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

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 date without providing hearing opportunity. The court held that while the advisory violated natural justice principles by not considering petitioner's submissions, no interference was warranted at this stage. The court clarified that under the GST Act scheme read with Rules 88B, 88C, and 142B, authorities can recover interest under Section 79(1) only after issuing intimation in Form GST DRC-01D, which serves as recovery notice. The advisory merely alerts the taxpayer about outstanding liability, allowing them to either pay or oppose when formal notice is received. The court found petitioner's anxiety about direct recovery unfounded given Rule 142B's requirement for proper intimation before recovery proceedings.

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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.

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