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August 25, 2020

Emails sent to taxpayers for payment of interest in GST u/s 50 are merely “intimations” and not “orders”

Emails sent to taxpayers for payment of interest in GST u/s 50 are merely “intimations” and not “orders”

Section 50 of CGST Act pertains to interest on delayed payment of GST. According to Section 50, every person who is liable to pay GST, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall, for the period for which the tax or any part remains unpaid, pay interest not exceeding 18%.

The interest shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which tax was due to be paid.

GST law makers have incorporated the elaborate provisions for the recovery of tax under various situations such as tax short paid or erroneously refunded or Input tax credit wrongly availed and non-payment of self-assessed tax or amount collected but not deposited taxes to the Government.

Section 78 of the CGST Act, provides that any amount payable by a taxable person in pursuance of an order passed shall be paid within 3 months from the date of service of such order. If the same is not paid then recovery proceedings shall be initiated by the department.

The proper officer considers it expedient in the interest of revenue it may with reasons to be recorded in writing, require the said person to make such payment within such reduced period as may be specify by him.

Section 79 of CGST Act 2017 pertains to Recovery of Tax. Section 79 contemplates that any amount payable by a person to the Government under any of the provisions of the Act and Rules made there under is not paid then the proper officer could recover the amount by one or more modes.

Let us refer to the case of Sahara Hospitality Ltd. v State of Maharashtra where the stand taken by Revenue is that the emails being sent to taxpayers for payment of interest are merely “intimations” and not “orders”, and will not be made the basis of any recovery action for interest u/s 50.

Submissions by the Petitioner

  • According to the Petitioner, Respondent seeked to directly recover interest under Section 50 of the GST Act through coercive recovery provisions of Section 79.
  • As per the petitioner this was clearly in contravention of Section 78 of the GST Act, which provided for a 3 month breathing period after the passing of any order, before the coercive recovery provisions of Section 79 can be invoked.
  • It was further submitted by the Petitioner that the impugned orders were passed without issuing any show cause notice and without giving a hearing to the Petitioner. The Petitioner was not aware of how the interest calculation has been arrived at.
  • The Petitioner had also submitted that Respondent was threatening to initiate coercive recovery proceedings under Section 79 of the GST Act if the amount is not paid within a period of 7 days

The Respondent filed an Affidavit in Reply

  • Respondent denied the conclusion arrived at by the Petitioner.
  • It submitted that the email sent to the Petitioner was merely an intimation of payment of interest under section 50 of CGST Act.
  • The payment of interest was on account of late fling of Return-GSTR 3B from July, 2017.
  • The office of the Respondent was conscious of the procedure required to be followed by it to recover and will initiate recovery proceedings with issuance of show cause notice, working of interest calculations and further actions as per provision of law.
  • There was no intention of the Respondent to directly recover interest u/s 50 of CGST Act, 2017.
  • Therefore the respondent stated that the writ petition was not only without merits but premature and hence was liable to be dismissed.

In view of the statements made in the Affidavit in Reply filed by the Respondent, the Advocate appearing for the Petitioner did not press for reliefs sought in the Petition and hence the Petition was disposed. The High Court also recorded the undertaking of authorities that interest under Section 50 will not be recovered without following proper procedure of show cause and hearing and without providing proper working to Petitioner.

In conclusion interest u/s 50 cannot be recovered on the basis of emails sent to taxpayers for payment of interest u/s 50 as they are merely “intimations” and not “orders”. Recovery can only take place after complete procedure is followed.

Section 79 provides the various modes of recovery of tax by the proper officer in the following manner:

  • The proper officer may recover by deducting the amount from the other amount payable to such person which may be under the control of such officer.
  • The proper officer may recover by detaining or selling any goods belonging to such person which are under his control.
  • The proper officer may by notice in writing, recover from other person, from whom money is due or may become due to such person or who holds or may subsequently hold money for or on account of such person, to pay to the Government.
  • The proper officer may detain any movable or immovable property belonging to or under control of such person and detain the same until the amount payable is paid. If the dues not paid within 30 days, the said property is to be sold and with the proceeds of such sale the amount payable and cost of sale shall be recovered.
  • The proper officer may prepare a certificate specifying amount due from such person and send it to collector of the relevant district and collector shall proceed to recover from such person the amount as if it were an arrear of land revenue.
  • The proper officer by way of an application to the appropriate Magistrate who in turn shall proceed to recover the amount as if it were a fine imposed by him
  • Where any bond or other instrument was executed under this Act or Rules or regulations made there under provided that any amount due under such instrument may be recovered.
  • The proper officer of State tax or Union tax, during the course of recovery of said tax arrears from any person may recover unpaid amount of tax, interest, penalty payable to Central Government by such person. Such amount will be recovered as if it were arrear of SGST/UTGST and credit the amount so recovered to the account of Central Government.
  • In case the amount recovered is less than the amount due, then such amount will be apportioned among Central Government, State Government & Union Territory in proportion of the amount due to each authority.

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