Interest on Delayed GST Payment Payable despite Voluntary Payment: Madras HC

Tvl. Noyyal Common Effluent Treatment Company Limited Vs Assistant Commissioner (ST) (Madras High Court)

The writ petition formed part of a batch of 250 writ petitions, including 53 petitions finally heard on the larger issue concerning challenges to proceedings under Section 74 of the respective GST enactments. The Court referred to its common order passed the same day in Turbo Energy Private Limited, Fastenex Private Limited, and Ispahani Estates Private Limited, which dealt in detail with the invocation of the extended period of limitation under Section 74.

The petitioner challenged the impugned order dated 31.05.2024, by which the proposal contained in the Show Cause Notice in GST DRC-01 dated 28.03.2024 was confirmed. Under the impugned order, interest of ₹72,25,154 was imposed on account of belated payment of tax for the tax period 2017–2018.

The petitioner had earlier received an Intimation in GST DRC-01A dated 28.07.2020. Pursuant to that intimation, the petitioner paid differential tax through multiple DRC-03 filings between 26.11.2020 and 11.01.2022. According to the petitioner, tax had originally been discharged at 5%, and after being informed by the department that tax was payable at 18%, the differential tax was paid. The petitioner contended that the tax was promptly paid after the departmental intimation and therefore the proceedings initiated under Section 74 and confirmed by the impugned order lacked merit. It was further submitted that the incorrect invocation of Section 74 deprived the petitioner of the benefit of amnesty under Section 128-A and the relevant notification.

The respondent submitted that neither the detailed show cause notice nor the detailed order invoked Section 74. According to the respondent, only the summaries in GST DRC-01 and GST DRC-07 referred to Section 74. It was argued that since the tax had not been paid in time, the DRC-01A intimation was issued, following which the petitioner paid the tax, and therefore interest under Section 50(1) necessarily followed. The respondent also contended that the matter fell outside the scope of the batch and that the petitioner had an alternative remedy.

In rejoinder, the petitioner argued that if Sections 73 or 74 were not invocable, there would be no scope for recovering interest. Reliance was placed on the Division Bench decision in Eternit Everest Limited Union of India, (1997) 89 ELT 28.

After considering the submissions, the Court held that Sections 73 and 74 constitute a complete code for the circumstances specified therein, along with Section 75(12) read with Section 79 of the respective GST enactments. The Court noted that the dispute related to the tax period 2017–2018 and that the petitioner had paid the tax only after the department pointed out the deficiency. The Court also recorded that, by letter dated 12.04.2024, the petitioner had stated that it would pay the interest arrears in five instalments.

The Court observed that the petitioner was statutorily required to pay not only the tax but also interest under Section 50(1), together with penalty at the prescribed rates under Sections 73 or 74. It noted that the record showed issuance of the DRC-01A intimation on 28.07.2020 and, after the tax payments, issuance of the show cause notice and summary in GST DRC-01 on 28.03.2024.

Referring to Section 75(12), the Court observed that, notwithstanding Sections 73, 74 or 74A, any unpaid self-assessed tax or unpaid interest on such tax is recoverable under Section 79. The Court further referred to the Explanation to Section 75(12), inserted with effect from 01.01.2022 by Notification No. 39/2021-Central Tax dated 21.12.2021, which provides that “self-assessed tax” includes tax payable in respect of outward supplies furnished under Section 37 but not included in the return furnished under Section 39.

The Court held that the impugned recovery proceedings would be justifiable under Section 75(9). It further held that, in any event, the petitioner was required to pay interest under Section 50 read with Section 75(12) and Section 79. The Court also observed that interest on belated payment of tax together with penalty under Section 73 or Section 74, as applicable, was payable and concluded that proceedings under Section 74 were maintainable. Referring to the common order passed in the batch, the Court stated that the threshold for invoking the extended period of limitation under Section 74 is much lower than under the earlier indirect tax legislations. Consequently, the challenge to the recovery proceedings merely on the ground that the summaries in GST DRC-01 and GST DRC-07 referred to Section 74 was held to be without merit.

However, considering that the petitioner was a company engaged in the treatment of effluents discharged from dyeing units, the Court remitted the matter to the respondent to reconsider the petitioner’s reply and pass a fresh order within three months from the date of receipt of the order. The writ petition was disposed of with these observations, without costs, and the connected miscellaneous petition was closed.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

This case was heard along with a batch of 250 Writ Petitions and as one of the 53 Writ Petitions which were finally heard on the larger issue regarding the challenge to the proceedings under Section 74 of the respective GST Enactments.

2. By a Common Order today in P.No.2142 of 2026 [Turbo Energy Private Limited], W.P.Nos.35967, 35970, 35974 and 35976 of 2024 [Fastenex Private Limited] and W.P.Nos.14487, 14492 and 14500 of 2025 [Ispahani Estates Private Limited], a detailed order has been passed insofar as the invocation of extended period of limitation under Section 74 of the respective GST Enactments.

3. In this Writ Petition, the Petitioner has challenged the Impugned Order dated 31.05.2024 whereby the proposal in the Show Cause Notice in GST DRC-01 dated 28.03.2024 has been confirmed.

4. By the Impugned Order, the Petitioner has been imposed with interest liability of Rs.72,25,154/- on the belated payment of tax for the Tax Period 2017-2018.

5. Earlier, the Petitioner was issued with an Intimation in GST DRC-01A dated 28.07.2020. Pursuant to the aforesaid Intimation, the Petitioner has paid the tax due for the following Tax Period on various dates:-

6. The Petitioner had earlier discharged the tax liability at 5% and on being pointed out that the Petitioner was liable to pay tax at 18%, the Petitioner has paid differential tax on the dates mentioned above.

7. The case of the Petitioner is that the Petitioner has promptly paid the tax due after the mistake was pointed out by the Department vide Notice / Intimation in GST DRC-01A dated 28.07.2020. Hence, it is submitted that the proposal in Notice issued under Section 74 of the respective GST Enactments which stand confirmed vide the Impugned Order is without any merits.

8. It is submitted that since Section 74 of the respective GST Enactments has been wrongly invoked against the Petitioner, the Petitioner has been disentitled to amnesty under Section 128-A of the respective GST Enactments on the Notification issued thereunder.

9. Defending the Impugned Order, the learned Government Advocate for the Respondent would submit that neither the Detailed Show Cause Notice issued along with summary of the Show Cause Notice in GST DRC-01 dated 28.03.2024 nor the Detailed Order dated 31.05.2024 issued along with the summary of the Order in GST DRC-01 has invoked Section 74 of the respective GST Enactments.

10. It is submitted that only in the summary of the Show Cause Notice in GST DRC-01 dated 28.03.2024 and in the summary of the Order dated 31.05.2024 in GST DRC-07, a reference has been made to Section 74 of the respective GST Enactments.

11. It is submitted that since the tax was not paid in time, Notice in GST DRC-01A dated 28.07.2020 was issued pursuant to which on the date mentioned above, the tax was paid by the Petitioner and therefore interest under Section 50(1) of the respective GST Enactments has to follow.

12. It is submitted that this case was outside the purview of the batch and therefore this Writ Petition is liable to be dismissed. It is further submitted that at best the Petitioner has an alternative remedy.

13. By way of rejoinder, the learned counsel for the Petitioner would submit that if Section 73 / Section 74 were not invokable, then there is no scope for recovering the interest from the Petitioner.

14. The learned counsel for the Petitioner placed reliance on the decision of the Division Bench of this Court in Eternit Everest Limited Union of India, (1997) 89 ELT 28.

15. I have considered the arguments advanced by the learned counsel for the Petitioner and the learned Government Advocate for the Respondent.

16. Both Section 73 and Section 74 of the respective GST Enactments constitute a complete code for the circumstances specified therein along with Section 75(12) read with Section 79 of the respective GST Enactments. In this case, admittedly the dispute pertains to the Tax Period 2017-2018. The Petitioner has paid the tax belatedly only after the Department pointed out the same.

17. By letter dated 12.04.2024, the Petitioner has also stated that the Petitioner will pay the interest arrears in 5 installments.

18. The Petitioner is statutorily required to not only pay the tax but also interest under Section 50(1) of the respective GST Enactments together with penalty at the rates specified therein on account of built-in amnesty under both Section 73 and Section 74 of the respective GST Enactments.

19. A reading of the Impugned Order reveals that not only intimation in GST DRC-01A was issued on 28.07.2020 for the Tax Period 2017-2018 but also a Show Cause Notice along with Summary of Show Cause Notice in GST DRC-01 was issued on 28.03.2024, after the tax was paid by the Petitioner on the dates mentioned above.,

20. Section 75(12) of the respective GST Enactments contemplates that notwithstanding anything contained in Section 73 or Section 74 or Section 74A of the respective GST Enactments, where any amount of self-assessed tax in accordance with the return furnished under Section 39 of the respective GST Enactments remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of Section 79 of the respective GST Enactments.

21. Further, as per Explanation to Section 75(12) of the respective GST Enactments inserted with effect from 01.01.2022 vide Notification No.39/2021-Central Tax, dated 21.12.2021 also it is clear that the expression “self-assessed tax” shall include the tax payable in respect of details of outward supplies furnished under Section 37, but not included in the return furnished under Section 39 of the respective GST Enactments.

22. Thus, the impugned recovery proceedings would be justifiable under Section 75(9) of the respective GST Enactments.

23. In any event, the Petitioner would have been required to pay interest in terms of Section 50 read with Section 75(12) read with Section 79 of the respective GST Enactments.

24. That apart, the Petitioner has to pay interest on belated payment of tax as required under Section 50 of the respective GST Enactments together with penalty under Section 73 or under Section 74 of the respective GST Enactments as the case may be which has not been paid or deliberately paid. Therefore, it has to be held that the proceedings under Section 74 of the respective GST Enactments was maintainable.

25. This is in view of the Common Order passed in the batch today by a separate order, wherein it has been explained in detail that the threshold for invoking the extended period of limitation under Section 74 of the respective GST Enactments is much lower compared to the earlier Indirect Tax Legislations.

26. Therefore, there is no merits in the challenge to the impugned recovery proceedings merely because summary of the Show Cause Notice in GST DRC-01 dated 28.03.2024 and summary of the Impugned Order in GST DRC-07 dated 31.05.2024 refers to Section 74 of the respective GST Enactments.

27. However, considering the fact that the Petitioner is a Company indulged in treatment of effluents discharged from dyeing units, I am inclined to remit the case back to the Respondent to reconsider the reply and pass a fresh order within a period of three (3) months from the date of receipt of a copy of this order.

28. This Writ Petition is disposed of with the above observations. No costs. Connected Writ Miscellaneous Petition is closed.