2024 (5) TMI 735 - HC - GST

Demand of interest - default in filing the Return - interest can be levied without adjudication or not - Whether the liability to pay interest u/s 50 of the GST Act is automatic? - HELD THAT - It is found that there was no adjudication before a demand for the payment of interest was raised because of the delayed filing of the Returns. This is a well accepted norm of judicial discipline that a Bench of co-equal strength must follow the decision of the another Bench of co-equal strength. In R.K. Transport Private Limited 2022 (2) TMI 1051 - JHARKHAND HIGH COURT , this Court referred to Mahadeo Construction Co. Vs. Union of India 2020 (4) TMI 666 - JHARKHAND HIGH COURT and held that without initiating any adjudication proceedings under section 73 or 74 of the CGST Act 2017, where the liability has been disputed, the Department cannot raise a demand for the payment of interest on delayed furnishing of the Return under section 39 of the CGST Act. In CHANDRA PRAKASH ORS. VERSUS STATE OF UP. ANR. 2002 (4) TMI 936 - SUPREME COURT the Hon'ble Supreme Court held ' The doctrine of binding precedent is of utmost importance in the administration of our judicial system. It promotes certainty and consistency in judicial decisions. Judicial consistency promotes confidence in the system, therefore, there is this need for consistency in the enunciation of legal principles in the decisions of this Court. It is in the above context, this Court Raghubir Singh held that a pronouncement of law by a Division Bench of this Court is binding on a Division Bench of the same or smaller number of Judges'. The impugned order is set aside - petition allowed.

Summary

Issues Involved:
1. Legality of interest demand without adjudication.
2. Validity of the appellate order and demand notice.
3. Compliance with procedural requirements u/s 73 and Rule 142 of JGST Act.

Summary:

1. Legality of Interest Demand Without Adjudication:
The petitioner-Firm challenged the demand for interest u/s 50 of the JGST Act for delayed filing of GSTR-3B returns, arguing that the interest cannot be levied without adjudication. The court referred to previous judgments, including "M/s Nkas Services Private Limited Vs. The State of Jharkhand" and "R.K. Transport Private Limited Vs. The Union of India," which established that recovery proceedings u/s 73 of the CGST Act cannot be initiated without a final adjudication. The court emphasized that interest liability, though automatic, requires quantification through an adjudicative process, especially when disputed by the taxpayer.

2. Validity of the Appellate Order and Demand Notice:
The petitioner-Firm sought to quash the appellate order dated 28th December 2022 and the demand notice dated 4th January 2021, which imposed a liability of Rs. 92,96,042.91 for delayed filing of returns. The court noted that the orders were issued without proper adjudication, violating the principles established in previous cases. The court reiterated that any demand for interest must follow an adjudicative process, considering the taxpayer's objections.

3. Compliance with Procedural Requirements u/s 73 and Rule 142 of JGST Act:
The court examined the procedural compliance under section 73 and Rule 142 of the JGST Act, which mandate issuing a notice and allowing the taxpayer to respond before finalizing any demand. The court found that the State Tax Officer issued the demand without following these procedural requirements, thus rendering the demand invalid. The court emphasized the need for judicial discipline and consistency in following established legal principles.

Conclusion:
The court set aside the order dated 4th January 2021 in Form GST DRC-07, the appellate order dated 28th December 2022, and the summary of demand in FORM GST APL-04 dated 11th February 2023. The department was granted liberty to initiate adjudication proceedings in accordance with the law if so advised. The related interlocutory applications were disposed of accordingly.