Facts of the Case:

The petitioner challenged Garnishee Notices issued in Form GST DRC-13 under Rule 145(1) of the CGST Rules read with Section 79(1)(c) of the CGST Act for recovery of interest liability under Section 50 of the CGST/MGST Act pertaining to FY 2017-18 to FY 2021-22. The petitioner contended that no show cause notice had been issued and no adjudication of the alleged interest liability had been undertaken before initiating recovery proceedings against its debtors. It was further argued that there existed a dispute regarding the computation of interest and that detailed representations dated 25.08.2023 and 27.10.2023 had already been submitted to the department explaining the correct interest computation.

The petitioner also contended that amounts deposited in the Electronic Cash Ledger should be treated as advance tax payments and, therefore, interest could not be levied beyond the date such amounts were credited to the Government treasury. Despite these representations, the department proceeded with garnishee action for recovery of the alleged dues.

The department, on the other hand, argued that mere deposit of funds into the Electronic Cash Ledger does not amount to payment of tax and that interest under Section 50 continues to accrue until the tax liability is actually discharged through filing of returns. The department relied upon various judicial precedents supporting its stand but fairly admitted that the petitioner’s representations remained pending for consideration.

Issue:

Whether recovery proceedings under Section 79 of the CGST Act through garnishee notices could continue without first deciding the taxpayer’s objections regarding computation of interest liability under Section 50, particularly when representations challenging such computation remained undisposed of; and whether the amount available in the Electronic Cash Ledger should be considered for adjustment while determining interest liability on self-assessed tax.

Held That:

The Bombay High Court observed that conflicting judicial views existed on the substantive issues concerning computation of interest under Section 50 and the effect of balances available in the Electronic Cash Ledger. However, the Court noted that the petitioner’s detailed representations disputing the interest computation had admittedly not been decided by the department. In such circumstances, the Court refrained from examining the merits of the rival contentions and held that the appropriate course would be for the department to first adjudicate the petitioner’s representations by passing a reasoned order in accordance with law.

Accordingly, the Court directed the concerned authority to decide the representations dated 25.08.2023 and 27.10.2023 within six weeks and communicate its decision to the petitioner. The Court further ordered that no coercive or precipitative action pursuant to the garnishee notices should be taken until such decision is rendered and communicated. It was also directed that if the decision ultimately went against the petitioner, the same should not be acted upon for a further period of three weeks, thereby enabling the petitioner to avail appropriate legal remedies. The Court expressly kept all substantive legal issues open for adjudication and disposed of the writ petition without deciding the merits of the dispute.

This ruling is significant for taxpayers facing recovery of GST interest liabilities without prior adjudication of their objections. The decision underscores that where a bona fide dispute exists regarding the computation of interest under Section 50, tax authorities should first determine such objections through a speaking order before resorting to garnishee proceedings under Section 79 of the CGST Act.

Case Name: BVG India Limited Versus Union Of India. dated 05.08.2026