When does it happen?

• Usually, recovery through court happens after other recovery methods like show-cause notices, attachment of bank accounts, and seizure of property have failed.
• It can also be used directly if the authorities believe the taxpayer is deliberately evading payment.

How does it work?

• The proper officer (designated GST official) files an application before a Magistrate with details of the unpaid amount and relevant information about the taxpayer.
• This application, along with supporting documents, is filed in Form GST DRC-19.
• The Magistrate treats the unpaid amount as a fine imposed under the Code of Criminal Procedure, 1973.
• The court then summons the taxpayer and proceeds with the recovery process as per law.

Important points to remember:

• Recovery through court is a serious step with potential consequences like attachment and auction of assets.
• It’s best to cooperate with the authorities and comply with payment notices to avoid reaching this stage.
• If you have genuine difficulties in paying, explore options like filing an application for waiver or reduction of penalty and interest.

EXAMPLE

Recovery Under GST:

The GST Act, 2017, outlines various provisions for the government to recover tax dues, including interest and penalty. If a taxpayer fails to pay their dues after receiving notices and following due process, the authorities can initiate recovery proceedings, ultimately leading to court involvement. These proceedings may involve:

• Attachment and sale of movable and immovable property:The authorities can attach and sell a taxpayer’s property to recover the dues.
• Arrest and detention:In certain cases, the authorities can arrest and detain a taxpayer for non-payment of dues.
• Initiating legal proceedings:The authorities can file a suit in court for recovery of the dues.

                                                       CASE LAWS

1. Mismatch between GSTR-1 and GSTR-3B:

• M/s. Caterpillar India Pvt. Ltd. v. The Assistant Commissioner Chennai [WP No. 28092 of 2023]:The Madras High Court ruled that recovery based on discrepancies between GSTR-1 and GSTR-3B cannot be directly initiated without following Rule 88C of the CGST Rules, 2017. This rule mandates specific procedures like issuing reconciliation statements and providing opportunities for explanations before recovery action.
• Jose Paul v. State Tax Officer [W.P.(C) No. 24938 of 2023]:The Kerala High Court quashed an assessment order based on GSTR-1/GSTR-3B mismatch as the department failed to provide a hearing before issuing the order. This highlights the importance of procedural safeguards before initiating recovery.

2. Restriction on Input Tax Credit (ITC) under Section 16(2)(c):

• Bharti Telemedia Ltd. v. Union of India [W.P.(C) No. 1551 of 2023]:The Delhi High Court raised concerns about the blanket denial of ITC to buyers solely due to the seller’s defaults under Section 16(2)(c). This case is under further hearing, potentially impacting how ITC restrictions are applied.

3. Recovery as Arrears of Land Revenue:

• Commissioner of Central Tax v. M/s. Konark Metal Products Pvt. Ltd. [TS-399-ITAT-2021 (P)]:The Income Tax Appellate Tribunal (ITAT) held that GST dues cannot be automatically treated as arrears of land revenue, attracting stricter recovery measures. This decision offers some protection for taxpayers against harsh recovery methods.

4. Refund Reconciliation Statement:

• M/s Shivbhola Filaments Pvt. Ltd. v. Assistant Commissioner [W.P.(C) No. 10943 of 2023]:The Delhi High Court emphasized the importance of issuing refund reconciliation statements before initiating demand and recovery proceedings. This ensures clarity and transparency in the process.