Issuance of notice in DRC-01D for recovery of interest mandatory, prior to recovery under Section 79 of the CGST Act
The Gujarat High Court, in Reliance Formulation Private Limited vs Assistant Commissioner of State Tax & Anr, ruled that recovering interest on self-assessed GST under Section 50(1) requires a prior notice in Form GST DRC-01D, as per Rule 142B. The Petitioner had received an advisory for outstanding interest, with a warning of recovery under Section 79. However, the Court clarified that despite Section 75(12) allowing direct recovery under Section 79 for self-assessed tax interest, the insertion of Rule 142B on August 4, 2023, now mandates an intimation in Form GST DRC-01D and an opportunity to respond before any recovery action. This decision emphasizes procedural due diligence, safeguarding taxpayers by ensuring they receive proper notice before coercive recovery measures for interest on delayed self-assessed GST are initiated under Section 79 of the CGST Act. The ruling distinguishes earlier judgments, aligning with the current legal framework post-amendment.
Facts:
Reliance Formulation Private Limited (“the Petitioner”), a registered entity under the Central and State Goods and Services Tax Acts, had been filing returns under Section 39 of the GST Act since July 1, 2017. The Petitioner received an advisory dated December 18, 2024, covering multiple financial years, directing payment of interest under Section 50(1) of the CGST Act for delayed payment of self-assessed tax. The advisory stated that in the event of non-payment of interest under Section 50(1), recovery under Section 79 of the CGST Act could be initiated.
The Petitioner contended that there was no provision for issuance of such an advisory under Section 50(1) and that initiation of recovery under Section 79 without following due process was impermissible.
The Respondent submitted that the advisory merely intimated the Petitioner of its outstanding liability and that actual recovery would only follow due procedure under Rule 142B, including issuance of Form GST DRC-01D, which is treated as notice of recovery under the law.
Issue:
Whether recovery of interest under Section 50(1) of the GST Act can be initiated based on an advisory without issuance of a notice under Rule 142B?
Held:
The Hon’ble Gujarat High Court in R/Special Civil Application No. 5453 of 2025 held as under:
- Observed that, as per Section 50(1) of the GST Act, interest is payable on delayed payment of self-assessed tax, and such interest must be calculated in accordance with Rule 88B of the GST Rules.
- Noted that, under Section 75(12) of the GST Act, interest payable on self-assessed tax can be recovered under Section 79 notwithstanding anything in Sections 73 or 74.
- Noted that, Rule 142B, inserted with effect from August 4, 2023, mandates issuance of an intimation in Form GST DRC-01D for recovery under Section 79.
- Held that, recovery action under Section 79 cannot be initiated unless such intimation is issued, and the Petitioner is given an opportunity to respond.
- Noted that, the advisory merely references Section 79 to alert the Petitioner of potential recovery, but no recovery can be enforced unless Form GST DRC-01D is served.
Our Comments:
The Court’s decision affirms that recovery of interest on self-assessed tax under Section 50(1) is not automatic and must follow a defined procedure. The judgment distinguishes the earlier ruling of the Hon’ble Jharkhand High Court in the case of Mahadeo Construction Co. vs Union of India [W.P. (T) No. 3517 Of 2019], on the ground that the same was rendered prior to the insertion of Rule 142B and Form DRC-01D. The Gujarat High Court’s reasoning is consistent with the current legal framework post-amendment, emphasizing that taxpayer is safeguarded before coercive recovery actions are undertaken. Rule 142B ensures notice and opportunity to be heard before recovery under Section 79.
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