Bombay High Court: paying the GST appeal pre-deposit stays recovery of the disputed interest too

Allowing three connected writ petitions, the Bombay High Court held that recovery proceedings against a company for disputed GST interest demands, while its appeals against those very demands were pending before the GST Appellate Tribunal, breached the automatic stay under Section 112(9) of the Central/Maharashtra GST Act. Justices M.S. Karnik and Sandesh D. Patil held that once an appellant complies with the pre-deposit requirements of Section 112(8), recovery of the balance amount in dispute stands stayed by operation of law until the appeal is decided, and this protection is not confined to disputes over the tax itself but extends equally to disputed interest demands. The Court rejected the State's argument that the Section 112(8) pre-deposit protection does not extend to interest alone where the underlying tax itself has already been paid, holding that Section 112(9) draws no such distinction.

It therefore quashed recovery communications and consequential garnishee notices issued to the petitioner's banks under Section 79(1)(c), which had restricted its banking operations by freezing its accounts, and directed the tax authorities to withdraw the notices and lift the resulting debit restrictions so that ordinary banking operations could resume. The Court left open, for the pending appeals before the Tribunal to decide on their own merits, the petitioner's disputes over the correctness of the interest computation and its claim for a refund of amounts already paid under protest.