Reliance Formulation Private Limited vs Assistant Commissioner Of State Tax, ... on 27 June, 2025

1. Outcome
The Gujarat High Court disposed of the Special Civil Application, declining to quash the advisory issued by the Assistant Commissioner of State Tax. The Court clarified that the advisory merely puts the petitioner on guard regarding interest liability, and actual recovery proceedings under Section 79 of the GST Act can only be initiated after following the due procedure, including the issuance of an intimation in Form GST DRC-01D under the newly inserted Rule 142B, which provides for an opportunity to respond.

2. Core Issue
The core issue was whether the GST authorities could issue an "advisory" for payment of interest on delayed self-assessed tax, threatening recovery action under Section 79 of the GST Act, without prior adjudication or providing an opportunity of hearing, particularly in light of the subsequent insertion of Rule 142B and Form GST DRC-01D.

3. Key Facts
* The petitioner, Reliance Formulation Private Limited, a company manufacturing pharmaceutical products, is registered under the GST Act and regularly files its returns.
* The petitioner received an "advisory" dated 18.12.2024 from the Assistant Commissioner of State Tax.
* The advisory pertained to outstanding interest liability under Section 50(1) of the GST Act for delayed payment of self-assessed tax for Financial Years 2017-18, 2018-19, 2021-22, 2022-23, and 2023-24.
* The advisory also stated that failure to discharge the interest liability or provide sufficient clarification could lead to recovery action under Section 79 of the GST Act.

4. Arguments
* Taxpayer (Petitioner - Reliance Formulation Private Limited):
* The respondent-Authority could not issue such an advisory under Section 50(1) without providing an opportunity of hearing or considering the petitioner's submissions.
* There is no legal provision for issuing such an "advisory" that threatens recovery under Section 79 without proper adjudication.
* The advisory implicitly refers to Sections 50, 75(12), and Rule 88B but lacks due process.
* Relied on the Mahadeo Construction Co. Versus Union of India judgment (Jharkhand High Court), which held that recovery under Section 79 for interest cannot be initiated without adjudication proceedings.
* Sought to quash and set aside the impugned advisory.
* Revenue (Respondent - Assistant Commissioner of State Tax):
* The advisory is merely an intimation to the petitioner regarding their outstanding interest liability as per Section 50(1) (interest on delayed payment of tax).
* Section 75(12) of the GST Act permits recovery of unpaid self-assessed tax or interest thereon under Section 79.
* The newly inserted Rule 142B of the GST Rules (effective 04.08.2023) provides for the issuance of an intimation in Form GST DRC-01D for amounts recoverable under Section 79.
* This intimation (DRC-01D) is considered a notice for recovery, providing the petitioner an opportunity to reply.
* Therefore, direct recovery under Section 79 cannot occur without issuing the DRC-01D intimation and following the prescribed procedure.
* The advisory simply serves to "put the petitioner on guard" about the proposed recovery, causing no prejudice, and subsequent due process will be followed.

5. Court’s Reasoning
* The Court undertook a conjoint reading of Section 39 (furnishing of returns), Section 50(1) (interest on delayed payment), Section 75(12) (recovery of self-assessed tax/interest under Section 79), and Section 79 (recovery of tax) of the GST Act, along with Rules 88B (manner of calculating interest), 88C (difference in GSTR-1 vs. GSTR-3B liability), and 142B (intimation of recoverable amounts).
* It acknowledged that the petitioner is liable to pay interest under Section 50(1) on delayed self-assessed tax.
* Crucially, the Court emphasized the significance of Rule 142B, which was inserted effective 04.08.2023. This rule mandates that where tax or interest becomes recoverable under Section 79 (including under Section 75(12) or Rule 88C), the proper officer shall first issue an intimation in Form GST DRC-01D.
* Rule 142B(2) explicitly states that this intimation (DRC-01D) "shall be treated as the notice for recovery."
* Therefore, the Court reasoned that the anxiety of the petitioner that direct recovery under Section 79(1) would be initiated without any notice or opportunity of hearing is unfounded due to the procedural safeguard provided by Rule 142B.
* The advisory issued to the petitioner was interpreted as merely a preliminary communication to inform them of the outstanding liability and the possibility of future recovery actions, not as a direct recovery notice itself.
* The Court also clarified that after the issuance of Form GST DRC-01D, the respondent-Authority is bound to provide an opportunity to file a reply and, if requested, an opportunity of hearing, in compliance with Section 75(4) and principles of natural justice.
* The precedent cited by the petitioner (Mahadeo Construction Co.) was distinguished as it was rendered prior to the insertion of Rule 142B and Form DRC-01D, making it no longer applicable given the amended statutory scheme.

6. Statutory References
* Central/Gujarat Goods and Services Tax Act, 2017 (GST Act):
* Section 39: Furnishing of returns (sub-section 1, 7)
* Section 50(1): Interest on delayed payment of tax (and its proviso)
* Section 73: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or willful misstatement or suppression of facts
* Section 74: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or willful misstatement or suppression of facts
* Section 75(4): Opportunity of hearing
* Section 75(12): General provisions relating to determination of tax (recovery of self-assessed tax/interest under Section 79)
* Section 79: Recovery of tax (sub-section 3)
* Central/Gujarat Goods and Services Tax Rules, 2017 (GST Rules):
* Rule 88B: Manner of calculating interest on delayed payment of tax
* Rule 88C: Manner of dealing with difference in liability reported in statement of outward supplies and that reported in return
* Rule 142B: Intimation of certain amounts liable to be recovered under Section 79 of the Act (inserted w.e.f. 04.08.2023)
* Form GST DRC-01D: Intimation for amount recoverable under Section 79 (prescribed under Rule 142B)

7. Precedents Cited
* Mahadeo Construction Co. Versus Union of India reported in [2020] 116 taxmann.com 262 (Jharkhand) - Cited by the petitioner, but distinguished by the Court due to the subsequent amendment and insertion of Rule 142B and Form DRC-01D.