In WP 15490/2023 -AP HC- Andhra Pradesh High Court deems ‘frozen bank account’ as ‘relevant factor’ in assessing appeal delays under CGST Act
Justice Durga Prasad Rao & Justice Venkata Jyothirmai Pratapa [19-07-2023]

Read Order: M/s. S.A. Iron and Metal v. The Assistant Commissioner (ST) & Ors.

Chahat Varma

New Delhi, August 14, 2023: The Andhra Pradesh High Court has ruled in favour of M/s. S.A. Iron and Metal (petitioner), asserting that when a petitioner's bank account is frozen by authorities, it is a relevant factor to consider in evaluating the delay for filing appeals under the Central Goods and Services Tax Act (CGST Act). This is especially notable due to the obligatory pre-deposit requirement of 10% of the disputed tax during appeal filing.

The brief background of the case was that the petitioner, involved in the trade of purchasing and selling iron scrap, underwent an inspection by the Assistant Commissioner (ST) Regional GST Audit and Enforcement Wing. Subsequently, a taxable amount of Rs. 5,48,29,347, inclusive of tax, penalty, and interest, was determined. Disputing the correctness of the order issued by the Assessing Authority, the petitioner escalated the matter to the Additional Commissioner (ST). However, due to the petitioner's frozen accounts by the Department, they were unable to gather the necessary funds for the mandatory pre-deposit of 10% of the contested tax, which was a requisite for appealing. The Additional Commissioner (ST) rejected the appeal through an impugned Order dated June 3, 2023.

The division bench of Justice Durga Prasad Rao and Justice Venkata Jyothirmai Pratapa noted that the term ‘sufficient cause’ within Section 107(4) of the CGST Act, regarding the condonation of delay in filing appeals before the Commissioner (Appeal), had been interpreted by the Apex Court in the case of Collector, Land Acquisition Vs. Mst. Katiji [LQ/SC/1987/214]. In this context, it was emphasized that the expression 'sufficient cause' possesses sufficient flexibility to empower courts to interpret and apply the law in a manner that serves the purpose of justice

The bench further remarked that when evaluating a request for the condonation of delay, the key factor was not the duration of the delay itself, but rather the reason behind the delay. If the cause aligned with the provisions laid out in Section 107(4) of the Act, then such delay should be condoned, regardless of its length.

Therefore, the bench concluded that the freezing of the petitioner's bank account by the authorities was a relevant factor to consider in assessing the delay. The bench criticized the Commissioner's standpoint, likening it to making a horse run with tied legs.

The bench asserted that the right of appeal, which was established by statute, constituted a substantive entitlement for the concerned party, and this right cannot be denied by adopting a narrow or overly rigid interpretation. The bench expressed dissatisfaction with the reasons provided by the Commissioner for rejecting the appeal, emphasizing that the delay fell within the condonable period of limitation and the presented cause was sufficient to warrant entertaining the appeal.

As a result, the writ petition was allowed in favour of the petitioner. The order, issued by the Additional Commissioner (ST), was set aside and the Additional Commissioner was instructed to reinstate the appeal and proceed with the case in accordance with the provisions of the law.