Godavari Commodities LTD Through Its Authorized Signatory Sanjeev Sinha vs. The Union Of INDIA Through The Commissioner Central Goods And Service Tax

Held

The Court held that Section 73(1) of the CGST Act is applicable even in cases where tax was not paid within the prescribed period, irrespective of whether the tax itself was eventually paid. The Court found the CGST respondents' argument that Section 73(1) is inapplicable because tax was paid to be unconvincing. The Court emphasized that the principles of natural justice must be followed, and in this case, no show-cause notice or opportunity of being heard was given to the petitioner before the demand letter was issued or before the amount was realized. Consequently, the Court treated the letter dated February 6, 2019, as a show-cause notice under Section 73(1) of the CGST Act. The adjudicating authority is directed to provide the petitioner an opportunity to be heard on the liability to pay the short-paid interest. If, upon adjudication, it is found that the petitioner is not liable, the amount shall be refunded with statutory interest. The adjudicating authority must pass a reasoned order within three months.

Facts

The petitioner, Godavari Commodities Ltd., is aggrieved by a letter dated February 6, 2019, issued by the Superintendent of CGST & CX Range-I, Ranchi, demanding payment of Rs. 11,58,643/- as short-paid interest for delayed GST deposit. Following this demand, the petitioner's bank account was frozen and subsequently defreezed after the payment of the demanded amount. The petitioner contends that this action is illegal as no show-cause notice was issued prior to the demand, violating Section 73(1) of the CGST Act. The CGST respondents argue that Section 73(1) is not applicable as the tax and some interest had been paid, and the issue pertains only to short-paid interest.

Key Issues

1. Whether the letter dated February 6, 2019, demanding short-paid interest, issued by the Superintendent of CGST & CX Range-I, Ranchi, is illegal for want of a prior show-cause notice, thereby violating Section 73(1) of the CGST Act? Petitioner's contention: The petitioner argues that the impugned action is illegal and contrary to Section 73(1) of the CGST Act, which mandates a show-cause notice before issuing any demand. Since no show-cause notice was provided, all subsequent actions, including the freezing of the bank account and realization of the amount, are illegal. Revenue's (CGST) contention: The CGST respondents contend that Section 73(1) of the CGST Act is not applicable in this case because the petitioner had already paid the admitted tax and some interest. They argue that the issue solely concerns short-paid interest, and therefore, no show-cause notice was required before issuing the demand letter. They refer to Section 50(1) of the CGST Act regarding interest on delayed payment of tax.