RECOVERY PROCEEDING OF INTEREST ON DELAYED PAYMENT UNDER GST CANNOT BE INITIATED WITHOUT INITIATION OF ANY ADJUDICATION PROCEEDINGS
BRIEF FACTS
The due date for filing of GSTR 3B Return for the months of February, 2018 and March, 2018 was reflecting as 31st March 2019 in GSTN Portal. The assessee reasonably believed that due date of filing of GSTR-3B Return for the months of February and March, 2018 has been extended up to 31st March, 2019 and in this background, the assessee filed its monthly return for the months of February, 2018 and March, 2018 within the due date as reflected in GSTN Portal and paid the tax amount.
The assessee was served with a letter issued by Superintendent of Goods and Services Tax and Central Excise directing him to make payment of interest on the ground of delay in filing of GSTR-3B Return for the months of February and March, 2018.
The Authorities further exercised powers under Section 79 of the CGST Act by initiating garnishee proceedings for recovery of aforesaid amount of interest by issuing notice to the assessee’s Banker.
ISSUES INVOLVED
Following issues were framed before the Hon’ble High Court-
(i) Whether interest liability under Section 50 of the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’) can be determined without initiating any adjudication process either u/s 73 or 74 of the CGST Act in the event of an assessee raising dispute towards liability of interest?
(ii) Whether recovery proceedings u/s 79 of the CGST Act can be initiated for recovery of interest u/s 50 of the said Act without initiation and completion of the adjudication proceedings under the Act?
SUBMISSIONS MADE / CONTENTION OF THE ASSESSEE
(i) That the letter dated 08.03.2019 issued by the Department demanding interest on the alleged ground of delay in submitting GSTR-3B Return for the months of February and March, 2018, is not sustainable in the eyes of law, as the said amount of interest has been determined without initiating any adjudication process under Sections 73 or 74 of the CGST Act
(ii) That there has been no delay on part of the assessee in furnishing of GSTR-3B Return and, consequentially, there is no delay on its part in depositing the tax with the concerned Authority, as in GSTN Portal, due date for furnishing of return for the months of February and March, 2018 was shown as 31st March, 2019
(iii) That the amount of interest requires determination through an adjudication process to be initiated as per the detailed provisions contained under Section 73 of the CGST Act
(iv) That the Authorities, without initiating adjudication process, not only have straightaway demanded interest, but they have, initiated garnishee proceedings in a most arbitrary and illegal manner
(v) That provisions of Section 79 of the CGST Act can be adopted only when “any amount payable by a person to the Government under the provisions of the Act and the Rules is not paid”
REVENUE’S CONTENTION
(i) That the dispute pertains to recovery of interest not on the ground of delay in filing of GSTR-3B Return, but on the ground of delayed payment of tax beyond the stipulated date
(ii) That once there is a delay in payment of tax, the liability to pay interest on the same becomes automatic, for which no separate proceedings are required to be initiated for determining such interest liability.
(iii) That it is an admitted case of default in filing self-assessed monthly statement/ return within the statutory period and payment of admitted self-assessed tax, which consequentially attracts payment of interest
(iv) That the provisions of Section 73 or 74 of the CGST Act are not applicable in the instant case, as it relates only to demand and recovery of tax not paid or short paid either on account of fraud or wilful misstatement or suppression of facts, or otherwise
(v) That due date as reflected in GSTN Portal as “31st March, 2019” for furnishing of GSTR-3B monthly return was reflecting because the Central Government, vide Notification No. 76/2018-Central Tax dated 31st December, 2018 has waived the levy of late fee for furnishing returns for the months of July, 2017 to September, 2018, if the said returns were furnished between the period 22nd December, 2018 to 31st March, 2019
(vi) That the said Notification cannot be interpreted to mean that the last date of filing of GSTR-3B Return has been extended up to 31st March, 2019.
(vii) That since the liability for payment of interest is automatic on delayed payment of tax, the amount of interest is an amount payable under the Act or the Rules and since the assessee, despite notices being issued to it, has failed to discharge the said liability, it was well within the competence of the Revenue to initiate garnishee proceedings under Section 79 of the CGST Act by attaching Bank account of the assessee.
HELD
(i) On a conjoint reading of the Section 73(1) read with Section 73(7), it would be evident that even in a case where an assessee files his return as per his own ascertainment, pays the tax and even pays interest, but if the said amount paid by the assessee is falling short of the amount actually payable, the Proper Officer is required to initiate proceedings under Section 73(1) for recovery of the said amount of tax and interest. The natural corollary of the above interpretation is that if an assessee has allegedly delayed in filing his return, but discharges the liability of only tax on his own ascertainment and does not discharge the liability of interest, the only recourse available to the Proper Officer would be to initiate proceedings under Section 73(1) of the CGST Act for recovery of the amount of “short paid” or “not paid” interest on the tax amount.
(ii) It is not true that liability of interest under Section 50 of the CGST Act is automatic, but the said amount of interest is required to be calculated and intimated to an assessee. 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 proceedings either under Section 73 or 74 of the Act for adjudication of the liability of interest (similar view was taken by the Hon’ble Madras High Court, in the matter of the Assistant Commissioner of CGST & Central Excise and others Vs. Daejung Moparts Pvt. Ltd. and ors,).
(iii) Though the liability of interest is automatic, but the same is required to be adjudicated in the event an assessee disputes the computation or very leviability of interest, by initiation of adjudication proceedings under Section 73 or 74 of the CGST Act. Therefore, till such adjudication is completed by the Proper Officer, the amount of interest cannot be termed as an “amount payable” under the Act or the Rules. Thus, no garnishee proceedings under Section 79 of the CGST Act can be initiated for recovery of interest without adjudicating the liability of interest amount.
(iv) The Court further stated that it shall be open for the Revenue to initiate appropriate adjudication proceeding either under Section 73 or 74 of the CGST Act (as the case may be) against the assessee and determine the liability of interest, if any, in accordance with law after giving due opportunity of hearing.
RELEVANT PROVISIONS ONLY FOR REFERENCE PURPOSES
(i) Section 39 of the CGST Act, 2017 read with Rule 61 of the CGST Rules, 2017– Furnishing of returns
(ii) Section 50 of the CGST Act, 2017 – Interest on delayed payment of tax
(iii) Section 73 of the CGST Act, 2017 – Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any wilful- misstatement or suppression of facts
(iv) Section 74 of the CGST Act, 2017 – Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilful- misstatement or suppression of facts
(v) Section 79 of the CGST Act, 2017 – Recovery of tax
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