. Initiation of recovery proceedings Any amount payable by a taxable person in pursuance of an order passed under this Act shall be paid by such person within a period of three months from the date of service of such order failing which recovery proceedings shall be initiated: PROVIDED that where the proper officer considers it expedient in the interest of revenue, he may, for reasons to be recorded in writing, require the said taxable person to make such payment within such period less than a period of three months as may be specified by him." 8. A perusal of the above provision would reveal that the amount payable by taxable person pursuant to an order passed under the Act shall be paid within three months from the date of service of such order 'failing which recovery proceedings shall be initiated'. The proviso to the said provision confers power on the proper officer for reasons to be recorded to require such taxable person to make payment within a period of three months. The language and intent of the provision is very clear wherein the recovery proceedings can be initiated at the end of three months from the date the amount becomes payable and for taking action prior to the said period of 3 months, reasons are required to be recorded. 9. In the present case, the amount became payable on the dismissal of the appeal filed by the petitioner and, therefore, in terms of provisions of Section 78 of the Act, essentially the demand could not have been enforced for a period of three months. This is besides the fact that under provisions of Section 112, on deposit of 10% of the demand, the rest of the demand gets stayed under sub-section (9) of Section 112 of the Act and the limitation for filing appeal is three months. In case the action as taken by the respondents i.e. recovery within four days from the appellate order is approved/upheld, the same would render the said provisions of Section 112(9) of the Act as nugatory inasmuch as, the appeal can be filed on the last date of limitation with 10% of the pre-deposit and, in case, the recovery has already taken place, the benefit of sub-section (9) of Section 112 of the Act, would not be available, which cannot be permitted. 10. Besides the above, the circular dated 11.07.2024 issued by the Central Board of Indirect Taxes and Customs is very clear and specific providing that even when appellate tribunals have not been constituted the pre-deposit in terms of Section 112 (8) of the Act can be made and in those circumstances, the action initiated and executed by the respondents in recovering the amount from the Electronic Credit Ledger/Electronic Cash Ledger of the petitioner cannot be sustained. 11. Consequently, the petition is allowed. The action of the respondents in recovering the amount from the Electronic Credit Ledger/Electronic Cash Ledger on 29.01.2025 is quashed and set aside. 12. The respondents would credit the account of the petitioner by an amount over and above the 10% of the demand against the petitioner, which it is indicated is about Rs.60,000/-. The petitioner would take requisite action in terms of the circular dated 11.07.2024 regarding filing of the undertaking etc. except for the deposit of amount which already stands deposited with the respondents. The requisite would be done by the respondents within a period of two weeks from today. Order Date :- 15.5.2025 Jyotsana/Sandeep (Kshitij Shailendra, J) (Arun Bhansali, CJ) Digitally signed by :- JYOTSANA SINGH High Court of Judicature at Allahabad