High Court of Jharkhand passed a judgement on 21st April, 2020 in the case of Mahadeo Construction Co. (Petitioner) stating that without initiation of any adjudication proceedings, no recovery proceeding under CGST Act can be initiated for recovery of the interest amount. The case is described as under:
Facts of the Case
- The petitioner stated that demanding interest amount of Rs.19,59,721/-on the 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 there has been no delay on its part in furnishing of GSTR-3B Return and, consequentially, there is no delay on its part in depositing the tax with the respondent-Authority.
- Considering the above facts, court agreed that interest liability arises automatically but if this liability is not accepted by assesse then the same requires determination through an adjudicatory process to be initiated as per the detailed provisions contained under Section 73 of the CGST Act.
- It is also further stated that garnishee proceedings under Section 79 of the CGST Act for recovery of the amount of interest is arbitrary and illegal, as the provisions of Section 79 of the CGST Act can be adopted only when “any amount payable by a person to the Government under the provisions of the Act and the Rules is not paid”. The amount payable (unless admitted) can only be determined by initiating adjudication process as provided u/s 73 & 74 of the CGST Act.
High Court after considering the above facts and observations passed the following rulings:
- 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 initiation of adjudication proceedings u/s 73 or 74 of the CGST Act.
- Without initiation of adjudication proceedings, the amount of interest cannot be termed as an amount payable under the Act or the Rules. Thus, no recovery proceeding under Section 79 of the Act can be initiated for recovery of the interest amount.