GST Recovery Under Section 79: Andhra Pradesh High Court Upholds Garnishee Notice Issued Directly to Bank Without Prior Notice to Assessee

Background and Context

A significant ruling has emerged from the Andhra Pradesh High Court concerning the scope and operation of recovery proceedings under the Goods and Services Tax framework. The judgment in V.V.S. Enterprises vs. State of Andhra Pradesh & Ors. addresses a critical question that frequently arises in GST enforcement — whether tax authorities are obligated to serve prior notice upon a defaulting assessee before initiating recovery action against third parties such as banks under Section 79(1)(c) of the CGST Act, 2017.

The decision carries substantial practical significance for registered assessees, as it draws a clear line between situations where tax liability remains disputed or undetermined and circumstances where an assessment order has already crystallized the demand and gone unchallenged for an extended period.

Facts of the Case

V.V.S. Enterprises (hereinafter referred to as "the Petitioner"), a registered dealer under the GST regime, found itself at the receiving end of a garnishee notice issued to its bank, directing the financial institution to remit an amount of Rs. 7,54,108/- representing outstanding tax dues payable to the Government.

The sequence of events was as follows:

  1. An assessment order dated January 17, 2025 was passed by the tax authorities, determining the Petitioner's tax liability under the applicable provisions of the GST Act.
  2. This assessment order was uploaded on the official GST portal, making it accessible to the Petitioner.
  3. The Petitioner did not challenge or respond to this assessment order for a period exceeding one year.
  4. On February 05, 2026, the tax authorities issued a notice under Section 79(1)(c) of the CGST Act, 2017, directing the Petitioner's bank to remit the outstanding dues directly to the Government.
  5. The Petitioner, aggrieved by this garnishee action, approached the Andhra Pradesh High Court by way of Writ Petition No. 6645 of 2026, seeking quashing of the impugned notice.

Contentions of the Parties

Petitioner's Submissions

The Petitioner raised the following principal objections before the High Court:

  • Absence of adjudication: The Petitioner alleged that no proper adjudication had been carried out under Sections 73/74 of the CGST Act, 2017 before initiating recovery proceedings.
  • Lack of prior notice: Recovery action was commenced without serving any prior notice upon the Petitioner, which allegedly violated the principles of natural justice.
  • Absence of authorization: The Petitioner contended that the officer issuing the garnishee notice lacked the requisite authorization from a competent authority to exercise powers under Section 79.
  • Jurisdictional infirmity: On account of the above deficiencies, the Petitioner argued that the impugned notice suffered from a lack of jurisdiction and was liable to be set aside.

Respondent's Submissions

The State of Andhra Pradesh and the tax authorities countered these contentions on the following grounds:

  • An assessment order dated January 17, 2025 had been duly passed, uploaded on the portal, and was within the knowledge of the Petitioner.
  • The said assessment order had remained completely unchallenged for over one year, thereby attaining finality under law.
  • The proper officer who issued the impugned notice was duly empowered under the Gazette Notification dated December 14, 2022 to exercise powers under Section 79 of the CGST Act, 2017.
  • Section 79 is a pure recovery mechanism and contains no express requirement to issue prior notice to the defaulting dealer before proceeding against third parties.

Whether recovery proceedings under Section 79(1)(c) of the CGST Act, 2017 can lawfully be initiated against third parties — including banks — without issuing prior notice to the assessee and without specific authorization from a competent authority, once an assessment order determining tax liability has attained finality?

Decision of the Andhra Pradesh High Court

The Hon'ble Andhra Pradesh High Court, in Writ Petition No. 6645 of 2026, dismissed the writ petition and upheld the recovery proceedings. The key findings and holdings of the Court are as follows:

Nature of Section 79