Case Title | R.K. Transport Private Limited vs Union of India |
Court | Jharkhand HIgh Court |
Honorable Judges | Justice Aparesh Kumar Singh Justice Deepak Roshan |
Citation | 2022 (02) GSTPanacea 488 HC Jharkhand W.P.(T) No. 1404 of 2020 |
Judgment Date | 16-February-2022 |
The case involves a dispute over the imposition of interest amounting to Rs. 83,96,873/- by the Assistant Commissioner, CGST and Central Excise, Ranchi, in a letter dated 28th February 2020/2nd March 2020. The interest was imposed due to an alleged delay in furnishing the GSTR-3B return for the period from July 2017 to December 2019.
The petitioner challenges this imposition of interest on the grounds that the liability itself is disputed. They argue that the interest shouldn’t have been levied without any adjudication proceeding under Section 73 or 74 of the CGST Act. The petitioner, through a reply dated 9th March 2020, has disputed the liability.
One of the key arguments put forth by the petitioner is the absence of prescribed rules for computing interest under Section 50 Sub-Section (2) of the CGST Act. They assert that interest cannot be charged on the gross tax liability. In support of this argument, reference is made to the Finance Act, 2021, which inserted a proviso to Section 50 of the CGST Act through Section 112.
This proviso stipulates that interest on tax payable concerning supplies made during a tax period and declared in the return for that period, furnished after the due date as per Section 39, is not applicable unless such return is furnished after the commencement of proceedings under Section 73 or 74.
In essence, the petitioner contends that the imposition of interest without proper adjudication proceedings and in the absence of clear rules for computation goes against the provisions laid out in the CGST Act. They argue for the application of the proviso inserted by the Finance Act, 2021, to support their position.
The case revolves around a dispute concerning the determination and recovery of interest without the initiation of any adjudication process under the Central Goods and Services Tax Act (CGST Act). The petitioner contends that their situation is similar to a previous case, Mahadeo Construction Company v. Union of India & Ors., wherein it was argued that interest liability cannot be imposed without the initiation of an adjudication process. The respondent, represented by the Central Goods and Services Tax (CGST), argues that interest must be paid on delayed tax payments as per Section 50 of the CGST Act, and such interest can be recovered under Section 79 along with late fees.
The CGST further emphasizes that monthly returns (Form GSTR-3B) and tax payments have been made after the due date prescribed by Section 39(1) of the CGST Act without the payment of applicable interest for the delay. It is stated that Rule 61(5) of the CGST Rules has been retrospectively amended, making GSTR-3B a return under Section 39 of the CGST Act, and Rule 61(6) has been omitted. The respondent also cites a notification specifying the rate of interest per annum for calculating interest, effective from July 1, 2017.
The respondent argues that delayed filing of returns and delayed payment of tax are distinct, with late fees applicable for delayed filing and interest applicable for delayed payment. It is asserted that interest and late fees are not identical, as clarified in the CGST Act.
The respondent contends that interest and late fees become confirmed demands under Sections 50 and 47 of the CGST Act, respectively, if returns are filed belatedly and tax dues are not paid on time. They argue that such demands do not necessitate an adjudication process under Sections 73 or 74 of the CGST Act.
The petitioner’s case, similar to Mahadeo Construction Co., has been challenged in the Supreme Court. The Supreme Court has tagged the petition with another case on the same issue but has not issued an interim stay on the judgment in the Mahadeo Construction Company case.
The court, after considering the arguments from both parties and examining relevant materials, addresses the core issue of whether interest liability under Section 50 of the CGST Act can be determined without initiating any adjudication process under Sections 73 or 74, especially when the assessee disputes such liability. The court’s decision hinges on this crucial question.
Section 79 of the CGST Act, 2017 deals with the liability of interest under Section 50 of the Act, which pertains to the payment of interest by a taxable person who fails to pay tax within the prescribed period. The interpretation and application of this section have been subject to judicial scrutiny, particularly in a case adjudicated upon by a Coordinate Bench of a court, as referenced in Annexure-5 dated 9th March 2020.
In the judgment rendered by the Coordinate Bench, it was clarified that the liability of interest under Section 50 is not automatic in the sense that it requires calculation and intimation to the assessee. If the assessee disputes the liability of interest, either regarding its calculation or the leviability itself, the Assessing Officer is obligated to initiate proceedings under Section 73 or 74 of the Act for adjudication of the interest liability.
The judgment further referenced a decision by the Hon’ble Madras High Court, wherein it was emphasized that while the liability to pay interest is automatic, the quantification of such liability cannot be unilateral. The court highlighted that even though interest liability arises automatically, its quantification necessitates an arithmetic exercise, especially when the assessee disputes the quantum or period of liability.
It was noted that the dispute in the case concerned the quantum of interest rather than the liability itself. The court emphasized the need to consider objections raised by the assessee in determining the quantum of interest liability. Unilateral quantification of interest liability was deemed unjustified, particularly when the assessee raises objections.
The judgment concluded by highlighting that the dispute centered on the quantum of interest, and the court disposed of the writ petitions with the condition that the petitioners pay the admitted liability of interest. The direction issued by the court emphasized the necessity of considering objections raised by each petitioner in determining the quantum of interest liability.
Overall, the judgment provides clarity on the application of Section 50 of the CGST Act, emphasizing the importance of considering objections raised by the assessee in determining the quantum of interest liability, despite its automatic nature.
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