GST Interest Liability is Automatic, Leviable only after Completion of Adjudication Proceedings: Jharkhand HC [Read Judgment]

The JharkhandHigh Court, on Tuesday, held that the Interest liability under Section 50 of the Central Goods and Service Tax (CGST), 2017 is automatic, but its computation and demand can be raised only after the completion of the adjudication proceedings under the Central Goods and Services Tax Act, 2017.

The petitioner, a partnership firm, filed GSTR-3B. However, due to the Nationwide problem in GSTN Portal, said return, which is an auto-populated return on the basis of details of inward and outward supply, is not being generated, due to which, by way of stop-gap arrangement, provisions have been incorporated or filing GSTR-3B Return in terms of Rule 61(5) read with Rule 61(6) of the Central Goods and Services Tax Rules, 2017.

The respondent, superintendent of Goods and Services Tax and Central Excise through a letter directed the petitioner to make payment of interest on the ground of delay in filing of GSTR-3B Return for the months of February and March, 2018.

Parallelly, the authorities exercised powers under Section 79 of the CGST Act by initiating garnishee proceedings for recovery of the amount of interest by issuing notice to the petitioner’s Banker.

Aggrieved by the above actions, the petitioners approached the High Court for relief contending that the impugned letter issued by respondent demanding interest amount on the alleged ground of delay in submitting GSTR-3B Return for the months of February and March 2018, is not sustainable in the eyes of law, as the said amount of interest has been determined without initiating any adjudication process under Sections 73 or 74 of the CGST Act.

The petitioner further contended that they are not liable to pay interest as there has been no delay on its part in the furnishing of GSTR-3B Return and, consequently, there is no delay on its part in depositing the tax with the respondent Authority, as in GSTN Portal, the due date for furnishing of return for the months of February and March 2018 was shown as 31st March 2019.

The division bench consists of Justice Deepak Roshan and Justice H.C. Mishra referring to a catena of decisions, held that “It is not a truth that liability of interest under Section 50 of the CGST Act is automatic, but the said amount of interest is required to be calculated and intimated to an assessee. If an assessee disputes the liability of interest i.e. either disputes its calculation or even the leviability of interest, then the only option left for the Assessing Officer is to initiate proceedings either under Section 73 or 74 of the Act for adjudication of the liability of interest.”

While quashing the letter for recovery of interest, the bench said, “we have already held that though the liability of interest is automatic, but the same is required to be adjudicated in the event an assessee disputes the computation or very leviability of interest, by the initiation of adjudication proceedings under Section 73 or 74 of the CGST Act, in our opinion, till such adjudication is completed by the Proper Officer, the amount of interest cannot be termed as an amount payable under the Act or the Rules. Thus, without initiation of any adjudication proceedings, no recovery proceeding under Section 79 of the Act can be initiated for recovery of the interest amount.”