Percentage-Based Pre-Deposit U/S 112(8)(b) CGST Act Does Not Extend To Disputed Interest Alone When Entire Tax Is Paid: Bombay High Court
The Court quashed the bank recovery notices for ₹22.12 crore interest as “in the teeth of” Section 112(9); leaves merits of interest and ₹80 crore refund claim open.
The Bombay High Court has held that the percentage-based pre-deposit prescribed by Section 112(8)(b) of the CGST/MGST Act “does not extend to disputed interest alone, especially when the entire tax has been paid”. Once the appeal is filed on that footing, recovery of the balance stands deemed stayed under Section 112(9) until the Tribunal decides it.
Allowing three writ petitions, the Court quashed recovery communications dated September 4 and 23, 2026 and five notices dated September 29, 2026 issued to banks under Section 79(1)(c), seeking ₹22,12,15,180. It directed the Assistant Commissioner to withdraw the notices and lift the resulting debit restrictions. It expressed no opinion on the merits of the interest demand or the petitioner’s refund claim of about ₹80 crore.
A Division Bench of Justice M.S. Karnik and Justice Sandesh D. Patil observed, “Perusal of Section 107(6) and Section 112(8) of the CGST/MGST Act make it clear that there is no requirement of predeposit of interest, when entire amount of tax has been paid…”.
“…We therefore have no hesitation in holding that the percentage-based predeposit prescribed by Section 112(8)(b) does not extend to disputed interest alone, especially when the entire tax has been paid. The merits of the interest demands, including the applicable tax base, payment dates and computation, are the subject of the pending appeals before the Tribunal”, the Bench noted further.
Senior Advocate Darius Shroff appeared for the petitioner and Shruti D. Vyas, AGP appeared for the respondent.
The petitioner, a highway construction company, was found by State GST officers in January 2026 to have paid tax late on certain invoices. A show cause notice dated January 22, 2026 sought interest under Section 50. The adjudicating authority confirmed the demand on April 16, 2026, and the First Appellate Authority upheld it on July 13, 2026. The petitioner’s appeal before the GST Appellate Tribunal is pending.
The revenue argued that interest is compensatory and arises automatically, that Section 75(12) treats self-assessed liability as admitted and recoverable under Section 79, and that late payment does not erase interest. The petitioner relied on Sections 107(6), 107(7), 112(8) and 112(9).
The Court noted it was undisputed that the entire tax had been paid. Sections 107(6) and 112(8) require a deposit of admitted amounts and ten per cent of disputed tax, but nothing for interest when only interest is challenged. It observed that the First Appellate Authority and the Tribunal had both accepted the appeals without any pre-deposit of interest. Since the statutory requirement was met, Section 112(9) deemed recovery stayed, and the Court found the recovery “in the teeth of” that provision.
On the revenue’s argument that the payments were voluntary, and the petitioner’s reply that they were made under protest to restore banking operations, the Court said the contentions “may be raised before the appropriate forum” and expressed no opinion.
The Court allowed prayer clauses (a), (b) and (c). It quashed the recovery communications and bank notices insofar as they sought recovery of interest covered by the pending appeals, and declared that recovery of the balance stands stayed under Section 112(9). It also directed withdrawal of the notices and restoration of ordinary banking operations.
Cause Title: Roadway Solutions India Infra. Ltd v. State of Maharashtra and others (Neutral Citation: 2026:BHC-AS:43662-DB)
Appearances:
Petitioner: Darius Shroff, Senior Advocate, Parag Khandhar, Kiran Chavan and Tapan Radkar, Advocates instructed by Cenex Legal LLP.
Respondent: Shruti D. Vyas, Addl. Government Pleader, A. R. Deolekar, AGP, Rajan N. Badar, Officer, ACST, SGST, was present.