The Gujarat High Court held that no direct recovery of interest under Section 79 of the CGST Act is permissible without prior issuance of notice in Form GST DRC-01D, as mandated under Rule 142B of the CGST Rules (effective 04.08.2023).
The writ petition was filed by Reliance Formulation Pvt. Ltd. challenging an advisory dated 18.12.2024 which demanded payment of interest under Section 50(1) of the GST Act for multiple financial years (2017–18 to 2023–24), warning that failure to pay may trigger recovery under Section 79.
Key Findings:
- Form GST DRC-01D is now a statutory precondition for recovery of interest under Section 79(1). This intimation will be treated as the notice for recovery, and the assessee must be given a chance to respond within 7 days.
- The advisory issued by the department is not per se recovery action. It only serves to alert the taxpayer about their outstanding liability. Actual recovery proceedings can only ensue after issuance of DRC-01D, ensuring due process under the principles of natural justice.
- The High Court distinguished prior case law, particularly the decision in Mahadeo Construction Co. (Jharkhand HC), noting that it was rendered before Rule 142B and Form DRC-01D were introduced.
- The Court observed that interest on delayed tax payment (Section 50(1)) and its calculation is as per Rules 88B and 88C, and recovery, if required, can proceed only after appropriate notice.
- The petition was disposed of without granting relief, holding that the advisory was merely cautionary and not actionable without following further legal steps as per GST Rules.
Outcome:
The HC clarified that no direct recovery under Section 79 can take place unless preceded by a valid intimation in Form DRC-01D. The petition was disposed of, and the advisory was deemed non-actionable in its present form.