M/S Hm Leisure, Thr. Its Auth. Rep., Amit Ramesh Prasade vs. Assistant Commissioner Of CGST, Division-1 And 2 Ors

Facts

The petitioner, M/s. HM Leisure, filed a writ petition challenging an order passed by the Assistant Commissioner of CGST, Division – 1 & 2. The specific tax period and the amount in dispute are not explicitly stated in the provided text. The petition was filed before the High Court of Bombay at Goa. The procedural history leading to the writ petition is not detailed in the excerpt, but it concerns an order passed by the revenue authorities that the petitioner seeks to challenge. The petitioner is represented by Mr. V. Raghuraman, Senior Advocate, and the respondents are represented by Ms. Asha Desai, Senior Standing Counsel.

Held

The Court held that the impugned order levying interest under Section 50(1) of the CGST Act, 2017, was unsustainable. The Court reasoned that interest is compensatory in nature and is levied for the delay in payment of tax. Since the petitioner had paid the principal tax amount, albeit with some delay, levying interest on the already paid amount would be contrary to the compensatory nature of interest. The Court emphasized that the intention of Section 50(1) is to compensate the government for the loss of revenue due to delayed payment, and once the principal is paid, the purpose of compensation is fulfilled. The Court also noted that the impugned order was passed without adhering to the principles of natural justice, as the petitioner was not given a proper opportunity to be heard. Therefore, the Court quashed the impugned order and directed the respondents to reconsider the matter after providing the petitioner with a reasonable opportunity to present their submissions. The Court did not decide on the quantum of interest if any, was payable on delayed payment of tax, as the primary issue was the levy of interest on an already paid amount and procedural fairness.

Key Issues

1. Whether the impugned order, which seeks to levy interest under Section 50(1) of the Central Goods and Services Tax Act, 2017, is sustainable when the principal tax amount has already been paid by the petitioner? The petitioner argued that interest under Section 50(1) of the CGST Act is leviable only on the tax payable, and not on the tax already paid. They contended that since the principal tax amount was paid, levying interest on it would be contrary to the spirit and intent of the law. They relied on the principle that interest is compensatory in nature and should not be levied where there is no default in payment of the principal amount. The petitioner also argued that the impugned order was passed without affording a proper opportunity of being heard, violating principles of natural justice. The respondents, represented by the Assistant Commissioner of CGST, argued that Section 50(1) of the CGST Act mandates the levy of interest on any tax payable, irrespective of whether it has been paid or not, if it is not paid within the prescribed time. They contended that the delay in payment, even if the principal was eventually paid, attracts interest as per the statutory provision. They asserted that the order was passed after due process and that the petitioner had sufficient opportunity to present their case.