2025 (6) TMI 1658 - HC - GST

Levy of interest and penalty - tax paid though belatedly - petitioner s reply has not been considered - violation of principles of natural justice - HELD THAT - There is a dispute that the petitioner has paid disputed tax belatedly and therefore the interest has been levied under Section 50(1) of CGST/TNGST Act 2017 r/w Rule 88B of the CGST Rule 2017. Therefore there cannot be any scope for any interference. Demand of interest - HELD THAT - The petitioner may have a case for interference that the penalty imposed for a sum of Rs. 5, 72, 052/- under Section 73(9) of the CGST/TNGST Act 2017 r/w Section 122(2) (a) of the respective Act 2017. Therefore the Court is inclined to dispose of this Writ Petition at the time of admission by directing the petitioner to pay the interest levied vide the impugned order and giving liberty to the petitioner to challenge the impugned order insofar as the imposition of penalty is concerned. Demand of penalty - HELD THAT - The petitioner has to comply with the other mandatory requirements under Section 107 of respective GST enactments including pre-deposit of 10% of the disputed penalty. If such appeal is filed within a period of 30 days from the date of receipt of a copy of this order together with the above deposit the Appellate Commissioner is directed to consider the appeal and dispose of the same without reference to limitation if any that he may rise. Conclusion - i) The interest demand under Section 50(1) CGST Act 2017 read with Rule 88B was confirmed and upheld. ii) The penalty demand was not interfered with at the writ stage; however the petitioner was granted liberty to challenge the penalty through statutory appeal subject to pre-deposit conditions. iii) The Court declined to interfere on grounds of non-consideration of reply in writ jurisdiction leaving the issue open for appellate adjudication. Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

• Whether the imposition of interest under Section 50(1) of the CGST Act, 2017 (and corresponding TNGST Act, 2017) read with Rule 88B of the CGST Rules, 2017, on delayed payment of tax is justified where the tax has been paid belatedly;
• Whether the penalty imposed under Section 73(9) of the CGST Act, 2017 read with Section 122(2)(a) of the CGST Act, 2017 (and corresponding provisions under TNGST Act, 2017) on the petitioner is sustainable, particularly when the petitioner contends that tax was paid, albeit late;
• Whether the petitioner's reply and submissions were duly considered before passing the impugned Order-in-Original;
• The availability and propriety of invoking writ jurisdiction under Article 226 of the Constitution of India in the facts of the case, given the existence of an alternate remedy of appeal before the Appellate Authority;
• The procedural requirements relating to the filing of appeal against penalty demands, including pre-deposit conditions under Section 107 of the GST enactments;
• The scope for interference by the Court in the impugned order confirming demands of late fees, interest, and penalty under the GST law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Legitimacy of Interest Demand under Section 50(1) CGST Act, 2017

Legal Framework and Precedents: Section 50(1) of the CGST Act, 2017 mandates the payment of interest on delayed payment of tax. Rule 88B of the CGST Rules, 2017 provides the procedural mechanism for calculation and levy of such interest. The law is settled that interest is a mandatory charge for delayed tax payments, regardless of whether the tax is ultimately paid.

Court's Interpretation and Reasoning: The Court observed that the petitioner admittedly paid the disputed tax amount but belatedly. The levy of interest under Section 50(1) is automatic and mandatory in such circumstances. The Court found no scope for interference with the interest demand of Rs. 11,82,520/- (CGST and SGST combined) imposed on the petitioner for delayed payment.

Application of Law to Facts: Since the petitioner delayed payment of tax amounting to Rs. 57,20,514/-, the interest demand was rightly imposed. The Court upheld the interest demand as lawful and consistent with the statutory provisions.

Treatment of Competing Arguments: The petitioner's contention that tax was paid and therefore interest should not be levied was rejected, as the statute clearly mandates interest for delayed payment. The Court found no merit in this argument.

Conclusion: The interest demand under Section 50(1) CGST Act, 2017 read with Rule 88B was confirmed and upheld.

Issue 2: Validity of Penalty Imposed under Section 73(9) and Section 122(2)(a) CGST Act, 2017

Legal Framework and Precedents: Section 73 of the CGST Act deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or willful misstatement or suppression of facts. Section 73(9) authorizes imposition of penalty. Section 122(2)(a) prescribes penalty for certain offences under the Act. The petitioner is liable to pay penalty if found liable under these provisions.

Court's Interpretation and Reasoning: The Court noted that the penalty of Rs. 5,72,052/- was imposed for the delayed payment of tax. However, the Court expressed inclination to entertain the petitioner's challenge to the penalty, recognizing that the petitioner may have a case for interference on penalty imposition despite the tax being paid belatedly.

Key Evidence and Findings: The impugned order confirmed penalty demand after considering the facts of delayed tax payment. The petitioner argued that the penalty was unjustified as the tax was paid, though late, and that their reply was not considered.

Application of Law to Facts: While interest is mandatory for delayed payment, penalty imposition depends on the circumstances and is subject to procedural safeguards. The Court found it appropriate to allow the petitioner to challenge the penalty via appeal rather than interfere in writ jurisdiction.

Treatment of Competing Arguments: The petitioner's grievance regarding non-consideration of their reply was acknowledged, but the Court emphasized that the proper forum to address such grievances is the Appellate Authority.

Conclusion: The penalty demand was not interfered with at the writ stage; however, the petitioner was granted liberty to challenge the penalty through statutory appeal, subject to pre-deposit conditions.

Issue 3: Consideration of Petitioner's Reply and Procedural Fairness

Legal Framework and Precedents: Principles of natural justice require that a party's submissions be considered before passing adverse orders. The GST law and rules mandate issuance of show cause notices and opportunity to be heard.

Court's Interpretation and Reasoning: The petitioner contended that their reply was not considered, amounting to a palpable error. The Court noted this contention but did not find sufficient grounds to interfere in writ jurisdiction, as the petitioner has remedy of appeal.

Application of Law to Facts: The Court directed that the petitioner may raise these issues before the Appellate Authority, which is empowered to examine procedural compliance and consider the petitioner's submissions afresh.

Treatment of Competing Arguments: The respondents maintained that the order was passed after due consideration and that the petitioner's remedy lies in appeal.

Conclusion: The Court declined to interfere on grounds of non-consideration of reply in writ jurisdiction, leaving the issue open for appellate adjudication.

Issue 4: Availability and Appropriateness of Writ Jurisdiction under Article 226

Legal Framework and Precedents: Article 226 of the Constitution of India empowers High Courts to issue writs for enforcement of fundamental rights and for any other purpose. However, where an efficacious alternate remedy exists, writ jurisdiction is generally not exercised.

Court's Interpretation and Reasoning: The Court emphasized that the petitioner has an alternate remedy of appeal before the Appellate Authority under the GST law. Hence, the writ petition was disposed of at admission stage, directing the petitioner to avail the appellate remedy.

Application of Law to Facts: The Court found no exceptional circumstances warranting exercise of writ jurisdiction, especially since the petitioner was directed