2019 (12) TMI 275 - HC - GST

Interest on delayed payment of GST - short paid interest for not depositing the tax within time - HELD THAT - In the present case, though it is submitted by learned counsel for CGST that since the tax was paid, Section 73 (1) of the Act shall not be attracted in the case of the petitioner, but the fact remains that the tax was not paid by the petitioner Company in the Government account within the due date, and accordingly it is a case of tax not being paid, within the period prescribed, or when due. In that view of the matter, we are unable to accept the contention of learned counsel for CGST that no show-cause notice was required to be given in this case. In the present case, admittedly amount of ₹ 11,58,643/-, i.e., the amount of short paid interest has already been realised from the petitioner, after freezing the bank account of the petitioner, and after the payment of the said amount, the bank account has also been defreezed - We treat the letter dated 6.2.2019, as contained in Annexure-3, to be a show-cause notice issued under Section 73(1) of the CGST Act. The petitioner shall be given an opportunity of being heard by the adjudicating authority, who shall give a hearing to the petitioner, whether the petitioner was liable to pay the short paid interest amount or not. Application disposed off.

Summary

Issues:
- Imposition of interest on delayed payment of GST without a show-cause notice.
- Interpretation of Sections 73(1) and 50(1) of the CGST Act.
- Violation of principles of natural justice in the absence of a show-cause notice.
- Realization of short paid interest without proper adjudication.

Analysis:
The petitioner challenged the imposition of interest on delayed GST payment without a show-cause notice as per Section 73(1) of the CGST Act. The respondent contended that since the tax and some interest were paid, only interest short paid was in question, and Section 73(1) did not apply. However, the court noted that the tax was not paid to the Government within the prescribed period, constituting non-payment. Thus, the court rejected the respondent's argument that no show-cause notice was necessary in this case.

The court emphasized the importance of following natural justice principles, stating that even in the absence of a specific provision, procedural fairness must be maintained. It was highlighted that prior to the issuance of the demand letter, no show-cause notice or opportunity to be heard was provided to the petitioner, rendering the actions illegal. The court stressed that irrespective of statutory provisions, adherence to natural justice principles is fundamental.

Referring to Section 50(1) of the CGST Act, which deals with interest on delayed tax payment, the court acknowledged the respondent's argument but reiterated that Section 73(1) was applicable due to the non-payment of tax within the stipulated timeframe. Consequently, the court directed that the letter demanding payment of interest be treated as a show-cause notice under Section 73(1), granting the petitioner a hearing before the adjudicating authority.

In light of the above, the court ordered the adjudicating authority to conduct a hearing and determine whether the petitioner was liable to pay the short paid interest. If found not liable, the amount was to be refunded with statutory interest. The adjudicating authority was instructed to issue a reasoned order within three months from the date of the court's communication, ensuring a fair and just resolution to the matter. Ultimately, the application was disposed of with the outlined directions for further proceedings.