• Dated 16^th January, 2026

Recovery Stayed During Pending Rectification-Emphasis on Fairness in GST Enforcement

Brief Facts:

A GST adjudication order was passed against the assessee, following which an application for rectification was filed highlighting apparent errors in the said order. However, while the rectification application was still pending consideration, the GST authority initiated recovery proceedings by debiting the assessee's electronic credit ledger, despite the fact that more than 20% of the disputed tax amount had already been recovered.

Assessee's contention:

The assessee argued that the adjudication order was passed in violation of principles of natural justice since their reply to the show-cause notice was not considered and no personal hearing was granted. It was also contended that a wrong provision of law was applied. According to the assessee, if the rectification application is decided in their favour, the tax demand itself may not survive, and therefore recovery during pendency of rectification was unjustified.

Department's contention:

The department submitted that the writ petition was not maintainable as the assessee had an alternative remedy of appeal. It was also argued that the petition was filed belatedly and that mere pendency of a rectification application cannot be a ground to stall recovery proceedings.

Court held:

The Calcutta High Court held that since the rectification application was pending and its outcome could affect the very existence of the demand, the proper officer must decide the rectification application within four weeks. The Court further directed that no further recovery should be made during the pendency of the rectification application, provided that more than 20% of the disputed tax had already been recovered.

BTA Comment

The judgment underscores that recovery under GST should not be pursued mechanically when a rectification application is pending and capable of affecting the very demand. By stalling further recovery after more than 20% of the disputed tax had already been recovered, the Court struck a fair balance between revenue protection and taxpayer rights. The ruling reinforces the authorities must first address their own errors before resorting to coercive recovery, especially through the electronic credit ledger.

Case ref- TIRUPATI TRADERS Versus UNION OF INDIA (2026) 38 [Centax 57 (Cal)].

Author: Aindrila Ghosh