HC Rules GST Interest on Delayed Returns Cannot Be Waived

The respondent-assessee had filed GST returns belatedly for the relevant tax periods, pursuant to which the jurisdictional officer under CGST issued ASMT-10 proposing the levy of interest on the delayed payment of tax and subsequently initiated garnishee proceedings by issuing DRC-13 to the respondent-assessee’s banker for the recovery of the dues. The Single Judge directed that the respondent-assessee be permitted to file or amend returns without insisting upon payment of interest, penalty or adherence to limitation, restrained coercive recovery for six months, and further directed segregation of pre-GST and post-GST works, computation of post-GST liability after allowing ITC. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that liability to pay interest on delayed payment of GST under Sections 39, 50, 79 and 128 of the CGST Act and the Karnataka GST Act arises by operation of law and cannot be waived, reduced or suspended in the absence of a specific statutory provision. It was observed that the directions permitting filing or amendment of returns without insisting on interest, penalty or limitation were contrary to the statutory framework and therefore unsustainable. The Court further held that any claim for reimbursement of additional GST liability arising from contracts executed before the introduction of GST was purely an inter se contractual dispute between the contracting parties, and contractual terms could not modify or override the statutory provisions governing levy. Accordingly, the impugned directions granting waiver of statutory liabilities were set aside.

List of Cases Referred to

• Chandrashekaraiah v. State of Karnataka [2024] 158 taxmann.com 443 (Karnataka) (para 6)
• Pratibha Processors v. Union of India [1996] 1996 taxmann.com 72 (SC) (para 10)