Interest On Belated Filing Of GSTR-3B Return Not Recoverable Without Adjudication: Jharkhand High Court

The High Court of Jharkhand ruled that, recovery of interest under CGST Act, 2017 for delay in filing the GSTR-3B return cannot be initiated without following any adjudication proceedings under the Act in the event the interest liability is disputed by the assessee.

The revenue authorities’ notice of recovery issued under Section 79 of the CGST Act was quashed by the Bench, consisting of Justices Aparesh Kumar Singh and Deepak Roshan, on the grounds that the adjudication proceedings under Section 73 or 74 of the CGST Act were not followed by the revenue authorities.

R.K. Transport Private Limited, the Petitioner/Assessee, filed a writ petition in the Jharkhand High Court challenging the Assistant Commissioner (CGST and Central Excise) of interest on Assessee for failure to file GSTR-3B return for a particular period under Section 50(1) of the CGST Act.

The Assessee R.K Transport argued in front of the High Court that because the Assessee had contested the responsibility of interest, it could not have been collected without going through an adjudication procedure under Section 73 or 74 of the CGST Act. The revenue department’s attorney argued that the interest due on such late tax payments may have been recovered under the CGST Act. The counsel claimed that if the Assessee filed the GSTR-3B return late and did not pay the tax dues within the prescribed time, interest and late fees were automatically confirmed demands under Section 50 and Section 47 of the CGST Act, respectively, and did not require any adjudication process under Section 73 or 74 of the CGST Act.

Section 50(1) of the CGST Act, 2017 states that anyone who is liable to pay tax under the CGST Act or the rules promulgated thereunder but fails to pay the tax or any part of it to the government within the prescribed period shall pay interest on his own at such rate, not exceeding 8%, as may be notified. Section 47 of the Act states that any registered person who fails to file the required returns by the designated due date must pay a late fee of one hundred rupees for each day the failure continues, up to a maximum of five thousand rupees.

The High Court of Jharkhand noted that, the Coordinate Bench of the Jharkhand High Court had ruled in Mahadeo Construction Company versus Union of India (2020) that, while interest liability under Section 50(1) of the CGST Act is automatic, it must be adjudicated by initiating adjudication proceedings under Section 73 or 74 of the CGST Act if an assessee disputes the computation or the very viability of such interest. In that case, the Jharkhand High Court held that the amount of interest could not have been termed as an amount payable under the CGST Act or the Rules made thereunder until the adjudication by the Proper Officer under the CGST Act was completed, and no recovery proceedings under Section 79 of the CGST Act could have been initiated for recovery of the interest amount until the adjudication was completed by the Proper Officer under the CGST Act.

The Revenue Department had raised a demand for payment of interest due to delay in furnishing the GSTR-3B return without initiating any adjudication proceedings under Section 73 or 74 of the CGST Act, despite the fact that the Petitioner/Assessee R.K Transport had disputed the liability towards interest levied by the revenue authorities. The Assessee’s case was thus covered by the ruling rendered by the Coordinate Bench in the Mahadeo Construction Company case, according to the High Court (2020).

As a result, the High Court granted the Assessee’s writ petition and enabled the tax authorities to commence adjudication proceedings under Section 73 or 74 of the CGST Act to assess the Assessee’s interest liability.

The High Court thus granted the Assessee’s writ petition and permitted the tax authorities to commence adjudication proceedings under Section 73 or 74 of the CGST Act to determine the Assessee’s interest liability after providing it an opportunity to be heard.

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