The Hon’ble High Court of Jharkhand vide its order dated 16th February 2022 in the matter of R.K. Transport Private Limited Vs. Union of India & another in W.P. (T) No. 1404 of 2020 held that liability of interest cannot be determined without initiating an adjudication process under Section 73 or 74 of the CGST Act.

That in the present writ petitioner has challenged the impugned letters dated 28th February 2020/2nd March 2020 wherein interest amounting to Rs. 83,96,873/- without initiating the adjudication process has been levied on the petitioner.

Facts: –

  • The petitioner for delay in furnishing the GSTR 3B for the period July 2017 to December 2019, received letters dated 28th February 2020/2nd March 2020 levying interest amounting to Rs. 83,96,873/-.
  • The Petitioner through its reply to aforesaid letters filed a reply dated 09th March 2020 and disputed the liability of interest inflicted upon it.

Petitioners Plea:

  • Since the liability in the present case has been disputed by the petitioner, the interest could not have been levied without any adjudication proceedings under Section 73 or 74 of the CGST Act.
  • The petitioner referring to Section 112 vide which a proviso to Section 50 was inserted, submitted that interest cannot be charged on the gross liability.
  • There is no rule prescribed under Section 50(2) for computation of interest under Section 50(1) of the Act.
  • The petitioner while mentioning that the due date of GSTR 3B has been extended several times relied on the judgment of Coordinate Bench of the same court in Mahadeo Construction Company Vrs. Union of India & Ors. W.P.(T) No. 3517 of 2019 and submitted the issue involved in the present matter is fully covered.

Respondents Plea:

  • It was submitted on the behalf of the respondents that the monthly returns in Form GSTR -3B and payment of tax have been made after the due date prescribed under Section 39(1) of the CGST Act, also the applicable interest under Section 50(1) has not been discharged.
  • The interest payable on such delayed payment can be recovered under Section 79 read with Section 75(12) of the Act.
  • GSTR 3B shall be considered a return under Section 39 with a retrospective amendment in rule 61(5) of the CGST Rules.
  • Levying interest under Section 50 and imposing late fee under Section 47 do not require any adjudication proceedings under Section 73 or 74 of the Act.
  • It was admitted on the behalf of the respondents that the same issue has been considered by the Hon’ble Court in the judgment relied upon by the petitioner in Mahadeo Construction Company, however it was informed that the said decision has been challenged before the Hon’ble Apex Court and till date there is no interim stay.

Held:

  • It was observed by the Hon’ble High Court that there is no dispute that the interest has been levied without any adjudication proceeding under Section 73 or 74 and the same was disputed by the petitioner by a reply dated 9th March 2020 filed in this regard.
  • Further the Hon’ble Court referring to the decision relied upon by the petitioner in Mahadeo Construction (supra) and reproducing the ratio laid down in the judgment observed that the issue involved has already been considered by the Coordinate Bench of the same Court, wherein it was held’ though the liability of interest under Section 50 is automatic, quantification of such liability shall have to be made by doing arithmetic exercise, after considering the objections of the assessee.’
  • The Second issue relating to recovery of interest under Section 79 of the Act was also answered by the Coordinate Bench and it was held that ‘without initiation of any adjudication proceedings, no recovery under Section 79 of the Act can be initiated for recovery of interest.’
  • The Hon’ble Court considering the ratio laid down by the Coordinate Bench held that issue involved in the present matter is covered by Mahadeo Construction Co. (supra) as despite the fact the liability towards interest was disputed by the petitioner, the revenue raised the demand for payment of interest without initiating any adjudication proceedings under Section 73 or 74 of the Act.

The Hon’ble High Court with the above findings quashed the impugned demand contained in letters dated 28th February 2020/2nd March 2020 providing liberty to the respondents to initiate appropriate adjudication proceedings and determine the liability against the petitioner under Section 73 or 74 of the Act.

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