Interest cannot be recovered without initiation & completion of adjudication proceedings: GST
Facts and issue of the case
Interest amounting to Rs.83,96,873/- on the alleged ground of delay in furnishing GSTR-3B return for the period July 2017 to December 2019 has been levied by the impugned letter dated 28th February 2020 / 2nd March 2020 issued by the respondent no.2 Assistant Commissioner, CGST and Central Excise, Ranchi. The same has been challenged on the specific ground that since the liability has been disputed by the petitioner, the same could not have been levied without any adjudication proceeding under Section 73 or 74 of the CGST Act which has not been done admittedly in this case. Petitioner has by way of his reply dated 9th March 2020 (Annexure-5) disputed the liability. According to the petitioner, no rules have been prescribed in terms of Section 50 Sub-Section (2) for computation of the interest under Sub-Section (1). Interest cannot be charged on the gross tax liability. In this regard learned counsel for the petitioner has referred to the Finance Act, 2021. Section 112 has inserted a proviso to Section 50 of the CGST Act.
The due date for filing return in GSTR-3B has also been extended from time to time by the respondent authorities. Learned counsel for the petitioner submits that the issue under consideration is fully covered by the decision rendered by the Coordinate Bench of this Court in the case of Mahadeo Construction Company Vrs. Union of India & Ors. W.P.(T) No.3517 of 2019 dated 21st April 2020.
Observation of the Case
Learned counsel for the CGST Mr. P.A.S. Pati has submitted that monthly returns in Form GSTR-3B and payment of tax have been made after the due date prescribed under Section 39(1) of the CGST Act without discharging the applicable interest payable on the delayed payment of tax under Sub-Section 1 of Section 50 of the CGST Act. Further, the interest payable on such delayed payment of tax can be recovered under Section 79 read with Section 75(12) of the CGST Act. It is submitted that Rule 61(5) of the CGST Rules has been amended retrospectively w.e.f. 1st July 2017 vide notification no.49 of 2019 Central Tax dated 9th October 2019 providing that GSTR-3B shall be a return under Section 39 of the CGST Act. Further Rule 61(6) of the CGST Rules has also been omitted vide notification dated 9th October 2019.
Learned counsel submits that by notification no.13/2017 Central Tax dated 28.06.2017 the rate of interest per annum has also been notified for the purposes of calculation of interest which has come into force from 1st July 2017. According to the respondents, if the returns have been filed belatedly and the tax dues have not been paid within time by default interest and late fee are confirmed demands within the meaning of Section 50 and 47 of the Act respectively which do not require any adjudication process under Section 73 or 74 of the CGST Act. Learned counsel for the respondent however does not dispute that the same issue has been considered and decided by this Court in the case of Mahadeo Construction Co. (supra) where the following two questions were framed for answer :-
Whether interest liability under Section 50 of the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’) can be determined without initiating any adjudication process either u/s 73 or 74 of the CGST Act in the event of an assesse raising dispute towards liability of interest?
Whether recovery proceedings u/s 79 of the CGST Act can be initiated for recovery of interest u/s 50 of the said Act without initiation and completion of the adjudication proceedings under the Act?
However, it is submitted that the said decision has been challenged before the Apex Court in Special Leave to Appeal (Civil) No.8370/2021. By order dated 16th July 2021 the petition has been tagged with Special Leave to Appeal (Civil) No.6977/2021 arising out of a judgment dated 3rd March 2020 passed in W.A. No.188/2020 in the case of M/s L.C. Infra Projects Pvt. Ltd. Vrs. Union of India & Ors. on the same issue. However, he submits that till date there is no interim stay of the operation of the judgment in the case of Mahadeo Construction Company.
We have considered the submissions of learned counsel for the parties. We have taken note of the relevant materials on record.
The issue at hand is whether interest liability under Section 50 of the CGST Act can be determined without initiating any adjudication proceeding either under Section 73 or 74 of the CGST Act in the event the assesse disputes its liability towards interest. It is not in dispute that no such proceeding has been initiated in the case of the petitioner, though the liability has been disputed by the petitioner by way of a reply to the notice of recovery under Section 79 of the CGST Act, 2017 vide Annexure-5 dated 9th March 2020 on specific grounds as also referred to above. The issue as on date stands answered by the decision rendered by the Coordinate Bench of this Court of which one of us (Deepak Roshan, J.) was a Member.
The learned court has also answered the second issue whether recovery proceedings under Section 79 of the CGST Act can be initiated for recovery of interest under Section 50 of the Act without initiation and completion of the adjudication proceedings under the Act at para-22 of the judgment
While quashing the impugned order and the garnishee notices, liberty was left to the respondent authorities to initiate appropriate adjudication proceedings either under Section 73 or 74 of the CGST Act against the petitioner-assessee and determine the liability of interest, if any, in accordance with law after giving due opportunity of hearing to the petitioner.
Court is of the considered opinion that the case of the present petitioner stands covered by the ratio rendered by this Court in the case of Mahadeo Construction Co. (supra) as despite disputing the liability towards interest, the revenue has raised a demand for payment of interest on the ground of delay in furnishing of GSTR-3B return for the period July 2017 to December 2019 without initiating any adjudication proceedings under Section 73 or 74 of the CGST Act, 2017. Earlier by an order dated 8th May 2020 a Coordinate Bench of this Court had been pleased to grant interim protection from any coercive steps against the petitioner pursuant to the impugned demand at Annexure-4.
The court ordered that without initiating any adjudication proceedings under Section 73 or 74 of the CGST Act, 2017, the amount of interest cannot be termed as an amount payable under the Act or the Rules and no recovery proceeding under Section 79 of the Act can be initiated for recovery of the interest amount – the writ petition is allowed.R.K.-Transport-Private-Limited-Vs-Union-of-India-Jharkhand-High-Court