Payment Under Protest Does Not Admit Liability; independent inquiry required before imposing GST interest and penalty.

Payment of disputed tax under protest does not amount to an admission of liability, and the taxpayer retains the right to contest the demand. The Himachal Pradesh HC noted that liability for alleged wrong availment of Input Tax Credit could not be fastened merely on the basis of the show cause notice summary; the adjudicating authority had to conduct an independent and impartial inquiry before imposing interest or penalty. On that reasoning, the order treating the protested reversal as admitted liability was unsustainable, and the assessee was entitled to a fresh DRC-07 reflecting only the disputed tax amount for further appellate challenge.

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Issues: Whether the order passed under Section 74 of the Himachal Pradesh Goods and Services Tax Act, 2017 was sustainable when the amount was reversed under protest, and whether interest and penalty could be levied by treating such payment as an admission of liability.

Analysis: The amount reversed by the petitioner was paid under protest, which meant that the payment was made without admitting liability and with the right to challenge the demand preserved. Treating such payment as an admission of liability was erroneous. The adjudicating authority was also required to conduct an independent and impartial inquiry before fastening liability in relation to the alleged wrong availment of Input Tax Credit, and could not proceed merely on the basis of the show cause notice summary. The order was therefore unsustainable in law.

Conclusion: The issue was decided in favour of the assessee. The order levying interest and penalty was quashed and the petitioner was entitled to a fresh DRC-07 reflecting only the disputed tax amount so as to pursue appellate remedies.

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