Facts of the Case:

In this case, the petitioner filed the writ petition seeking release and remittance of an amount of ₹25,00,000 (₹20,00,000 + ₹5,00,000) which was mistakenly transferred to the account of Sai Fertilizer Pvt. Ltd. i.e. respondent instead of the intended beneficiary M/s Mortex International. While intending to transfer ₹20,00,000 to M/s Mortex International (account ending 8005), the petitioner inadvertently transferred the amount to another Yes Bank account ending 8025, belonging to the added respondent. Subsequently, an additional amount of ₹5,00,000 was also mistakenly transferred to the same wrong account. Upon discovering the error, the petitioner immediately approached Yes Bank Ltd., requesting reversal of the funds. However, instead of remitting the amount back, the bank placed the amount on hold.

Despite repeated representations, the bank did not release the funds. Meanwhile, the tax authorities issued a communication to the bank referring to Section 79(1)(c)(i) of the CGST/WBGST Act, 2017, advising the bank to retain the amount as recovery proceedings could be initiated against third parties. The added respondent i.e Sai Fertilizer Pvt. Ltd. filed an affidavit categorically stating that it had no business relationship with the petitioner; the amount of ₹25,00,000 did not belong to it; and  it had no objection to the said amount being reversed and remitted back to the petitioner.

Issue:

Whether the tax authorities could invoke Section 79(1)(c)(i) of the CGST/WBGST Act, 2017 to retain and recover an amount that was erroneously transferred into the account of a third party who neither owed any money to the petitioner nor had any business relationship with the petitioner, and who had expressly consented to reversal of the amount.

Held that:

The Court observed that there was no business relationship, contractual obligation, or legally enforceable debt between the petitioner and the added respondent, and therefore, the said amount could not be treated as “money due” to the taxable person or “money held on account of” such person so as to attract Section 79(1)(c)(i). It was found that the amount of ₹20,00,000/- and ₹5,00,000/- was transferred to the account of the added respondent due to a clerical and typographical error committed by the petitioner while entering the beneficiary account number. 

The Court further held that the added respondent had unequivocally admitted that the money did not belong to it and had expressly consented to the reversal of the entire amount to the petitioner. In such circumstances, the continued retention of the amount or its attachment on the pretext of tax recovery was held to be arbitrary and without authority of law. The communication issued by the tax authorities advising the bank to act under Section 79 was found to be inapplicable to the facts of the case, as the statutory preconditions for third-party recovery were not satisfied.

The Court held that the invocation of recovery proceedings under Section 79(1)(c)(i) of the CGST/WBGST Act, 2017 was wholly misconceived and unsustainable in law. Accordingly, the Court directed the respondent bank to immediately release and transfer the erroneously credited amounts to the petitioner’s bank accounts within the stipulated time. Recovery powers under the GST law cannot be stretched to cover amounts that never legally belonged to the assessee or a third party. 

Case name: Jai Balaji Industries Limited & Anr. Versus The Assistant Commissioner of Sale Tax & Ors. dated 20.01.2026

To read the coomplete judgement 2026 Taxo.online 146