Section 50 deals with interest on delayed payment of tax by the taxpayer state that every person who is liable to pay tax but fails to pay the same or any part thereof within the period prescribed shall, on his own, pay interest at such rate not exceeding 18% for the period for which the tax or any part thereof remains unpaid. It mandates the taxpayer to pay the interest on his own for the period for which the tax or any part thereof remains unpaid. The liability to pay interest is fastened on the taxpayer and the same has to be discharged on his own. This was held by Hon'ble Madras High Court in the matter of The Assistant Commissioner of CGST & Central Excise and others v. Daejung Moparts Pvt. Ltd. and ors and reaffirmed by Hon'ble Jharkhand High Court in the matter of Mahadeo Construction Co. v. Union of India.
The GST authorities are, however, demanding interest based on a notice, which is not in any prescribed format notified by CBIC and directing the taxpayer to pay the interest within seven days failing which the bank account may be attached - as a measure of recovery of tax, without giving any opportunity of hearing even if the demand of interest is contested by the taxpayer.
The GST authorities are imposing interest and initiating the recovery proceeding without giving any opportunity to the taxpayer and without initiation of adjudication proceedings - which are against the principles of natural justice. It was held in the matter of Mahadeo Construction Co. that though the liability of interest is automatic, the same is required to be adjudicated in the event a taxpayer disputes the computation or very leviability of interest thereof, by the initiation of adjudication proceedings. Till such adjudication is completed by the GST officer, the amount of interest cannot be termed as an amount payable under the Act or the Rules. Thus, without the initiation of any adjudication proceedings, no recovery proceeding can be initiated for recovery of the interest amount.
The adjudication proceedings under section 73 and 74 of the Act provide for the opportunity of hearing to the taxpayer. The taxpayer may furnish his reply electronically in Form GST DRC - 06 against the show cause notice issued to him. Further, he may also opt for personal hearing through this form and present the matter appropriately.
Thus, for levying any interest upon the taxpayer, GST authorities should adjudicate the matter as per the Act and may initiate penalty proceedings only after completion of adjudication proceedings - giving the opportunity of hearing to the taxpayer and following the principle of natural justice.