Petitioner Wins Temporary Relief Against GST Recovery as Court Questions Procedural Violations Under Sections 73(1) and 16(4)

HC granted interim relief to the petitioner challenging GST demand and garnishee notice for April 2018-March 2019 discrepancies. The court restrained authorities from taking coercive recovery actions pending further hearing. Petitioner argued the department violated procedural requirements by failing to issue proper show-cause notice under Section 73(1) of JGST Act before levying tax, interest, and penalties. Additional contentions included improper denial of Input Tax Credit under Section 16(4) and levy of interest without prescribed computation rules. The court recognized these as substantial legal questions requiring full consideration.

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Issues:
1. Discrepancies in GST return for the period April 2018 to March 2019.
2. Allegations of interpretation of Section 16(4) of the JGST Act and denial of ITC.
3. Levy of interest without prescribed rules for computation.
4. Failure to issue show-cause notice under Section 73(1) before levying tax, interest, and penalty.
5. Violation of principles of natural justice and procedural requirements under Section 73 of the Act.
6. Issuance of garnishee notice to petitioner's bank for immediate payment.

Analysis:
1. The petitioner's GST return for April 2018 to March 2019 showed discrepancies, leading to an intimation of tax payable under Section 73(5)/74(5) of the JGST Act. The petitioner contended that denial of Input Tax Credit (ITC) based on Section 16(4) was misconceived, citing relevant judgments in support.

2. Regarding the levy of interest, the petitioner argued that interest computation rules were absent, making the levy unworkable. It was emphasized that interest should start post adjudication of the demand, especially when the liability is disputed. The petitioner highlighted the necessity of a show-cause notice under Section 73(1) before imposing penalties.

3. The adjudication order issued without following the principles of natural justice and procedural requirements under Section 73 was challenged. The petitioner referenced specific judgments, including one related to the initiation of recovery proceedings without proper adjudication on interest disputes.

4. The petitioner sought relief from coercive actions following the issuance of a garnishee notice to their bank for immediate payment. The petitioner argued that without issuance of a show-cause notice under Section 73(1), coercive steps for recovery should not be taken. The court granted time for the State to file a counter affidavit and restrained coercive actions until further hearing.

5. The judgment highlighted the importance of adhering to procedural fairness and legal requirements in tax matters, emphasizing the need for proper adjudication and issuance of show-cause notices before imposing tax, interest, or penalties. The court's decision to prevent coercive actions without proper legal basis reflects a commitment to upholding natural justice principles in tax disputes.

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