The
Bombay High Court in the case of “SHEETAL DILIP JAIN VERSUS THE STATE OF
MAHARASHTRA & ORS. - 2022 (10) TMI 177 - BOMBAY HIGH COURT” has
struck down the recovery proceedings without issuance of SCN and held that the
order is erroneous because in the SCN only 7 days was given to reply to the SCN
and on the 8th day the order came to be passed. Therefore, the question of not
paying within 30 days of the issue of the notice will not arise.
Relevant extract of the
judgment is reproduced hereunder:
“5. These acts/omissions of Respondents’ officers is adding to the
already overburdened dockets of the Court. Valuable judicial time is wasted
because such unacceptable orders are being passed by Respondents’ officers. The
officers do not seem to understand or appreciate the hardship that is caused to
the general public. In this case, Petitioner could afford (we have assumed) to
spend on a lawyer and approach this Court but for every Petitioner, we would
hazard a guess, atleast ten would not be able to afford a lawyer and approach
the Court and their registrations may get cancelled by the very same officers
who have passed such patently illegal orders.Cost of Rs. 10000/- imposed on GST
officer.”
Similar Judgments in this
regard are as under:
- Karnataka
High Court in the case of M/S. LC INFRA PROJECTS PVT. LTD.,
(FORMERLY KNOWN AS LAXMI CONSTRUCTION) VERSUS THE UNION OF INDIA MINISTRY
OF FINANCE, AND OTHERS - 2019 (8) TMI 84 - KARNATAKA HIGH COURT has
held that the issuance of SCN is sine qua non to proceed with the recovery
of interest payable thereon under sec 50 of the CGST
Act and penalty leviable under the provisions of the Act or the
Rules made thereunder. Determination of the interest payable under sec
50 of the CGST Act without issuing SCN is in breach
of principles of natural justice and therefore, it cannot be sustained. Sec
75(12) does not empower the authorities to proceed with the recovery
without issuing SCN.
Further, the above order was
also upheld by the Karnataka HC [Division Bench] in THE UNION
OF INDIA, THE STATE OF KARNATAKA, THE SUPERINTENDENT OFFICE OF CENTRAL G.S.T
VERSUS M/S. LC INFRA PROJECTS PVT., LTD., (FORMERLY KNOWN AS LAXMI
CONSTRUCTIONS) - 2020 (4) TMI 664 - KARNATAKA HIGH COURT Relevant
extract of the judgment is reproduced hereunder:
“13. Therefore, the Learned Single Judge rightly
held in Paragraph 6 of the impugned judgment that issuance of show cause notice
is sine qua non to proceed with the recovery of interest payable in accordance
with sub-section (1) of Section 50 of the GST Act.
14. The impugned demand has been set aside only on the
ground of the breach of the principles of natural justice by granting liberty
to the respondents to initiate action in accordance with law obviously for
recovery of interest.
15. Though a perusal of Paragraph 4 of the impugned
order shows that the same is based on concession made by the Learned Counsel
for the appellant, in Paragraph 6 the Learned Single Judge has laid down the
law.
16. For the reasons which we have recorded earlier, we
concur with the ultimate view taken by the Learned Single Judge that before
recovery interest payable in accordance with Section 50 of the GST
Act, a show cause notice is required to be issued to the assessee. Hence, no
case for interference is made out. The appeal is accordingly dismissed. Interim
applications do not survive.
17. Further, we make it clear that as far as Annexure-K
is concerned, as the main demand for interest has been set aside, Annexure-K,
which is the order of attachment, also will have to be set aside. We make it
clear that we have not gone into the question whether the principles of natural
justice are required to be complied with before taking action in accordance
with Rule 145 of the Rules framed under the GST Act.”
Note: Notice has been issued UNION OF
INDIA AND ORS. VERSUS M/S LC INFRA PROJECTS PVT. LTD. - 2021 (8) TMI 832 - SC
ORDER on the issue that whether demand of interest without
issuing any show cause notice amounts to violation of principles of natural
justice.
- The
Jharkhand HC in the case of MAHADEO CONSTRUCTION CO. VERSUS THE UNION
OF INDIA, ASSISTANT COMMISSIONER, CENTRAL GOODS & SERVICES TAX AND
CENTRAL EXCISE, SUPERINTENDENT, CENTRAL GOODS & SERVICES TAX AND
CENTRAL EXCISE - 2020 (4) TMI 666 - JHARKHAND HIGH COURT hasheld
that liability of interest was required to be adjudicated in event an
assessee disputed computation or very leviability of same, Thus, without
initiation of any adjudication proceedings, no recovery proceedings under sec
79 of the CGST Act could be initiated for recovery of
interest amount.
Relevant extract of the
judgment is reproduced hereunder:
“22. The next issue for adjudication in the
instant writ application is as to whether garnishee proceedings under Section
79 of the CGST Act can
be initiated for recovery of interest without adjudicating the liability of
interest, when the same is admittedly disputed by the assessee. Section 79 of
the CGST Act empowers the authorities to initiate garnishee proceedings for
recovery of tax where “any amount payable by a person to the Government under
any of the provisions of the Act and Rules made thereunder is not paid”. Since
in the preceding paragraphs of our Judgment, we have already held that though
the liability of interest is automatic, but the same is required to be
adjudicated in the event an assessee disputes the computation or very
leviability of interest, by initiation of adjudication proceedings under Section
73 or 74 of the CGST Act, in our opinion, till such
adjudication is completed by the Proper Officer, the amount of interest cannot
be termed as an amount payable under the Act or the Rules. Thus, without
initiation of any adjudication proceedings, no recovery proceeding under Section
79 of the Act can be initiated for recovery of the interest amount.
23. Accordingly, the impugned order dated 8-3-2019 issued
by Respondent No. 3 (Superintendent, Daltonganj Range) (as contained in
Annexure-7) is hereby quashed/set aside and, further, garnishee notice
contained in the Order dated 22-5-2019 (Annexure-10 of the Supplementary
Affidavit) issued under Section 79 of the CGST Act to the Banker of the petitioner for
recovery of interest amount of Rs. 19,59,721/- is also, hereby, quashed/set
aside.”
Note: Notice has been issued
in the above matter [UNION OF INDIA VERSUS MAHADEO CONSTRUCTION CO.
2021 (11) TMI 274 - SC ORDER].
Conclusion: Any recovery proceedings can be initiated
only after issuance of SCN, followed by adjudication proceedings u/s 73 or 74 of
the CGST Act in terms of Sec 78 read
with Sec 79 of the CGST Act
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