Once 10% pre-deposit is paid under Section 107(6), recovery must
stop—AP High Court orders refund of ₹170 crores and revokes provisional
attachment.
Introduction
The Andhra Pradesh High
Court, in a detailed and impactful judgment delivered on 3 September 2025,
protected the rights of a GST taxpayer against premature and excessive recovery
action by the State Tax Department. The Court held that once a taxpayer files
an appeal against a GST assessment order and pays the mandatory 10%
pre-deposit, a deemed stay comes into effect under Section 107(6)
of the APGST Act. After this stage, authorities cannot continue recovery or
impose conditions forcing the taxpayer to keep large balances in the bank.
This judgment came in the
case of Wingtech Mobile Communications (India) Pvt. Ltd. vs. State of Andhra
Pradesh, where the company faced an enormous demand of ₹244.63 crores,
provisional attachment of its accounts, and forced recovery of ₹170 crores—all
before it could even file an appeal. The High Court analyzed the legality of
these actions and granted substantial relief.
Case
Details
- Case Title:
Wingtech Mobile Communications (India) Pvt. Ltd. vs. Deputy
Commissioner ST, Tirupati & Others
- Court:
High Court of Andhra Pradesh at Amaravati
- Bench:
Justice R. Raghunandan Rao & Justice T.C.D. Sekhar
- Case No.:
W.P. 22461/2025
- Date of Judgment:
3 September 2025
Background
of the Dispute
Wingtech Mobile
Communications is a manufacturing company engaged in mobile production in
Tirupati. The State Tax Department initiated enforcement action against the
company beginning in July 2025.
1. Provisional Attachment
Under Section 83
On 17.07.2025, the
department provisionally attached the company’s bank account with HSBC Bank,
Chennai. As a result, Wingtech could not operate its main current account.
2. Assessment Order
Shortly thereafter, on 02.08.2025,
a massive tax demand of ₹244,63,28,470 was raised under Section 73(9)
of the APGST Act.
3. Recovery Before Appeal
Period Expiry
Before the company could
file an appeal, the department issued a recovery notice under Section
79(1)(c) on 19.08.2025, even though the law grants 90 days
for filing an appeal.
This recovery notice was
sent to HSBC Bank, which resulted in the forcible withdrawal of ₹170 crores
from the company’s account.
4. Company Unable to File
Appeal
Since the bank account
was emptied and the account remained frozen, Wingtech could not pay the 10%
pre-deposit required for filing an appeal under Section 107(6). Therefore,
the company approached the High Court through a writ petition.
Issues
Raised in the Writ Petition
The petitioner
challenged:
1. Recovery
notice dated 19.08.2025, issued before expiry of 90 days.
2. Forced
withdrawal of ₹170 crores from its bank account.
3. Provisional
attachment orders dated 16.07.2025 and 17.07.2025.
4. The
insistence of the department that the company must maintain ₹130 crores
in its account until the appeal is disposed of.
The company also
requested that the amount forcibly recovered be treated as the 10%
pre-deposit, and the remaining balance be refunded.
Interim
Relief Granted by Court
On 22.08.2025, the
High Court allowed Wingtech to file an appeal and held that:
- The requirement of 10% pre-deposit would
be deemed to have been met by adjusting ₹24.4 crores out of the
₹170 crores already taken.
- The Chief Commissioner must consider
Wingtech’s representation for refund of excess amount.
Subsequently, on 01.09.2025,
the Chief Commissioner:
- Revoked provisional attachments
- Allowed the company to operate its
HSBC account
- Acknowledged the ₹170 crores recovery
as satisfying the 10% pre-deposit requirement
- However, imposed a new condition
requiring the company to maintain ₹130 crores balance in its bank
account
This condition was again
challenged by the company.
Arguments
by the Petitioner
Wingtech argued that:
1. Section
107(6) creates a statutory “deemed stay” once 10% of the disputed
tax is paid.
2. After
deemed stay comes into effect, the department cannot insist on maintaining
balances or continue recovery proceedings.
3. The
demand itself was ₹244 crores, and with ₹170 crores already recovered,
forcing retention of ₹130 crores is irrational and excessive.
4. The
company voluntarily undertook not to take any sale proceeds outside India until
the appeal is disposed of.
5. The
recovery of ₹170 crores before expiry of 90 days was illegal.
Arguments
by the Government Pleader
The department argued
that:
- The petitioner did not give any
formal undertaking earlier.
- Hence, the department could not
refund the ₹170 crores.
- Retaining ₹130 crores was necessary
for safeguarding revenue.
However, the department
could not point to any statutory provision allowing it to require maintenance
of funds after the 10% deposit is made.
Court’s
Findings
The Court conducted a
careful analysis and made important legal observations.
1. Authorities Cannot
Recover Once 10% Pre-Deposit is Paid
The Court made it clear:
“We do not find any
provision which would permit such a course of action once a deemed stay comes
into play under Section 107.”
This sentence forms the
core of the judgment.
Once the taxpayer pays or is deemed to have paid the 10% pre-deposit,
recovery must stop.
2. No Power to Impose
Conditions Like Maintaining Balance
The Court held that after
statutory pre-deposit:
- The department cannot insist
on the taxpayer keeping ₹130 crores in its bank account.
- There is no statutory backing
for such a requirement.
3. Refund Must Be
Released
The Court held that
Wingtech is entitled to refund of the amount recovered beyond the 10%
pre-deposit.
4. Petitioner’s
Undertaking is Sufficient
The Court accepted
Wingtech’s offer to:
- Maintain refunded amount in its bank
account until appeal is disposed.
- Keep future sale proceeds in the
account to maintain a minimum balance of ₹221 crores (pre-deposit +
balance requirement).
5. Provisional
Attachments and Recovery Revoked
Since the department had
already revoked the attachments, the Court directed release of funds subject to
undertakings.
Final
Directions of the Court
The High Court disposed
of the writ petition with the following binding directions:
1. Wingtech
must file an undertaking that it will keep all refunded
amounts in its bank account until the appeal is decided.
2. Department
must refund ₹170 crores, after retaining only the 10%
pre-deposit.
3. Upon
receiving sale proceeds of property, Wingtech must maintain minimum balance
of ₹221 crores until appeal disposal.
4. The
amount of ₹221 crores = ₹24.4 crores (pre-deposit already met) + required
balance.
No costs were imposed,
and pending miscellaneous applications were closed.
Conclusion
This judgment provides
strong protection to taxpayers facing aggressive GST recovery actions. The
Andhra Pradesh High Court has reinforced three critical principles:
1. Statutory
rights under Section 107 cannot be bypassed.
The taxpayer has 90 days to file an appeal, and recovery before that is
illegal.
2. Once
10% of the disputed tax is paid, recovery is automatically stayed.
The department cannot impose additional financial conditions.
3. Refund
of excess recovery is mandatory.
Forced withdrawal of funds and retention beyond pre-deposit limits violates
statutory safeguards.
This ruling will greatly
help businesses that face premature bank attachments, forced withdrawals, and
coercive recovery during the GST dispute process
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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