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2022 (3) TMI 1047 - HC - GSTInterest payable on delayed payment of taxes - section 50 read with section 75(12) of JGST Act - Financial Years 2017-18, 2018-19 and 2019-20 - validity of Garnishee notice issued in Form GST DRC-13 for three different financial years - HELD THAT - A perusal of Rule 142 (1A), shows that the proper officer may, before service of notice to the person chargeable with tax, interest and penalty under sub-section (1) of Section 73 or sub-Section (1) of Section 74 or sub-section (2) of Section 76, as the case may be, communicate the details of such tax, interest and penalty, as ascertained by the State Officer in Part-A of Form GST DRC-01. Sub-rule (2A) provides that where the person referred to in sub-rule (1A) has made partial payment of the amount communicated to him or desires to file any submissions against the proposed liability, he may make such submission in Part-B of Form GST DRC-01A. In the present case, the Proper Officer has issued the statement in Form GST DRC-01A upon the petitioner intimating him to pay the amount of tax ascertained along with the amount of applicable interest in full by 05.02.2020, failing which show-cause notice will be issued under section 73(1). Petitioner instead of making the payment, filed a reply before the proper officer which has been enclosed and acknowledged by the Respondent in their counter affidavit also. However, no show-cause notice under section 73(1) was issued thereafter. It is clear that though the petitioner did not pay the amount of tax and interest intimated to him in Form GST DRC-01A and instead submitted his reply thereto, the Respondent despite the stipulation contained in Form GST DRC-01 failed to issue any show-cause notice upon him under section 73(1) of JGST Act, 2017. When the petitioner had disputed the demand of interest intimated to him, the adjudication order could not have been passed without proper show-cause notice. Thus, Respondents have failed to follow the principles of natural justice and the procedure prescribed under section 73(1) of JGST Act before issuing the Summary of the Order in Form GST DRC-07. The writ petition is therefore, maintainable under Article 226 of Constitution of India. Whether liability of interest under section 50 of the Act could be raised without initiating any adjudication proceeding either under section 73 or 74 of JGST Act in the event Assessee raising a dispute towards liability of interest? - HELD THAT - It has been held in the case of Mahadeo Construction 2020 (4) TMI 666 - JHARKHAND HIGH COURT that if an Assessee disputes the liability of interest i.e. either disputes its calculation or even the leviability of interest, then the only option left for the Assessing Officer is to initiate proceeding either under Section 74 or 74 of the Act for adjudication of the liability of interest. In the present case, petitioner has disputed the interest liability by filing reply. Respondent had also indicated that in case petitioner fails to deposit the amount of tax and interest by 05.02.2020, show-cause notice under section 73(1) shall be issued. Respondent have themselves failed to follow the procedure stipulated under the Act as indicated by them in Form GST DRC-01A containing the intimation of the tax ascertained against the petitioner. Summary of the Order has been issued upon the petitioner in Form GST DRC-07 on his GSTN portal without following the principles of natural justice. The Respondents have failed to follow the procedure prescribed in law before issuing Summary of the Order in Form GST DRC-07 holding the petitioner liable to pay interest under section 50(1) of the Act due to late filing of GSTR-3B and not depositing the due interest on its own. As such, writ petition succeeds only on the point of failure to follow the principles of natural justice and the procedure prescribed in law - Since the proceedings have been held to be vitiated on failure to follow the principles of natural justice and the procedure prescribed under section 73(1) of JGST Act, 2017, no comments on the merits of this contention raised by the petitioner is made at this stage. The impugned Summary of the Order contained in Form GST DRC-07 dated 26.02.2020 in the respective writ petitions relating to different tax periods in question are accordingly quashed. Petition allowed.
Issues Involved:
1. Maintainability of the writ petition. 2. Liability of interest under section 50 of JGST Act, 2017 without initiating adjudication process under section 73/74. 3. Recovery proceeding under section 79 of the Act without conclusion of adjudication proceeding. 4. Whether interest under section 50(1) can be demanded for delay in filing monthly return in Form GSTR-3B. 5. Retrospective application of GSTR-3B for filing return. 6. Computation of interest under section 50(2) without prescribed rules. 7. Levy of interest under IGST Act, 2017. Comprehensive, Issue-wise Detailed Analysis: 1. Maintainability of the Writ Petition: The court held that the writ petition under Article 226 of the Constitution of India is maintainable. It was emphasized that the existence of an alternative remedy does not bar the High Court from exercising its jurisdiction, especially when there is a violation of the principles of natural justice. The court referenced the case of Magadh Sugar & Energy Ltd. versus State of Bihar & others, where it was established that the High Court can exercise its writ jurisdiction in certain contingencies, including when there has been a violation of natural justice. 2. Liability of Interest under Section 50 of JGST Act, 2017 Without Initiating Adjudication Process under Section 73/74: The court concluded that if an assessee disputes the liability of interest, the only option left for the Assessing Officer is to initiate proceedings either under Section 73 or 74 of the Act for adjudication of the liability of interest. This was supported by the case of Mahadeo Construction Co. versus Union of India, where it was held that the liability of interest under Section 50 is automatic, but the quantification of such liability requires an arithmetic exercise after considering the objections of the assessee. 3. Recovery Proceeding under Section 79 of the Act Without Conclusion of Adjudication Proceeding: The court noted that the Respondents failed to follow the procedure prescribed in law before issuing the Summary of the Order in Form GST DRC-07. The court emphasized that the proper procedure involves issuing a show-cause notice under section 73(1) of JGST Act, 2017, especially when the assessee disputes the demand of interest. 4. Whether Interest under Section 50(1) Can Be Demanded for Delay in Filing Monthly Return in Form GSTR-3B: The court refrained from making any comments on the merits of this contention at this stage. However, it acknowledged the petitioner's argument that interest under section 50(1) being compensatory in nature, can only be charged on the tax unpaid or if the assessee fails to pay the same by the due date. The petitioner argued that since there was no delay in payment of the tax, interest is not chargeable for late filing of GSTR-3B, for which a late fee under Section 47 of the Act has already been paid. 5. Retrospective Application of GSTR-3B for Filing Return: The petitioner contended that the substitution of GSTR-3B for filing return with retrospective effect does not make the levy of interest retrospective. The court did not delve into this issue in detail but noted the petitioner's argument that the liability towards interest is substantive and cannot apply retrospectively. 6. Computation of Interest under Section 50(2) Without Prescribed Rules: The petitioner argued that the State Government cannot demand interest without prescribing the manner of calculation of interest under section 50(2) by framing rules. The court did not specifically address this issue but acknowledged the petitioner's reliance on the case of C.I.T, Bangalore versus B.C. Srinivasa Setty, which held that the charging provision and computation provisions together constitute an integrated code. 7. Levy of Interest under IGST Act, 2017: The petitioner argued that there is no substantive provision under the IGST Act, 2017 for the levy of interest, hence by reference to Section 50(1) of CGST Act, 2017, no interest can be demanded. The court did not specifically address this issue but noted the petitioner's argument. Conclusion: The court quashed the impugned Summary of the Order contained in Form GST DRC-07 dated 26.02.2020 in the respective writ petitions relating to different tax periods. The Respondents were directed to issue a proper show-cause notice in terms of Section 73(1) of JGST Act, 2017, with an opportunity for the petitioner to file a response before passing any adjudication order. The court emphasized the necessity of following the principles of natural justice and the procedure prescribed under the Act. The writ petitions were allowed on the grounds of failure to follow the principles of natural justice.
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