Court invalidates interest demand under GST Act, orders refund & interest evaluation

The court held that the impugned order demanding interest under Section 50 of the GST Act was not sustainable in law due to a retrospective amendment. The garnishee notice issued was set aside, and the respondent was directed to recalculate the demand, considering the amendment, and refund any excess amount collected. The court also instructed the respondent to evaluate the petitioner's claim for interest on the excess amount. Consequently, the writ petition challenging the demand and related notices was disposed of, along with various related applications.

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Issues:
Challenge to vires of sections of GST Act including Section 50, demand of interest, garnishee notice under Section 79, retrospective amendment of Section 50, calculation of interest, refund of excess amount collected.

Analysis:
The petitioner challenged the vires of several sections of the GST Act, including Section 50, and an order demanding interest under Section 50 for a specific period. The petitioner also contested a garnishee notice issued to HDFC Bank for recovery under the said notice. During the pendency of the writ petition, Section 50(1) of the GST Act was amended by the Finance Act, 2021, which clarified that interest is payable only on the tax paid by debiting the electronic cash ledger. The petitioner argued that only a specific amount was payable under Section 50, as mentioned in their supplementary affidavit, and this amount was not disputed in the opposing affidavit.

The court noted the retrospective amendment of Section 50 and held that the impugned order demanding interest was not sustainable in law. Consequently, the garnishee notice was set aside. The court directed the respondent to recalculate the demand in accordance with the law, considering the amendment to Section 50, and refund any excess amount collected. The respondent was also instructed to evaluate the petitioner's claim for interest on the excess amount collected.

As a result, the writ petition challenging the demand and related notices was disposed of. Additionally, various applications related to the case were also disposed of by the court.

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