In a major relief to taxpayers, the Hon’ble Supreme Court has upheld a High Court order that stayed coercive recovery proceedings under GST law, pending adjudication of multiple overlapping Show Cause Notices (SCNs). The top court refused to interfere with the interim relief granted by the High Court, thereby reinforcing the principle of fairness in tax recovery actions.
Case Background:
The case arose when the tax authorities issued several SCNs to the assessee for overlapping tax periods. Despite the pendency of these SCNs before the courts, the department proceeded to pass assessment orders and initiate coercive recovery measures. Aggrieved by this action, the assessee approached the concerned High Court, which granted interim protection by staying any recovery till the disputes were conclusively resolved.
The tax department challenged this interim stay by filing Special Leave Petitions (SLPs) before the Supreme Court, contending that such protection was unwarranted and premature.
Legal Issue:
The core question before the Supreme Court was whether the High Court was right in restraining the tax department from initiating coercive recovery steps during the pendency of related adjudication proceedings involving overlapping periods.
Supreme Court’s Ruling:
The Apex Court dismissed the SLPs filed by the Revenue, thereby confirming the High Court’s stay order. The Supreme Court observed:
- The High Court had validly exercised its discretion in granting interim relief.
- Coercive recovery in the midst of ongoing adjudication over multiple overlapping SCNs could lead to undue hardship.
- Interim protection in such cases ensures procedural fairness and respects the taxpayer’s right to challenge disputed demands.
The Court found no substantial question of law or jurisdictional error that justified intervention under Article 136 of the Constitution.
Key Takeaway:
The Supreme Court’s verdict affirms the authority of High Courts to grant interim relief in GST and other tax matters where overlapping proceedings are pending. While the order stays coercive recovery steps, the department retains the right to pursue recovery through lawful means once the legal process concludes.
Conclusion:
This landmark decision reinforces judicial safeguards available to taxpayers facing multiple tax proceedings. It sets a precedent that coercive recovery actions should not override pending adjudications, especially when SCNs for overlapping periods remain unsettled.