Introduction

Whether interest liability under Section 50 of the Central Goods and Services Tax Act, 2017 can be determined without initiating any adjudication process either u/s 73 or 74 of the CGST Act in the event of an assesse raising dispute towards liability of interest?

The aforesaid question appears to be of seminal importance since the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act/the Act’) being relatively new, the stakeholders are bound to have divergent views as to the interpretation of its various provisions. Indeed, of late in many cases the tax authorities have issued the demand and have initiated recovery proceedings under Section 79 of the Act against many assesses by attaching their bank accounts for the recovery of the interest payable under Section 50 of the Act without first adjudication of the same or without even issuance of the show cause notice.

Such straight away demand and recovery proceedings are based on the premise that the liability to pay the interest on the delayed returns or on delayed payment of tax is automatic and consequently it becomes an amount payable under the Act or the Rules made thereunder hence it does not require any adjudication by virtue of Section 75 (12) of the CGST Act. Hence, recovery proceedings for the recovery of such interest can be initiated straight away under Section 79 of the CGST Act without first doing any adjudication under Section 73 or 74 of the CGST Act or issuance of show cause notice.

In view of the aforesaid, let us examine some relevant provisions of the CGST Act which are reproduced below:- Section 39. Furnishing of returns (1) Every registered person, other than an Input Service Distributor or a non resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, in such form, manner and within such time as may be prescribed, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars as may be prescribed: