Sona Enterprises Vs Assistant Commissioner of Central Tax (Andhra Pradesh High Court)
The petitioner, a dealer in iron and steel scrap, purchases scrap from Indian Railways and is liable to pay Goods and Services Tax under the reverse charge mechanism (RCM). Under the GST Act, such RCM tax must be paid in cash and cannot be discharged by adjusting available input tax credit (ITC). The petitioner filed its GSTR-3B returns for the period July 2017 to March 2021.
On 14.03.2022, the tax authorities issued a notice stating that the petitioner had availed ITC of ₹43,57,395 during the said period and had utilised ₹42,82,275 between April 2019 and March 2021, allegedly in violation of RCM provisions. The petitioner responded by filing a DRC-03 challan adjusting the amount from its cash ledger. Despite this, recovery proceedings were initiated under Section 79(1)(c) of the GST Act, and the petitioner’s banker was directed to remit amounts towards tax and interest. Subsequent notices demanded additional sums towards interest and tax, resulting in recovery of ₹15,23,804 as interest from the banker.
Aggrieved by the recovery of interest without any adjudication, the petitioner approached the Andhra Pradesh High Court. The petitioner contended that interest was recovered without issuance of any adjudicatory order or determination explaining the basis of calculation. The respondents argued that since the liability was admitted, recovery was permissible under Section 75(12) of the GST Act without adjudication.
