Godavari Commodities Ltd VS Union of India

petitioner, the demand for additional interest on delayed payment is justified under the provisions of the Central Goods and Services Tax (CGST) Act. The letter of intimation issued by the Superintendent of CGST & CX Range-I, Ranchi, informing the petitioner of the liability for interest on delayed payment of GST, is in accordance with the legal framework.

The petitioner contests this demand, asserting that the action of the respondent authority is illegal. They argue that according to Section 73(1) of the CGST Act, a show-cause notice must be issued before imposing such liabilities. Since no such notice was provided to the petitioner before the issuance of the letter containing the demand, they contend that all subsequent actions taken by the authorities are unlawful and should not be upheld.

Furthermore, the petitioner highlights the immediate consequence of the demand, which was the freezing of their bank account. It was only after the payment of the demanded amount that their account was unfrozen. This sequence of events underscores the significant impact of the demand on the petitioner’s financial operations.

In response, the counsel representing the CGST defends the legality of the demand, emphasizing that the petitioner had indeed defaulted on their tax payment obligations, leading to the imposition of interest as per the provisions of the law. They argue that the payment of admitted tax and partial interest does not absolve the petitioner from their liability for additional interest on delayed payment.

Both parties present contrasting interpretations of the legal framework governing GST payments and penalties. While the petitioner insists on strict adherence to procedural requirements, the counsel for the CGST asserts the authority’s right to enforce penalties for non-compliance.

The outcome of this legal dispute hinges on the court’s interpretation of the relevant statutes and procedural norms, balancing the taxpayer’s rights with the government’s duty to enforce tax regulations effectively.

The case revolves around a writ application filed by the petitioner against a letter of intimation issued by the respondent No.3, Superintendent of CGST & CX Range-I, Ranchi, dated 6.2.2019. This letter imposed a liability of Rs.11,58,643/- upon the petitioner for short-paid interest on delayed GST payment. The petitioner was instructed to pay this amount within three days, failing which their bank account was frozen until payment, after which it was unfrozen.

The petitioner’s counsel argues that the respondent’s action is illegal as it violates Section 73(1) of the CGST Act, which mandates issuing a show-cause notice before such actions. Since no such notice was provided, the counsel asserts that all subsequent actions are unlawful.

On the other side, counsel for the CGST opposes the petitioner’s plea, arguing that since the admitted tax and some interest were paid, the issue pertains only to interest short-paid. They contend that Section 73(1) of the CGST Act doesn’t apply in this scenario. The petitioner had credited the tax and interest in their electronic cash ledger after the due date, but the actual payment to the government account was made later. The CGST counsel argues that since interest was paid only till the date of credit in the electronic cash ledger, Section 73(1) doesn’t apply, and hence, no show-cause notice was necessary before issuing the demand.

Both sides present conflicting interpretations of the law, with the petitioner stressing the necessity of a show-cause notice and the CGST counsel arguing the inapplicability of Section 73(1) due to the nature of the shortfall.

In the case presented, the petitioner is challenging a letter of intimation issued by the Superintendent of CGST & CX Range-I, Ranchi, dated 6.2.2019, demanding payment of interest on delayed GST payment amounting to Rs.11,58,643/-. The petitioner was instructed to deposit this amount within three days of receiving the letter, and their bank account was frozen until payment was made, subsequently being unfrozen after payment.

The petitioner’s counsel argues that the respondent’s action is illegal as it contravenes Section 73(1) of the CGST Act, which mandates issuance of a show-cause notice before such demands. Since no such notice was served, all subsequent actions are deemed unlawful.

On the contrary, the CGST’s counsel contends that since the petitioner had paid the admitted tax and some interest, the issue pertains only to interest that was underpaid. They argue that Section 73(1) of the CGST Act does not apply in this scenario. The petitioner had credited the tax and interest in their electronic cash ledger after the prescribed date, but actual payment to the government account was delayed, resulting in underpaid interest. The CGST’s counsel cites Section 50(1) of the CGST Act, which mandates interest payment on delayed tax payment, to support their stance.

Therefore, while the petitioner claims procedural irregularity and demands the nullification of the demand letter, the CGST argues that the interest payment is legitimate under the relevant provisions of the CGST Act.

The petitioner, in this case, challenges a letter of intimation for the payment of interest on delayed payment of Goods and Services Tax (GST), issued by the Superintendent of CGST & CX Range-I, Ranchi. The letter, dated 6.2.2019, imposed a liability of Rs.11,58,643/- on the petitioner for short-paid interest due to not depositing the tax within the prescribed time. The petitioner was instructed to make the payment within three days, and their bank account was frozen until the payment was made, subsequently being unfrozen after payment.

The petitioner’s counsel argues that the respondent’s action is illegal, citing Section 73(1) of the CGST Act, which mandates a show-cause notice before issuing such a letter. As no show-cause notice was provided to the petitioner, they contend that subsequent actions are unlawful.

In response, counsel for the CGST opposes the petitioner’s plea, asserting that as the admitted tax and some interest were paid, the matter concerns only interest short-paid. They argue that Section 73(1) doesn’t apply because the petitioner credited the tax and interest to their electronic cash ledger after the prescribed date but made the actual payment to the government account later. According to counsel for the CGST, interest was paid only up to the date the amount was credited to the electronic cash ledger, hence, Section 73(1) doesn’t apply, and no show-cause notice was necessary.

Counsel for the CGST also refers to Section 50(1) of the CGST Act, regarding interest on delayed payment of tax, which allows interest to be levied at a rate not exceeding eighteen percent for unpaid tax. They argue that this provision, rather than Section 73(1), governs the situation.

To further support their argument, counsel for the CGST emphasizes that Section 73(1) applies only when tax hasn’t been paid due to reasons other than fraud. They assert that this provision doesn’t apply in the present case as the delay was not due to fraud.

In summary, the petitioner challenges a demand for interest on delayed GST payment, arguing that proper procedures weren’t followed, while the CGST contends that the demand is justified under Section 50(1) and that Section 73(1) doesn’t apply to this situation.

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