In a significant ruling, the Gujarat High Court addressed the procedural lapses in the recovery of interest on delayed tax payments under the GST framework. The case involved Bombay Art, a registered GST dealer, challenging a demand for ₹28,16,834/- issued by the Central GST authorities without a formal assessment or show-cause notice. The authorities had attempted to recover the amount by freezing the petitioner's bank accounts, following an advisory notice and a subsequent Form DRC-13, despite the absence of a preceding notice in Form DRC-01D as required by the rules.
The court examined whether the department could initiate recovery proceedings without issuing a formal notice in Form DRC-01D, as mandated by Rule 142B. This rule, effective from August 2023, requires an intimation in Form GST DRC-01D before any recovery action under Section 79, including interest collection. The court held that the advisory notices issued were not valid recovery notices and could not justify coercive measures like bank account attachment.
Read More: GST – Orissa High Court: Parallel proceedings by State and Central Authorities barred under Section 6(2)(b); Central order quashed [Order attached]
Emphasizing the need for procedural compliance, the court outlined a two-step process: issuing a notice in Form DRC-01D and providing an opportunity for reply and hearing before proceeding with recovery actions. Drawing from precedents, the court quashed the notice dated May 2024 and allowed the department to restart the process in compliance with legal requirements. The ruling underscores the importance of following due process in tax recovery actions, reinforcing the principles of natural justice.
Order date: 10 Oct 2025
Parties: Bombay Art v. Union of India & Ors.
Facts –
- The petitioner, a registered GST dealer (HUF), challenged the notice dated 27.03.2023 and subsequent communications issued by the Central GST authorities demanding ₹28,16,834/- towards interest on delayed tax payment under Section 50 of the CGST Act.
- The department invoked Section 75(12) and threatened recovery under Section 79 without initiating any formal assessment proceedings or issuing a show-cause notice.
- Later, the authorities issued Form DRC-13 (dated 20.05.2024) attaching the petitioner’s bank accounts, leading to freezing of funds.
- The petitioner sought quashing of these actions and refund of ₹7,50,000/- paid under protest, arguing that recovery without notice violates Rule 142B and principles of natural justice.
Issue –
- Whether the department can initiate recovery proceedings for interest on delayed tax payment under Section 75(12) without issuance of a formal notice in Form DRC-01D as prescribed under Rule 142B of the GST Rules?
Order –
- The Court noted that Rule 142B, inserted on 04.08.2023, mandates that any recovery under Section 79 (including interest) must be preceded by an intimation in Form GST DRC-01D, treated as a recovery notice.
- It held that the impugned “advisory” or demand letters were not valid recovery notices and could not trigger coercive recovery or bank attachment.
- The Court clarified that authorities must follow a two-step procedure: to Issue notice/intimation in Form DRC-01D under Rule 142B and to Provide opportunity to reply and hearing under Section 75(4) before proceeding to recovery under Section 79.
- The Bench relied on Reliance Formulation Pvt. Ltd. v. Assistant Commissioner of State Tax (SCA No. 5453 of 2025) and Rajkamal Builder Infrastructure Pvt. Ltd. v. Union of India (2021) 127 Taxmann.com 150 (Guj), affirming that no recovery can occur without DRC-01D compliance.
- Consequently, the notice dated 20.05.2024 was quashed and set aside, with liberty to the department to proceed afresh strictly in accordance with law. Petition allowed, and Rule made absolute.
