GST: Section 73(1) Show-Cause Notice mandatory in cases Where Tax was not Paid for Any Reason other than Fraud, says Jharkhand HC [Read Judgment]

GST: Section 73(1) Show-Cause Notice mandatory in cases Where Tax was not Paid for Any Reason other than Fraud, says Jharkhand HC [Read Judgment]

Show-Cause Notice - Service Tax - Jharkhand High Court - GST - Taxscan

The Jharkhand High Court has ruled that show-cause notice issued under Section 73(1) of the CGST Act must be issued in all cases where the tax was not paid for any reason other than fraud.

The judgement was pronounced by the Jharkhand High Court in Godavari Commodities Ltd. v. The Union of India through the Commissioner and Others. The division bench comprising of Justice H.C. Mishra and Justice Deepak Roshan.

The relevant matter here is that a letter of intimation for payment of interest on delayed payment of GST was issued to the petitioner. The petitioner was asked to make the payment within three days of the receipt of the letter. Pursuant to the issuance of this demand, the bank account of the petitioner Company was frozen and upon the payment of the aforesaid amount, the account has been defreezed.

The petitioners argued that that the impugned action of the respondent authority is absolutely illegal and is in teeth of Section 73(1) of CGST Act, which requires a show-cause notice to be given to the petitioner before issuing any such letter.

The counsel for the CGST, on the other hand, opposed the prayer and submitted that since admitted tax and some interest had been paid by the petitioner, the matter only relates to interest short paid, and Section 73(1) of the CGST Act shall not be applicable in the present case. It is further pointed out that the petitioner Company had credited the amount of tax and interest thereon in their electronic cash ledger beyond the prescribed date of payment, but the actual payment in the Government account was made even later, and the interest has been paid by the petitioner Company, only till the date and the amount was credited in their electronic cash ledger.

The court observed that the in the present case the tax was not paid by the petitioner Company in the Government account within the due date, and accordingly it is a case of tax not being paid, within the period prescribed, or when due.

The court hence ruled that “we are unable to accept the contention of learned counsel for CGST that no show-cause notice was required to be given in this case”.

The court further clarified that “Even otherwise, if any penal action is taken against the petitioner, irrespective of the fact whether there is provision under the Act or not, the minimum requirement is that the principles of natural justice must be followed”.

The court held that, “The petitioner shall be given an opportunity of being heard by the adjudicating authority, who shall give a hearing to the petitioner, whether the petitioner was liable to pay the short paid interest amount or not. In case, upon adjudication, it is found that the petitioner was not liable to make the payment of interest short paid, the said amount shall be refunded to the petitioner with statutory interest thereon.”

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