BVG India Limited Vs Union of India (Bombay High Court)
Bombay High Court: Interest under Section 50 cannot be recovered through garnishee proceedings without prior determination; DRC-13 recovery stayed
The Bombay High Court considered a Writ Petition primarily challenging Garnishee Notices dated 30th March 2023 issued in FORM GST DRC-13 under Rule 145(1) of the CGST Rules read with Section 79(1)(c) of the CGST Act, 2017. The notices sought recovery of interest under Section 50 of the CGST/MGST Act, 2017 for F.Y. 2017-18 to F.Y. 2021-22.
The Petitioner contended that no show-cause notice had been issued and there had been no adjudication of its interest liability. It was also submitted that a dispute existed regarding computation of the interest liability. The Petitioner had made representations dated 25th August 2023 and 27th October 2023, setting out the requisite details and interest computation, but the Respondents initiated garnishee proceedings against the Petitioner’s debtors without adjudicating those representations.
The Petitioner relied upon decisions including Assistant Commissioner of CGST & Central Excise & Vs. M/s. Daejung Moparts Pvt. Ltd., Mahadeo Construction Vs. Union of India & Ors, R. K.Transport Private Limited Vs. Union of India & Anr., Union of India & Ors LC Infra Projects Pvt. Ltd. and KesoramIndustries Ltd Commissioner of Central Tax. The Petitioner also relied upon Arya Cotton Industries & vs. Union of India & Anr. and Vision Distribution (P) vs. Commissioner, State Goods & Services Tax and Ors., contending that recovery under Section 79 could not be initiated without adjudication under Sections 73 and 74. It was further submitted that amounts deposited in the Electronic Cash Ledger constituted advance tax and that interest under Section 50, being compensatory, could be levied only until the date of such deposit.
The Respondents submitted that mere deposit of money into the Electronic Cash Ledger did not amount to payment or discharge of tax dues. Reliance was placed on Megha Engineering & Infrastructures vs. Commissioner of Central Tax, RSB Transmissions (India) vs. Union of India and Sona Enterprises Union of India. Reliance was also placed on P. K. Ores Pvt. Ltd. Vs. Commissioner of Sales Tax, where the Court observed that interest forms an integral part of belatedly paid tax in respect of self-assessment and considered the liability to pay prescribed interest on the amount due from the first day tax was payable until the date of payment.
The Court noted that differing or contradictory views existed on the issues concerning interest on self-assessed tax and adjustment or deduction on account of amounts available in the Electronic Cash Ledger. However, it was admitted that the Petitioner’s representations dated 25th August 2023 and 27th October 2023 had not been decided or adjudicated by Respondent No.4.
The Court therefore directed Respondent No.4 to decide both representations on their own merits and in accordance with law by passing a reasoned order and to intimate the Petitioner once the decision was taken. The Court expressly clarified that it had not delved into the merits of the rival contentions, which were kept open.
Respondent No.4 was directed to decide the representations as expeditiously as possible and, in any event, within six weeks from the uploading of the order. The Respondents were directed not to take any precipitative steps pursuant to the Impugned Notices until the decision on the representations was taken and intimated to the Petitioner. If the decision went against the Petitioner, the Court directed that it should not be acted upon for a further period of three weeks to enable the Petitioner to take appropriate legal steps.
The Petition was accordingly disposed of with no order as to costs.
Cases Discussed
