Interest on delayed GST payment- Whether automatic or adjudication is called for -Saga continues
In my earlier article, case of M/s LC Infra Projects Pvt Ltd [ Writ Petition No. 28876 of 2019 (T-RES, Karnataka High court) ] was highlighted wherein department issued demand notice for recovery of interest and also served a letter for attachment of the bank accounts of petitioner.
Karnataka High Court [Single Judge bench] held that issuance of Show Cause notice u/s 73 of the Act is essential to proceed with the recovery of interest payable thereon under Section 50 and further held that Sec 75(12) of CGST Act is applicable only to the self-assessment made by the assessee and not to quantification or determination made by the Authority and hence by virtue of said section authorities are not empowered to proceed with recovery of interest without issuing Show Cause Notice on account of principle of natural justice.
Aggrieved by Single Judge order Revenue [GST department] preferred appeal before Karnataka High Court-Division bench [Writ Appeal No. 188 of 2020 (T-RES)] on the ground that on self-assessment tax SCN is not required.
While dismissing revenue appeal, High court vide order dated 03-Mar-2020 upheld single judge order and observed that whether there was a failure on the part of the assessee to pay the tax within the period prescribed, the assessee is entitled to be heard as he could always point out on the basis of the material on record produced that there was no delay in payment of tax. Further upheld noting of the learned Single Judge that issuance of SCN is essentially required to proceed with the recovery of interest.
A similar case has recently came up before Bombay High court in WP LD-VC No. 112/2020 wherein petition was filed challenging orders passed for recovery of interest without issuance of SCN and personal hearing. Subsequently, email was sent under sec 79 for coercive recovery of interest amount on delayed payment tax & filing of GSTR-3B.
While deposing writ petition via video conferencing Hon’ble court vide order dated 13.08.2020 held that direct recovery of interest under Section 50 through coercive recovery provisions of Section 79 is clearly in contravention of Section 78 of the GST Act, which provides for 3-month breathing period after the passing of any order, before coercive recovery provisions of Section 79 can be invoked. Further, impugned orders have been passed without issuing any show cause notice and without giving a hearing to the Petitioner.
Hon’ble HC, recorded revenue’s assurance that “This office is conscious of the procedure required to be followed by it to recover and will initiate the recovery proceeding with issuance of show cause notice, working of interest calculation and further actions as per provisions of law”.
Accordingly, on the basis of statement by revenue disposed writ petition.
With more & more judgments by Hon’ble High courts, the question raised that whether “interest on delayed GST payment is automatic or adjudication is called for” is emerging more strongly and we’ll have to see with time a perfect answer to it.