ADVISORY ISSUED BY DEPARTMENT TO THE TAXABLE PERSON FOR THE PAYMENT OF INTEREST

In Reliance Formulation Private Limited Versus Assistant Commissioner Of State Tax, Ghatak 21, Division 2. - 2025 (7) TMI 1066 - GUJARAT HIGH COURT, the petitioner company is specialised in formulation of psychotropic range of Ayurvedic and herbal products as well as variety of antibiotics, enzymes and vitamins.  The petitioner paid the taxes regularly and filed the required returns regularly.

The petitioner received an advisory, dated 18.12.2024 from the Department for ensuring the payment of interest for the financial years 2017-18 to 2023 – 24, under Section 50(1) of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) in respect of self-assessed tax paid after the due date of furnishing of returns. The advisory also indicated that if the interest is not paid or if sufficient clarification is not submitted by the taxable person, the department is constrained to initiate recovery action under Section 79 of the Act.

Against the said advisory the petitioner filed the present writ petition before the High Court with the following prayers-

• To hold that the impugned advisory is arbitrary, illegal and are dehors to the provisions of the Act and rules made there under and as a consequence thereof to quash and set aside the advisory dated 18.12.2024 issued by the Department to the petitioner;
• To stay the operation and implementation and execution of the impugned advisory.

The petitioner submitted the following before the High Court-

• Section 50(1) of the Act provides that if any person who is liable to pay self-assessment tax, then he will be liable to pay interest @ 18% per annum or at the rate of interest as recommended by the GST Council. There is no provision under this section for the issue of advisory by the Department.  Therefore, the Department could not have issued the advisory.
• Without giving an opportunity of hearing and without considering the submissions of the petitioner no recovery proceedings could have been contemplated.
• Section 50(1) and 75(12) of the act read with Rule 88B provides the manner of calculating interest on delayed payment of tax.
• Without initiation of any adjudicating proceedings, no recovery proceedings under Section 79 of the Act could be initiated for recovery of interest amount.

Therefore, the petitioner prayed the High Court to quash and set aside the advisory issued by the Department, dated 18.12.2024.

The Revenue submitted the following for the contentions of the petitioner-

• The advisory was issued to ensure the payment of interest by the petitioner and it is the intimation given to the petitioner reminding to pay the interest liability under Section 50(1) of the Act. 
• If any interest is not paid for the delayed payment of tax either wholly or partly then such amount is to be recovered under Section 79 of the Act.
• The newly  introduced Rule 142B provides to issue an intimation for certain amounts liable to be recovered under section 79 of the Act.
• Without giving an intimation in Form GST DRC – 01D no recovery proceedings can be made by the Department.
• The issuance of advisory would not result into taking any action of recovery as per the mode prescribed under section 79(1) of the Act.
• On giving the intimation in Form GST DRC – 01D the petitioner will have an opportunity to file a reply to such notice for recovery and after considering the reply of the petitioner only, the department will initiate recovery proceedings under section 79(1) of the Act.
• The advisory was issued only to put the petitioner on guard with regard to the proposed recovery proceedings.

The Department, therefore, submitted that no interference may be made by the High Court at the stage of issuance of advisory by the Department since the petitioner is not put to any prejudice but on the contrary, the petitioner is put on guard about the outstanding interest liability as per the provisions of the Act and the rules made there under.

The High Court considered the submissions of the petitioner and the Department.  For the purpose of this petitioner the High Court analysed the following provisions of sections/rules-

• Section 39 – Furnishing of returns;
• Section 50 – interest on delayed payment of tax;
• Section 75 – General provisions relating to determination of tax;
• Section 76 – Recovery of tax;
• Rule 88B – Manner of calculating interest on delayed payment of tax;
• Rule 88C – Manner of dealing with the difference in liability reported in statement of outward supplies and that reported in return;
• Rule 142B – Intimation of certain amounts liable to be recovered under section 79 of the Act (with effect from 04.08.2023).

The High Court observed that on conjoint reading of the scheme of the Act and the rules, it appears that the department can recovery the amount of interest, due under section 50(1) of the Act only after the issuance of an intimation in Form GST DRC – 01D, which will be treated as notice.

The High Court also perused the contents of Form GST DRC – 01D and observed that it is clear that the petitioner is put to notice under Section 75(12) of the Act to pay the outstanding interest within 7 days from the date of receipt of the said notice, failing which, the proceedings will be initiated to recover the outstanding dues as per the prescribed modes.

The High Court held that it is on the part of the petitioner, on the issuance of an advisory by the Department either to make the payment of such liability if he agrees or may oppose the same when the notice in Form GST DRC – 01D is received by the petitioner for recovery of such outstanding amount.  The High Court was of the view that no interference is required to be made at the stage of issuance of advisory as the same is subject to further proceedings as contemplated in Rule 142B and the Department can proceed in the manner prescribed under the said provisions of the Act and the Rules and disposed of the writ petition.