Statutory Stay Under S. 112 BGST Act Granted Due to Non-Constitution of Appellate Tribunal: Patna High Court - 2025-04-26

Patna High Court Grants Conditional Stay in GST Dispute Due to Non-Functional Appellate Tribunal

Patna: In a significant ruling addressing a common predicament faced by taxpayers, the Patna High Court has directed that taxpayers be granted the statutory benefit of stay on recovery proceedings, even if they are unable to file a formal appeal before the Goods and Services Tax (GST) Appellate Tribunal (GSTAT) because the tribunal has not yet been constituted.

A division bench comprising Honourable The Chief Justice K. Vinod Chandran and Honourable Mr. Justice Madhuresh Prasad passed the order in the case of M/S Simranjeet Singh vs. The Union of India & Others (Civil Writ Jurisdiction Case No.3697 of 2023) on April 10, 2023.

Background of the Case

The petitioner, M/S Simranjeet Singh, a sole proprietorship firm, challenged an adverse order and sought to avail the statutory remedy of filing an appeal before the Appellate Tribunal under Section 112 of the Bihar Goods and Services Tax Act (B.G.S.T. Act).

However, the core issue preventing the petitioner from pursuing this remedy was the non-constitution of the Appellate Tribunal itself. This situation not only blocked the appeal process but also deprived the petitioner of the crucial benefit of stay on recovery of the balance tax amount, which is statutorily available under Sub-Section (8) and Sub-Section (9) of Section 112 upon depositing a pre-deposit amount.

Arguments and Court's Observation

The petitioner argued that they were being unfairly deprived of their statutory rights solely due to the respondents' (the government authorities) failure to constitute the tribunal.

The respondent State authorities acknowledged the fact that the Tribunal had not been constituted. They referred to a notification (Order No. 09/2019-State Tax, S. O. 399, dated 11.12.2019), issued under Section 172 of the B.G.S.T Act (power to remove difficulties), which stated that the period of limitation for filing an appeal before the Tribunal would only commence after the President or State President of the Tribunal assumes office following its constitution. While this addressed the limitation period for filing the appeal, it did not resolve the immediate issue of obtaining a stay on recovery.

The Court noted that similar relief had been granted in a previous case, SAJ Food Products Pvt. Ltd. vs. The State of Bihar & Others (C.W.J.C. No. 15465 of 2022) . The bench emphasized that a taxpayer cannot be denied a statutory benefit like the stay of recovery simply because the government has failed to set up the necessary appellate forum.

The High Court's Decision

Recognizing the Catch-22 situation and aiming to balance the equities, the High Court disposed of the writ petition with the following directions:

1. Conditional Stay Granted: Subject to the petitioner depositing a sum equal to 20 percent of the remaining disputed tax amount (in addition to any amount already deposited earlier under Sub-Section (6) of Section 107 of the B.G.S.T. Act, relating to the first appeal stage), the statutory benefit of stay under Sub-Section (9) of Section 112 of the B.G.S.T. Act must be extended to the petitioner.
2. Recovery Stayed: Upon fulfilling the deposit condition, the recovery of the balance amount and any steps taken in that regard will be deemed stayed.
3. Mandatory Filing of Appeal: The statutory stay is not open-ended. Once the Appellate Tribunal is constituted and made functional, the petitioner must file their appeal under Section 112 of the B.G.S.T. Act before the Tribunal, observing all statutory requirements and within the period specified upon constitution.
4. Consequence of Non-Filing: In case the petitioner chooses not to file the appeal before the Tribunal within the specified period after its constitution, the respondent authorities will be at liberty to proceed further in the matter in accordance with law.

Implications

This judgment provides crucial temporary relief to taxpayers in Bihar and potentially other states facing similar delays in the constitution of the GST Appellate Tribunals. It upholds the principle that the State's administrative delays should not prejudice the statutory rights of taxpayers. While granting interim protection, the order also reinforces the obligation of taxpayers to ultimately pursue their remedies through the established statutory appellate framework once it becomes operational.