Issuance of advisory by GST Authority subjected to further proceedings as u/r 142B is not Conclusive: Gujarat HC Dismisses Appeal of Reliance Formulation [Read Order]

The petitioner is a private limited company specialized in the formulation of a psychotropic range of Ayurvedic and herbal products as well as a variety of antibiotics, enzymes and vitamins. The petitioner is registered under the provisions of the Central/State Goods and Services Tax Act, 2017 (for short ‘the GST Act’) and is regularly filing its return of income from 01.07.2017 as per the provisions of Section 39 of the GST Act.

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The petitioner received an advisory dated 18.12.2024 for financial years 2017-18, 2018-19, 2021-22, 2022-23 and 2023-24 for ensuring payment of interest under Section 50(1) of the GST Act in respect of self-assessed tax paid after the due date of furnishing of returns. The advisory also provides that in case of failure to discharge interest liability or to submit sufficient clarification in respect of such liability, recovery action under Section 79 of the GST Act may be initiated by the respondent.

On the other hand, the respondent-Authority submitted that the issuance of the advisory for ensuring payment of interest under Section 50(1) of the GST Act is only to intimate the petitioner with regard to the outstanding interest liability as per the provisions of Section 50(1) of the GST Act which provides for interest on delayed payment.

It was submitted that as per Section 75(12) of the GST Act, where any amount of self-assessed tax in accordance with the return furnished under Section 39 of the GST Act remains unpaid either wholly or partly or any amount of interest payable on such tax remains unpaid notwithstanding anything contained in Sections 73 and 74 of the GST Act, the same is to be recovered under the provisions of Section 79 of the GST Act.

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The bench found that 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.

A division bench of Justices Bhargav D. Karia and Justice Pranav Trivedi observed that 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.

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After issuance of the notice in Form GST DRC-01D, as per the provisions of Section 75(4) of the GST Act, the respondent-Authority is bound to provide an opportunity to file reply as well as an opportunity of hearing, if requested by the assessee in compliance of the principles of natural justice.

Since the court held that 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.

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