No recovery proceeding to be initiated for interest amount under GST without any adjudication proceedings
Mahadeo Construction Co.
Vs
Union of India
Gist of Case : The assessee was served with a letter issued by Superintendent of Goods and Services Tax and Central Excise directing the assessee to pay interest amounting to Rs.19,59,721 due to delay in filing of return in Form GSTR-3B for the months of February and March, 2018. The revenue authorities further initiated recovery proceedings of interest amount by issuing notice to the banker of assessee.
High Court’s Decision:
The Hon’ble High Court observed that as per Section 73(1) of the Central Goods and Services Tax Act (‘CGST Act’), if tax had not been paid or had been short paid, a notice was required to be served by the Proper Officer on the assessee. The said notice would not only require him to show cause as to why tax should not be recovered from it, but should also specify the interest payable under Section 50 will also be recovered along with penalty. Thus, if there was a short payment of tax or non-payment of tax, a notice was required to be issued even for recovery of interest under Section 50 of the CGST Act.
Section 79 of the CGST Act empower the authorities to initiate garnishee proceedings for recovery of tax wherein any amount payable by a person to the Government under any of the provisions of the Act and Rules made is not paid. Even though the liability of interest is automatic, but the same is required to be adjudicated when assessee dispute the computation or leviability of interest, by initiation of adjudication proceedings. Until such adjudication was completed by the Proper Officer, the amount of interest could not be termed as an amount payable under GST. Therefore, without initiation of any adjudication proceedings, no recovery proceeding under Section 79 of the Act could be initiated for recovery of the interest amount.
The Hon’ble High Court set aside the letter demanding interest as well as notice initiating recovery proceedings.