Court holds that when entire tax liability is paid, no pre-deposit of disputed interest is required; recovery notices and bank attachment orders quashed under statutory protection of CGST Act
In a significant judgment dated October 27, 2026, the Bombay High Court (Division Bench comprising Justices M. S. Karnik and Sandesh D. Patil) has ruled in favor of Roadway Solutions India Infra. Ltd. against the State of Maharashtra in a tax dispute concerning recovery of interest under the Goods and Services Tax (GST) regime. The writ petitions challenged recovery proceedings initiated by the GST authorities for alleged interest on delayed payment of tax, despite the petitioner having already paid the entire tax liability.
The petitioner, engaged in highway construction and maintenance contracts, was subjected to GST scrutiny following an inspection of their GSTR-3B returns. The department alleged delays in tax payments on certain supplies, leading to interest demands confirmed by the adjudicating authority and upheld by the first appellate authority. The petitioner contested the interest demand before the GST Appellate Tribunal, with appeals pending.
Crucially, the GST department issued recovery intimations and bank attachment notices under Section 79(1)(c) of the CGST Act, 2017, seeking to recover disputed interest amounts while the appeals were sub judice. The petitioner contended that under Sections 107(6) and 112(8) of the CGST Act, no pre-deposit of interest is required when the entire tax has been paid, and accordingly, recovery of the balance amount is stayed under Section 112(9) during the pendency of appeal.
The High Court examined the statutory provisions and the facts in detail. It noted that the petitioner had voluntarily discharged the full tax liability, albeit belatedly, and that the interest on delayed payment arises automatically as a statutory consequence under Section 50 of the CGST Act. However, the key issue was whether the department could proceed with recovery of disputed interest despite the statutory stay of recovery during appeals.
The Court held that the statutory scheme distinguishes between admitted tax liabilities and disputed demands. Since the entire tax amount was paid, the pre-deposit requirements for filing appeals did not extend to the disputed interest alone. The Court further held that once the statutory pre-deposit requirements are complied with, recovery of the balance amount, including disputed interest, is deemed stayed during the pendency of appeal under Section 112(9).
Consequently, the recovery notices and bank attachment orders issued for recovery of disputed interest were declared unsustainable and quashed. The Court directed the respondents to withdraw the bank notices immediately, communicate the same to the banks, and lift any debit restrictions imposed solely due to such notices, thereby restoring normal banking operations for the petitioner.
The judgment reaffirms the principle that statutory protection against coercive recovery under the CGST Act must be respected, especially when appeals against disputed demands are pending with the requisite pre-deposit made. The Court explicitly refrained from commenting on the merits of the interest demand, limiting its order to enforcement of procedural safeguards.
This ruling provides clarity on the treatment of interest demands in GST appeals and protects taxpayers from premature recovery actions on disputed interest when the tax liability itself is not in dispute and has been fully paid.
Bottom Line:
GST - Where entire tax liability has already been paid and only interest demand is under challenge before the Tribunal, no percentage-based pre-deposit of disputed interest is required under Sections 107(6) and 112(8) of the CGST/MGST Act - On compliance with applicable pre-deposit requirements, recovery of balance amount stands stayed under Section 112(9) - Recovery notices and bank attachment notices issued under Section 79(1)(c) for disputed interest during pendency of appeal are liable to be quashed.
Statutory provision(s):
Central Goods and Services Tax Act, 2017 Sections 50, 75(9), 75(12), 79(1)(c), 107(6), 107(7), 112(8), 112(9)
