Facts of the case:

In this case, the petitioner challenged recovery proceedings initiated by the GST authorities. The dispute arose from supplies made during April 2021 to September 2022, in respect of which the petitioner had issued credit notes during September 2022 to November 2022. The petitioner reported these credit notes in GSTR-1 within the statutory time limits. However, the corresponding reduction in outward tax liability was not reflected in GSTR-3B at that time. Subsequently, the petitioner adjusted the tax impact of these credit notes in GSTR-3B filed in July 2023. Based on the mismatch between GSTR-1 and GSTR-3B, the department issued an intimation under Rule 88C of the Central Goods and Services Tax Rules, 2017 in Form GST DRC-01B. Thereafter, a recovery intimation was issued in Form GST DRC-01D invoking Section 75(10) read with Section 79. 

The petitioner submitted explanations stating that the alleged liability arose due to adjustment of previously reported credit notes, and therefore there was no short payment of tax. Despite this, the department issued a garnishee notice dated 03.02.2026 to the petitioner’s banker (HSBC Bank) and froze the petitioner’s bank account.

Aggrieved by the recovery action, the petitioner approached the High Court seeking quashing of the recovery notice and lifting of the bank account freeze.

Issue:

Whether the GST department can initiate recovery proceedings under Section 79, including garnishee proceedings against the taxpayer’s bank account, without first examining the taxpayer’s explanation and supporting documents regarding the alleged mismatch between GSTR-1 and GSTR-3B.

Held that:

The Court observed that the petitioner had already provided explanations and expressed willingness to submit all supporting documents to clarify the difference between GSTR-1 and GSTR-3B arising from the reporting of credit notes.

The Court noted that the department had called for certain documents by email but before the petitioner could furnish the same, recovery proceedings were initiated by issuing garnishee notices to the petitioner’s banker. The Court held that in such circumstances, the department ought to have examined the taxpayer’s explanation and supporting documents before proceeding with recovery.

Considering that the petitioner was a reputed company and had shown willingness to provide complete documentation, the Court held that immediate recovery through garnishee proceedings was not justified at that stage. Accordingly, the Court directed that the garnishee notice issued to HSBC Bank be withdrawn forthwith, enabling the petitioner to operate its bank account. The petitioner was directed to submit all relevant documents within 10 days, and the department was directed to examine the material and take an appropriate decision regarding the recovery within one month thereafter.

Case Name: WIPRO LIMITED v. THE STATE OF MAHARASHTRA & ORS. dated 12.02.2026

To read the complete judgement 2026 Taxo.online 537