No GSTAT, No Recovery: Delhi HC Stops GST Recovery After Pre-Deposit

The Delhi High Court has given a major relief to taxpayers by ruling that no GST recovery can be made if the Goods and Services Tax Appellate Tribunal (GSTAT) is not yet operational — as long as the taxpayer pays the mandatory pre-deposit under GST law.

This ruling brings huge relief to many businesses waiting to file appeals but stuck due to the non-functional GST Tribunal.

Background of the Case

The case was filed by M/s Welcut Industries, which had received a GST demand of ₹27,000 as per an Order-in-Appeal dated 23rd May 2025.

Since the GSTAT was constituted but not functional, the company couldn’t file an appeal under Section 112 of the CGST Act, 2017.

Their counsel informed the court that they were ready to deposit the pre-deposit amount (10%), yet the department started recovery proceedings.

What the Court Said

A bench of Justice Prathiba M. Singh and Justice Shail Jain referred to the CBIC Circular dated 11th July 2024, which clearly allows taxpayers to:

• Deposit the mandatory pre-deposit amount, and

• Submit an undertaking to file an appeal once the GST Tribunal becomes functional.

The circular also states that no recovery should be made on the remaining amount until the appeal can be filed.

Following this, the Delhi High Court ordered M/s Welcut Industries to:

• Deposit 10% of the disputed amount by 15th November 2025, and

• Directed that the remaining recovery be stayed until the GSTAT starts working.

Once the Tribunal begins functioning, the deposited amount will automatically be treated as the official pre-deposit for appeal.

Why This Judgment Matters

This decision ensures that taxpayers are not punished for delays beyond their control.
It clearly confirms that:
- If GSTAT isn’t operational, recovery can’t start.
- Paying the 10% pre-deposit protects the taxpayer.
- CBIC’s circular is legally valid and must be followed by GST officers.

It’s a much-needed relief for businesses who have been waiting months to file their appeals.

What Taxpayers Should Do Now

If you’re facing a similar issue, here’s what you should do:

1. Deposit 10% of the disputed amount (as pre-deposit).

2. Submit an undertaking saying you’ll file an appeal once GSTAT starts.

3. Refer to CBIC Circular dated 11th July 2024 for guidance.

4. Approach the High Court if recovery still continues.

This way, you’ll be protected until the Tribunal begins functioning.

FAQs

Q1. What does the Delhi High Court’s decision mean for taxpayers?
It means that if GSTAT isn’t operational, no recovery can be made as long as the taxpayer has paid the 10% pre-deposit.

Q2. What is a pre-deposit under GST?
It’s a small percentage (usually 10%) of the total disputed GST amount that taxpayers must pay before filing an appeal.

Q3. Can the department still recover the remaining amount?
No. Once the pre-deposit is made and an undertaking is filed, recovery of the remaining amount must stop until GSTAT starts working.

Q4. Is the CBIC circular binding on GST officers?
Yes, it provides clear instructions that recovery should remain on hold once the pre-deposit is made.

Q5. Will the taxpayer need to pay again when GSTAT starts?
No, the same amount will be considered as the official pre-deposit for the appeal.

Conclusion

The Delhi High Court’s “No GSTAT, No Recovery” judgment is a big win for taxpayers.
It ensures fairness and protects businesses from unfair recovery when the appellate tribunal isn’t functional.