Interest on Delayed GST Payment Cannot Be Demanded Without Prior Show-Cause Notice Under Section 73 of CGST Act

The HC granted interim relief by staying notices issued under Section 50 of CGST Act demanding interest on delayed tax payment. The petitioner contended the notices were invalid without a prior show-cause notice under Section 73, especially since tax was already paid under Section 39(7). Respondents argued that acknowledgment of tax receipt is based on return filing date, not payment date, and that Section 75(12) permits recovery proceedings under Section 79 without Section 73 notice. The court favored petitioner's interpretation, staying the operation of the impugned notices pending further consideration.

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Issues Involved:
1. Validity of notices issued under Section 50 of the CGST Act without a show-cause notice as required under Section 73.
2. Interpretation of provisions regarding acknowledgment of tax receipt and delayed filing of return.
3. Authority to initiate recovery proceedings under Section 79 without issuing a notice under Section 73.

Analysis:

Issue 1: Validity of Notices under Section 50 without Show-Cause Notice
The petitioner argued that the notices issued under Section 50 of the CGST Act on 15.12.2021 and 25.03.2022, without a show-cause notice as required under Section 73, were not sustainable. The counsel contended that since the tax due had been paid under Section 39(7) of the CGST Act, the notices were legally flawed. The court, after hearing both parties, decided to stay the effect and operation of the impugned notices, as per the contentions raised by the petitioner.

Issue 2: Interpretation of Tax Receipt Acknowledgment and Delayed Return Filing
The respondents argued that the acknowledgment of tax receipt is based on the date of filing the return, not the actual payment date. They contended that since the return was filed after the due date, the notices under Section 50 demanding interest on delayed tax payment were valid. Additionally, they referred to Section 75(12) of the CGST Act to support their position that recovery proceedings can be initiated under Section 79 without issuing a notice under Section 73. The court considered these arguments but ultimately decided to grant interim relief by staying the effect and operation of the impugned notices.

Issue 3: Authority to Initiate Recovery Proceedings without Issuing Section 73 Notice
The respondents further argued that recovery proceedings could be initiated under Section 79 of the CGST Act without issuing a notice under Section 73. They maintained that there was no legal infirmity in issuing the notices under Section 50. However, the court's decision to grant interim relief by staying the notices implied a different interpretation, favoring the petitioner's position.

In conclusion, the High Court of Chhattisgarh, after considering the arguments presented by both parties, decided to grant interim relief by staying the effect and operation of the notices dated 15.12.2021 and 25.03.2022 issued under Section 50 of the CGST Act. The court's decision was based on the petitioner's contention regarding the legality of the notices in the absence of a show-cause notice as required under Section 73, despite the respondents' arguments regarding tax receipt acknowledgment and recovery proceedings initiation. The matter was scheduled for further consideration after the summer vacation.

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