2019 (12) TMI 779 - HC - GST

Recovery of the amount of interest due - Section 50 of the Central Goods and Services Tax Act, 2017 - garnishee proceedings initiated under Section 79 (1) (c) of the said Act - HELD THAT - Prima facie we were not at all convinced that there existed any legal ground to interfere with the impugned order passed by the learned Single Judge. But learned counsel for the appellant/petitioner had pointed that, Ext.P20 notice was issued under Section 79 without adverting to the contentions raised against Ext.P16 notice through Exts.P18 and P19 reply submitted by the petitioner to respondents 1 2. Going by provisions contained in Section 50 of the CGST Act, we are of the opinion that the accrual of interest mentioned therein is automatic when the tax due as conceded in the return is not remitted along with the return. However, when the appellant/petitioner had raised contentions refuting their liability for payment of interest as calculated by the respondent, the theory of audi alteram partem will come into play. Therefore we are of the opinion that a direction to the 3rd respondent for consideration of Ext.P18 and P19, before proceeding with the coercive steps, would suffice to meet the ends of justice. Both the writ appeal as well as the writ petition are hereby disposed of by directing the 3rd respondent to consider Ext.P18 and P19 objections filed by the petitioner against the proposal intimated in Ext.P16, after affording an opportunity of personal hearing to the petitioner or to his representative.

Summary

Issues:
Sustainability of proceedings for recovery of interest under Section 50 of CGST Act and garnishee proceedings under Section 79(1)(c) of the Act.

Analysis:
1. The judgment deals with a writ appeal filed against an interim order of a Single Judge regarding the sustainability of proceedings initiated for recovery of interest under Section 50 of the Central Goods and Services Tax Act, 2017, and the consequential garnishee proceedings under Section 79(1)(c) of the Act. The appellant contended that the interest due was calculated without considering input tax credit, leading to an unsustainable liability.

2. The appellant raised objections against the demand for interest due under Section 50 of the CGST Act. They argued that the liability for interest accrues only if there is a failure to pay the tax due, which should be ascertained after considering input tax credit to prevent a cascading effect on dealers. The appellant highlighted amendments in Section 50 and contended that interest accrual is automatic only when the tax due is not remitted along with the return.

3. Despite objections, a notice was issued for payment of the alleged due amount, which was challenged in the writ petition. The Single Judge's interim order stayed the garnishee notice operation subject to a condition of paying 40% of the demand. The writ appeal was filed against this order, questioning the issuance of the notice without considering the objections raised by the appellant.

4. The High Court opined that there was no legal ground to interfere with the Single Judge's order. However, considering the appellant's contentions against the interest calculation, the principle of audi alteram partem warranted a direction for the respondent to consider the objections before taking coercive steps. The Court emphasized the need for a fair hearing before proceeding with recovery actions.

5. The Court directed the respondent to consider the objections filed by the appellant against the proposed recovery, after providing a personal hearing. The freezing of the appellant's bank account was to be lifted upon furnishing a Bank Guarantee for the entire demanded amount. This decision aimed to balance the interests of the taxpayer and the public exchequer, ensuring a fair process before enforcing recovery actions.