Sri Avanth Rapolu vs. Deputy Commissioner

Held

The Court allowed all the writ petitions. Regarding the primary issue concerning the levy of interest under Section 50 of the CGST Act, the Court noted that the Finance Act, 2021, had substituted the proviso to Section 50 with retrospective effect from July 1, 2017. The amended proviso clarifies that interest on tax payable in respect of supplies made during a tax period and declared in the return furnished after the due date shall be levied only on that portion of the tax which is paid by debiting the electronic cash ledger. The Court found that this amendment has redressed the grievance of the petitioners. Consequently, the Court directed the respondents to issue notices and hear the petitioners before quantifying the interest payable as per the amended provision of Section 50. The Court did not explicitly address the issue of the garnishee notice in detail, but by allowing all petitions and directing a re-quantification of interest as per the amended Section 50, it implicitly set aside any coercive actions based on the prior incorrect calculation of interest. Miscellaneous applications were closed, and there were no orders as to costs.

Facts

This judgment concerns a batch of writ petitions filed by various entities, including Raghava Constructions, M/s. Standard Automobiles, M/s. Thirupathi Steels, and Sri Upender Rao. The petitioners are challenging actions by the Central Tax authorities, primarily concerning the levy of interest on delayed payment of GST. In WP No. 16885 of 2019, Raghava Constructions sought a writ of mandamus directing the Branch Manager of Andhra Bank to pay Rs. 5,99,89,117, alleging this amount was illegally held due to an arbitrary demand. In other petitions (WP Nos. 14218, 14327, 19451, 22180, 22181, 23006, and 25155 of 2019), the petitioners are aggrieved by orders and notices demanding interest on the entire tax paid, rather than on the net cash amount, and subsequent recovery proceedings. One petition also challenges a garnishee notice issued to a bank without prior determination of the petitioner's tax liability.

Key Issues

1. Whether the interest on delayed payment of tax under Section 50 of the CGST Act should be levied on the gross returned income or the net cash amount paid. This issue turns on the interpretation of Section 50(1) and its proviso, as it stood prior to and after the substitution by the Finance Act, 2021. The petitioners argued that interest should be calculated only on the portion of tax paid by debiting the electronic cash ledger, as per the proviso. The revenue contended, implicitly, that interest was leviable on the entire tax due, irrespective of how it was paid, prior to the amendment. 2. Whether the garnishee notice issued by the revenue authorities was valid without first determining the petitioner's tax liability and issuing proper notice. This issue relates to the procedural fairness and adherence to statutory provisions before initiating coercive recovery steps. The petitioner argued that the notice was arbitrary and violated principles of natural justice and constitutional rights.