Punjab and Haryana High Court Bars Coercive Recovery Action Against Firm After VAT Records 'Burnt In Fire'

The Punjab and Haryana High Court has restrained the Punjab tax department from taking coercive recovery action against a proprietorship firm over a legacy VAT demand, after the state told the court that the assessment record had been destroyed in a fire.

A Division Bench of Justice Lisa Gill and Justice Ramesh Chander Dimri recorded the State's submission that the assessment order against Swastika Insulation was not available with the department, as the record was “stated to have been burnt.”

The court issued notice to the State and directed that no coercive steps be taken till the next date of hearing.

The case relates to a demand of about Rs 41 lakh for the year 2012–13, when the firm was registered under the Punjab VAT Act. According to the petition, the department claims an assessment order was passed in November 2019, but the firm says it was never served with any such order.

The firm has told the court that it came to know about the alleged demand only in March 2024, after receiving a phone call from the department. It says it then sought a copy of the assessment order in writing but received no response.

According to the plea, despite the assessment order not being supplied, the department uploaded Form GST DRC-07A (a recovery notice issued on the GST portal for enforcing tax demands) in December 2024 and proceeded to recover amounts by directly debiting the firm's electronic cash and credit ledgers.

The firm has also pointed to errors in the annexure attached to the recovery notice. It claims the document itself shows that the assessed tax was adjusted against input tax credit and even reflects excess credit, yet still raises a further tax demand and penalty.

The petition further relies on information received under the Right to Information Act, under which the department stated that the entire assessment record had been destroyed in a fire. The firm argues that it has been left without any effective statutory remedy, as it cannot challenge an assessment order that has neither been served nor produced.

For now, the High Court has granted the State time to file its reply and ordered that no coercive recovery be carried out against the firm until the matter is heard further.

For Petitioner: Advocates Amit Bajaj, Chetan Jain, Porush Jain

For Respondent: Additional AG, Punjab R.S.Pandher