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
- Sona Enterprises Union of India, 2026 SCC OnLine AP
- Arya Cotton Industries & vs. Union of India & Anr., 2024 SCC OnLine Guj 3107
- KesoramIndustries Ltd Commissioner of Central Tax, [2023]155 com 107 (Telangana)
- P. K. Ores Pvt. Ltd. Vs. Commissioner of Sales Tax (Orissa High Court), (2023) 108 GSTR 457
- RSB Transmissions (India) vs. Union of India, 2022 SCC OnLine Jhar
- R. K.Transport Private Limited Vs. Union of India & Anr., 2022 SCC OnLine Jhar 1782
- Mahadeo Construction Vs. Union of India & Ors, 2020 SCC OnLine Jhar 1725
- Union of India & Ors LC Infra Projects Pvt. Ltd., 2020 SCC OnLine Kar 5093
- Vision Distribution (P) vs. Commissioner, State Goods & Services Tax and Ors., 2019 SCC OnLine Del 12136
- Megha Engineering & Infrastructures vs. Commissioner of Central Tax, Writ Petition 44517 of 2018 decided on 18-04-2019.
- Assistant Commissioner of CGST & Central Excise & Vs. M/s. Daejung Moparts Pvt. Ltd., W.A. Nos.2127 and 2151 of 2019 dated. 19.12.2019
Argued by Adv. Bharat Raichandani a/w Adv. Mahesh Raichandani i/b UBR Legal.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. The Writ Petition is filed primarily challenging the Garnishee Notices bearing different dates, more particularly, Notices dated 30th March 2023 (“Impugned Notices”). These are issued by Respondent No.4 in FORM GST DRC-13 under Rule 145(1) of the Central Goods and Services Tax Rules (“CGST Rules”) read with Section 79(1)(c) of the Central Goods and Services Tax Act, 2017 (“CGST Act”).
2. Rule. Rule returnable forthwith, with the consent of the parties.
3. The Petitioner has assailed the Impugned Notices which seek recovery of interest under Section 50 of the CGST/MGST Act, 2017, for the F.Y. 2017-18 to F.Y. 2021-22.
4. Mr. Raichandani, learned counsel for the Petitioner would firstly contend that there is no show-cause notice issued to the Petitioner, neither is there any adjudication of its interest liability,by the Respondents. He would further submit that there is a dispute between the Respondents and Petitioner about computation of interest liability. The Petitioner made representations vide letters dated 25th August 2023 (Exh.- P) and 27th October 2023 (Exh.-R) setting out the requisite details along with the interest computation. However, without any adjudication of the same, the Respondents proceeded to initiate garnishee proceedings against the Petitioner’s debtors.
5. Mr. Raichandani would rely on the following decisions :-
(i) Assistant Commissioner of CGST & Central Excise & Vs. M/s. Daejung Moparts Pvt. Ltd.1;
(ii) Mahadeo Construction Vs. Union of India & Ors2;
(iii) R. K.Transport Private Limited Vs. Union of India & Anr.3;
(iv) Union of India & Ors LC Infra Projects Pvt. Ltd.4;
(v) KesoramIndustries Ltd Commissioner of Central Tax5;
This in support of his contention that without undertaking adjudication as stipulated under Section 73, 74 of the CGST Act, no recovery proceeding under Section 79 thereof can be initiated, by the Respondents, for recovery of the alleged interest amount.
6. Mr. Raichandani has further relied on the following judgments :-
(i) Arya Cotton Industries & vs. Union of India & Anr.6;
(ii) Vision Distribution (P) vs. Commissioner, State Goods & Services Tax and Ors. 7;
He would in the above context submit that once the amount deposited in the Electronic Cash Ledger is in the nature of advance tax and interest under Section 50 of the CGST Act, being compensatory in nature, such interest, can be levied only till the date of such deposit. Once the amount stands credited to the Government Treasury, no further interest can be demanded, merely on the ground of subsequent filing of the Returns.
7. Mr. Raichandani would urge that in light of the law laid down in the aforementioned decisions, the actions of the Respondents culminating in the Impugned Garnishee Notices are illegal and unsustainable.
8. Per Contra, Mr. Adik, the learned counsel for the Respondent Nos.3 to 5 would primarily submit that mere deposit of money into the Electronic Cash Ledger by the Assessee, does not amount to payment and/or discharge of its tax dues. In this context, Mr. Adik has placed due reliance on the following judgments:-
(1) Megha Engineering & Infrastructures vs. Commissioner of Central Tax8;
(2) RSB Transmissions (India) vs. Union of India9 and;
(3) Sona Enterprises Union of India10.
9. Mr. Adik has placed reliance on the decision of the Orissa High Court in P. K. Ores Pvt. Ltd. Vs. Commissioner of Sales Tax11. The Court observed that since interest is an integral part of tax which is belatedly paid in respect of self-assessment, Section 80 of Orissa Goods and Services Tax Act, 2017 clearly excludes grant of instalment. There is no scope for the Commissioner of CT & CGST to entertain application for the grant of instalment. Moreover, the interest levied on account of such belated deposit of admitted tax as per self-assessed Returns cannot be allowed to be deposited in instalments. Accordingly, the Assessee shall be liable to pay prescribed interest on the amount due from first day such tax was due to be payable till date tax is paid. In view of the proviso to Section 80, if default occurs in payment of one instalment, the Assessee would be required to deposit the entire outstanding balance payable on the date of default, without further notice. The Commissioner of CGST was, therefore, justified in rejecting the contention of the Assessee to deposit interest levied on belated deposit of admitted tax under self-assessed Returns, furnished in terms of Sections 39, 59, 80 of the OGST/CGST Act read with Rule 158 thereof.
11. Mr. Adik would in the above context submit that the Petitioner’s contentions being contrary to the law as referred to above, do not merit acceptance, in the given factual matrix. However, Mr. Adik has fairly agreed that the Representations of the Petitioner dated 25thAugust 2023 (Exh.-P) and 27th October 2023 (Exh. – R) remains to be decided by the Respondent No.4. In view thereof, the Court would pass appropriate orders/directions in the given facts and circumstances.
12. We have perused the record and analysed the rival contentions of the learned counsel for the parties before us. The issue that arises for our determination in these proceedings is whether the interest on self-assessed tax pursuant to filing such returns attract adjustment/deductions on account of the amount available in the Petitioner’s Electronic Cash Ledger. Consequently, whether in such fact situation, the Garnishee proceedings initiated by way of the Impugned Notices, would be sustainable in the eyes of law.
12. In the aforesaid backdrop, upon hearing the learned counsel for the parties, we find that there are decisions where differing/contradictory views are taken by Courts on the issues formulated above. However, it is an admitted position that the Representations of the Petitioner dated 25th August 2023 (-P) and 27th October 2023 (Exh. – R) are not decided and/or adjudicated by the Respondent No.4.
13. In light of the above, in our considered view, it would be prudent to direct the Respondents to decide such Representations of the Petitioner in light of the legal provisions and the applicable judicial pronouncements. Therefore, in our view, the following Order would serve the ends of justice.
ORDER
(i) The Representations of the Petitioner dated 25thAugust 2023 (Exh.-P) along with another dated 27th October 2023 (Exh.-R) be decided by Respondent No.4 on its own merits and in accordance with law by passing a reasoned order.
(ii) The said/concerned Respondent shall intimate the Petitioner once such decision on the Petitioner’s Representations is taken.
(iii) We clarify that we have not delved into the merits of the rival contentions which in the given factual complexion, are expressly kept open.
(iv) Considering the nature of the issues raised the Respondent No.4 may decide the Representations of the Petitioner as expeditiously as possible and in any event, within six weeks from the uploading of the
(v) Needless to clarify that such decision by the concerned Respondent would have a bearing on the Impugned Notices and the actions taken in furtherance thereof. Accordingly, we direct that the Respondents shall not take any precipitative steps pursuant to the Impugned Notices until the decision on the said Representations is taken and intimated to the Petitioner. In the event such decision goes against the Petitioner, in exercise of our discretionary jurisdiction, we direct that the same shall not be acted upon for a further period of 3 weeks thereafter, so as to enable the Petitioner to take appropriate legal steps, in accordance with law.
14. The Petition is Disposed of in the above No Costs.
15. All concerned to act on an authenticated copy of this order.
Notes:
1 W.A. Nos.2127 and 2151 of 2019 dated. 19.12.2019
2 2020SCC OnLine Jhar 1725
3 2022SCC OnLine Jhar 1782
4 2020SCC OnLine Kar 5093
5 [2023]155 com 107 (Telangana)
6 2024SCC OnLine Guj 3107
7 2019SCC OnLine Del 12136
8 WritPetition 44517 of 2018 decided on 18-04-2019.
9 2022SCC OnLine Jhar
10 2026SCC OnLine AP
11 (2023)108 GSTR 457
