2020 (2) TMI 668 - HC - GST

Interest on delayed payment of tax - attachment of bank accounts - whether interest on delayed payment of tax as contemplated under Section 50 of the Central Goods and Services Tax Act 2017 is automatic or the same is to be determined after considering the explanation offered by the assessee? - HELD THAT - Though the liability fastened on the assessee to pay interest is an automatic liability quantification of such liability certainly needs an arithmetic exercise after considering the objections if any raised by the assessee. It is to be noted that the term automatic does not mean or to be construed as excluding the arithmetic exercise . In other words though liability to pay interest arises under section 50 of the said Act it does not mean that fixing the quantum of such liability can be unilateral especially when the assessee disputes the quantum as well as the period of liability. Therefore though the liability of interest under section 50 is automatic quantification of such liability shall have to be made by doing the arithmetic exercise after considering the objections of the assessee. Maintainability of writ appeal - Whether the dismissal of the writ appeals by Dr.Vineet Kothari, J. is correct or whether those writ appeals ought to have been entertained for further hearing? - HELD THAT - A careful perusal of the direction issued by the Writ Court does not indicate anywhere as to how the Revenue is prejudiced by the said order especially when the Revenue is given liberty to pass an order in a manner known to law and communicate the same to the petitioners after considering their objections. Thus the Writ Appeals preferred against the said orders of the Writ Court as observed by Dr.Vineet Kothari, J. are wholly unnecessary - Therefore I am in agreement with the view expressed by Dr.Vineet Kothari, J. as I find that entertaining the writ appeals is not warranted since the Writ Court has not determined the interest liability of each petitioners against the interest of the Revenue in any manner and on the other hand it only remitted the matter back to the concerned Officer to determine the quantum of such liability. Thus the second question with regard to the maintainability of the writ appeals is answered accordingly. Appeal dismissed.

Issues Involved:
1. Whether the delayed filing of returns attracts the interest liability on the assessee automatically.
2. Whether the Writ Appeals ought to have been entertained.

Issue-Wise Detailed Analysis:

1. Whether the delayed filing of returns attracts the interest liability on the assessee automatically:

The judgment discusses the automatic nature of interest liability under Section 50 of the CGST Act. The court observed that Section 50(1) mandates that every person liable to pay tax but fails to pay within the prescribed period shall, "on his own," pay interest at a rate not exceeding 18%. This indicates that the liability to pay interest is automatic and does not require a separate assessment. The court noted, "The liability to pay interest is evidently fastened on the assessee and the same has to be discharged on his own." However, the quantification of such interest liability needs to consider the objections raised by the assessee. The court stated, "Though the liability fastened on the assessee to pay interest is an automatic liability, quantification of such liability certainly needs an arithmetic exercise after considering the objections if any, raised by the assessee."

The court also referred to the Division Bench decision of the Telangana High Court in Megha Engineering & Infrastructures Ltd. v. Commissioner of Central Tax and others, which held that the liability to pay interest under Section 50(1) arises automatically when a person fails to pay the tax within the prescribed period. Despite this, the court acknowledged that the Telangana High Court's decision is under review, where a stay has been granted.

2. Whether the Writ Appeals ought to have been entertained:

The court examined whether the dismissal of the writ appeals by one of the judges was correct. The writ petitioners were not disputing their liability to pay interest but were contesting the quantum of interest claimed by the Revenue. The petitioners argued that the interest liability was calculated on the entire tax liability instead of the unpaid portion. They contended that the bank attachment proceedings were initiated without determining the actual quantum of liability.

The court found that the Writ Court had disposed of the writ petitions by directing the petitioners to pay the admitted interest liability and remitting the matter back to the concerned officer to determine the quantum of such liability after considering the objections. The court noted, "A careful perusal of the direction issued by the Writ Court does not indicate anywhere as to how the Revenue is prejudiced by the said order." Therefore, the court agreed with the view that the writ appeals were unnecessary and should not have been entertained. The judgment concluded, "I am in agreement with the view expressed by Dr.Vineet Kothari,J., as I find that entertaining the writ appeals is not warranted."

Conclusion:

The court concluded that the liability to pay interest under Section 50 of the CGST Act is automatic, but the quantification of such liability requires considering the objections raised by the assessee. The court also held that the writ appeals were unnecessary and should not have been entertained, as the Writ Court's order did not prejudice the Revenue and only remitted the matter back for determining the quantum of interest liability. The writ appeals were dismissed, and the connected miscellaneous petitions were also dismissed.

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