2019 (12) TMI 275 - HC - GST

Court clarifies interest on delayed GST payment, upholds natural justice principles

Godavari Commodities Ltd., Ranchi. Versus The Union of India through the Commissioner, Central Goods & Services Tax, Ranchi, Deputy Commissioner, Superintendent, Central Goods & Services Tax Range-1

Godavari Commodities Ltd., Ranchi. Versus The Union of India through the Commissioner, Central Goods & Services Tax, Ranchi, Deputy Commissioner, ... Issues:- Imposition of interest on delayed payment of GST without a show-cause notice.- Interpretation of Sections 73(1) and 50(1) of the CGST Act.- Violation of principles of natural justice in the absence of a show-cause notice.- Realization of short paid interest without proper adjudication.Analysis:The petitioner challenged the imposition of interest on delayed GST payment without a show-cause notice as per Section 73(1) of the CGST Act. The respondent contended that since the tax and some interest were paid, only interest short paid was in question, and Section 73(1) did not apply. However, the court noted that the tax was not paid to the Government within the prescribed period, constituting non-payment. Thus, the court rejected the respondent's argument that no show-cause notice was necessary in this case.The court emphasized the importance of following natural justice principles, stating that even in the absence of a specific provision, procedural fairness must be maintained. It was highlighted that prior to the issuance of the demand letter, no show-cause notice or opportunity to be heard was provided to the petitioner, rendering the actions illegal. The court stressed that irrespective of statutory provisions, adherence to natural justice principles is fundamental.Referring to Section 50(1) of the CGST Act, which deals with interest on delayed tax payment, the court acknowledged the respondent's argument but reiterated that Section 73(1) was applicable due to the non-payment of tax within the stipulated timeframe. Consequently, the court directed that the letter demanding payment of interest be treated as a show-cause notice under Section 73(1), granting the petitioner a hearing before the adjudicating authority.In light of the above, the court ordered the adjudicating authority to conduct a hearing and determine whether the petitioner was liable to pay the short paid interest. If found not liable, the amount was to be refunded with statutory interest. The adjudicating authority was instructed to issue a reasoned order within three months from the date of the court's communication, ensuring a fair and just resolution to the matter. Ultimately, the application was disposed of with the outlined directions for further proceedings.