2025 (7) TMI 1066 - HC - GST

Gujarat HC rules GST advisory under Section 50(1) doesn't require hearing before formal recovery notice

Reliance Formulation Private Limited Versus Assistant Commissioner Of State Tax, Ghatak 21, Division 2.

Gujarat HC disposed of a petition challenging an advisory issued under Section 50(1) of GST Act for interest payment on self-assessed tax paid after due ... Issuance of advisory for ensuring payment of interest u/s 50(1) of the GST Act in respect of self-assessed tax paid after the due date of furnishing of returns, for initiation of recovery proceedings - no opportunity of hearing provided and the submissions of the petitioner not considered - violation of principles of natural justice - HELD THAT:- As per the provisions of Section 39(7) of the GST Act, the petitioner is required to file the return of income by self-assessment and if the petitioner does not pay the interest as per the self-assessment procedure prescribed under Section 39 of the GST Act, the petitioner is liable to pay the interest as provided under Section 50(1) of the GST Act which provides that any person who is liable to pay tax interest in accordance with the provisions of the GST Act and Rules but fails to pay the tax or any part thereof, then such person is liable to pay the interest on his own at the rate of 18% per annum as may be recommended by the GST Council. The manner in which the interest is to be computed is provided under Rule 88B of the GST Rules for delayed payment of tax, whereas, Section 75(12) of the GST Act provides that notwithstanding anything contained in Sections 73 or 74 of the GST Act, where any amount of self-assessed tax or interest payable on such tax remains unpaid, then the same shall be recovered under the provisions of Section 79 of the GST Act. At the same time, Rule 88C of the GST Rules provides the manner of dealing with difference in liability reported in statement of outward supplies and that reported in return, whereas, Rule 142B of the GST Rules which is inserted by the Central Goods and Services Tax (with an Amendment) Rules, 2023 with effect from 04.08.2023 provides for intimation of certain amounts liable to be recovered under Section 79 of the GST Act which includes the tax or interest which has become recoverable in accordance with Section 75 of the GST Act read with Rule 88C of the GST Rules or otherwise. Therefore, on conjoint reading of the Scheme of the GST Act and the Rules, it appears that the respondent-Authority can recover the amount of interest which has become due as per the provisions of Section 50(1) of the GST Act read with Rules 88B and 88C of the GST Rules under Section 79(1) of the GST Act only after issuance of intimation in Form GST DRC-01D which will be treated as notice for the recovery as provided under Rule 142B of the GST Rules and without following such procedure, the respondent-Authority cannot make any effective recovery of interest which may become payable by the assessee under the provisions of the GST Act and Rules on self-assessment to be made by such assessee. The reference to Section 79 of the GST Act in the impugned advisory is only to put the petitioner on guard as to such outstanding liability as per the record of the respondent-Authority so that the petitioner can either make the payment of such liability if agreed or may oppose the same when the notice in Form GST DRC-01D is received by the petitioner for recovery of such amount as stated hereinabove. Therefore the anxiety of the petitioner that the respondent-Authority will directly apply the mode of recovery prescribed under Section 79(1) of the GST Act, is without any basis in view of the insertion of Rule 142B in the GST Rules with effect from 04.08.2023 which requires intimation/notice of recovery to the petitioner so as to enable the petitioner to reply the same. No interference is required to be made at the stage of issuance of advisory by the respondent-Authority as the same is subject to further proceedings as contemplated in Rule 142B of the GST Rules read with Section 79 of the GST Act - Petition disposed off. ISSUES: Whether the issuance of an advisory under Section 50(1) of the GST Act for ensuring payment of interest on delayed self-assessed tax is arbitrary, illegal, or beyond the provisions of the GST Act and Rules. Whether recovery proceedings under Section 79 of the GST Act can be initiated without issuance of a formal intimation/notice as prescribed under Rule 142B of the GST Rules. Whether the petitioner is entitled to an opportunity of hearing before initiation of recovery proceedings for interest payable under the GST Act. RULINGS / HOLDINGS: The issuance of the advisory under Section 50(1) of the GST Act is not illegal or arbitrary but serves to put the petitioner on guard regarding outstanding interest liability; it is 'only to intimate' the petitioner and does not itself initiate recovery proceedings. Recovery of unpaid self-assessed tax or interest under Section 79 of the GST Act can be effected only after issuance of an intimation in Form GST DRC-01D as prescribed by Rule 142B of the GST Rules, which 'shall be treated as the notice for recovery.' After issuance of the notice in Form GST DRC-01D, the respondent-Authority is obliged to provide the petitioner an opportunity to file a reply and, if requested, a hearing in compliance with the principles of natural justice before proceeding with recovery. RATIONALE: The Court examined the statutory scheme under the Central/State Goods and Services Tax Act, 2017 and the associated Rules, particularly Sections 39, 50, 75(12), 79 of the GST Act and Rules 88B, 88C, and 142B of the GST Rules. Section 50(1) mandates interest on delayed payment of tax, and Rule 88B prescribes the manner of calculating such interest. Section 75(12) mandates recovery of unpaid self-assessed tax or interest under Section 79. Rule 142B, inserted with effect from 04.08.2023, requires issuance of an intimation (Form GST DRC-01D) as a prerequisite to recovery proceedings, which acts as a formal notice and ensures procedural safeguards. The Court distinguished prior precedent relied upon by the petitioner, noting it predates the insertion of Rule 142B and the Form DRC-01D regime, thus not binding on the current procedural framework. The Court emphasized adherence to the due process embedded in the GST Act and Rules, including the right to be heard before recovery, thereby upholding principles of natural justice.