Facts of the case: In this case, the petitioner challenged the premature recovery of GST dues by the Department despite the statutory appellate remedy remaining available under the Central Goods and Services Tax Act, 2017. An Order-in-Original dated 24 December 2024 had confirmed a GST demand of ₹1,11,71,740 along with applicable interest and penalty. Although the petitioner had already preferred a first appeal after making the prescribed pre-deposit, the appeal was rejected and the summary order in Form GST APL-04 was issued on 19 January 2026.

Before the expiry of the limitation period for filing a second appeal before the GST Appellate Tribunal under Section 112 of the CGST Act, the Department issued a garnishee notice in Form GST DRC-13 on 13 February 2026, pursuant to which the petitioner’s bank account was debited for the entire demand amount. During the pendency of the writ petition, the Department re-credited the recovered amount to the petitioner’s Electronic Cash Ledger instead of refunding the amount to the bank account from which it had been recovered. The petitioner contended that the premature recovery had severely affected its business operations and sought restoration of the amount to its bank account.

Issue: Whether the amount recovered by the Department from the petitioner’s bank account before expiry of the statutory period for filing a second appeal under Section 112 of the CGST Act, and subsequently re-credited to the Electronic Cash Ledger, should be refunded to the petitioner instead of remaining as a ledger balance.

Held that: 

The High Court observed that the controversy was confined to the question of refund or re-credit of the amount recovered before the expiry of the statutory period available for filing a second appeal under Section 112 of the CGST Act. Taking note of the fact that the Department had itself chosen to re-credit the recovered amount to the petitioner’s Electronic Cash Ledger, the Court found that the petitioner could seek refund of the amount, particularly when the recovery from the bank account had adversely impacted its business activities.

The Court disposed of the writ petition by granting liberty to the petitioner to file a refund application in respect of the amount lying in the Electronic Cash Ledger. The Court directed that if such an application was filed within one week, the jurisdictional Assistant Commissioner should consider and decide the refund claim in accordance with law within one week thereafter, keeping in view the observations made by the Court.

Case Name: Phoenix Spaces (Guntur) Private Limited Versus The Additional Commissioner of Central Tax, Hyderabad dated 08.06.2026

To read the complete judgement 2026 Taxo.online 1713