Calcutta High Court Halts GST Recovery From Trader's Electronic Credit Ledger Pending Rectification Plea

The Calcutta High Court has stepped in to stop GST recovery from a trader's electronic credit ledger, saying the department must first decide a pending rectification plea that could wipe out the entire demand.

Justice Om Narayan Rai passed the order on December 22, 2025, while hearing a writ petition filed by Tirupati Traders.

In a brief but clear order, the court said that if the rectification application is allowed, “the demand raised by the order in original may not survive,” and therefore it would be proper to first have that application decided.

The court directed the proper officer to consider and dispose of the petitioners' application for rectification within a period of four weeks from the date of communication of this order.

The issue began with a tax demand issued on December 12, 2023. The trader had questioned the correctness of that order and had approached the adjudicating authority seeking rectification.

Pending the decision in the rectification plea, the CGST authorities went ahead and initiated recovery proceedings, debiting more than 20 percent of the disputed tax amount from the trader's electronic credit ledger.

The counsel for the trader told the court that the demand order was passed by applying the wrong provision of law and without even considering the reply to the show cause notice. He also pointed out that no opportunity for a personal hearing was granted.

The tax department opposed the plea, saying the trader had approached the High Court far too late and that the law already provided a proper remedy by way of an appeal, making the writ petition unnecessary.

They also said that the pendency of a rectification application could not justify approaching the High Court at this stage.

After looking at the records, including ledger entries showing that more than 20 percent of the disputed tax had already been recovered, the court restrained the department from making any further recovery while the rectification application remains pending.

It clarified that “till such time the petitioners' application for rectification remains pending, the respondents/CGST authorities should not proceed to recover any further sum from the petitioners on the strength of the order dated December 12, 2023.”

The court added that this protection would apply subject to verification that more than 20 percent of the disputed tax has indeed been recovered. The court also allowed the trader to file an additional representation in support of the rectification plea. 

Case Title: Tirupati Traders & Anr. vs. The Union of India & Ors.

Citation: 2026 LLBiz HC (CAL) 6

Case Number: WPA 7846 of 2025