Relief for taxpayers willing to settle GST issues but facing recovery proceedings: Madras High Court stays recovery proceedings in light of recommendations made in the 53rd GST Council Meeting.

Are you keen to settle your GST demand without interest or penalties, but the department is attempting to recover the entire amount along with interest and penalties? Worry not. The Madras High Court’s recent judgment in Unitac Energy Solutions (India) (P.) Ltd versus Assistant Commissioner (ST) and others (W.P. (MD) NO. 14732 OF 2024) helps taxpayers settle GST issues by staying proceedings, enabling them to resolve disputes without paying interest and penalties.

Waiver of interest and penalty as per the 53rd GST Council Meeting held on 22.06.2024 & proposed S.128A of CGST Act, 2017:

Following recommendations made in the 53rd GST Council Meeting held on 22.06.2024, bona fide taxpayers who have received show cause notices or orders under S.73 of CGST Act, 2017 are eagerly awaiting to settle their disputes. The Council Meeting has granted certain immunity from payment of interest and penalties to taxpayers who have received notices or orders under S.73 of CGST Act, 2017. Persons with the following notices or orders can avail of waivers for interest and penalty payments:

i. If a notice is issued under S. 73(1) of the CGST Act, 2017 or,

ii. If a statement is issued under S. 73(3) of the Act or,

iii. If an order has not been issued under S. 73(9) of the Act or,

iv. If an order has been issued under S. 73(9) of the Act,

v. If an order passed under sub-section (9) of section 73, and where no order under sub-section (11) of section 107 or sub-section (1) of section 108 has been passed; or

vi. If an order passed under sub-section (11) of section 107 or sub-section (1) of section 108, and where no order under sub-section (1) of section 113 has been passed

If a taxpayer’s adjudication is pending at any of the above stages, they can avail of a waiver from payment of interest and penalties by fulfilling the following conditions:

• The disputed period must be between FY 2017-18 to FY 2019-20. The immunity can only be availed for disputes pertaining to these three years.
• The demand notices should be issued under S. 73. Notices issued under S. 74 will not be covered under this immunity.
• The taxpayer must pay the full demand raised against them. When the demand contains multiple issues, the entire amount should be paid; partial payment on individual issues is not acceptable.
• The waiver of interest and penalties is not applicable for erroneous refunds.

These recommendations have now been incorporated in the new Finance Bill, 2024 via S. 142. The bill proposes to insert the above waiver provision as S.128A of the CGST Act, 2017. We expect this bill to be enacted as an Act shortly.

Given these developments, bona fide taxpayers who have received demand notices or orders under the provisions stated above are eligible for these benefits, provided they meet the stipulated conditions.

A pressing question arises:

What if an assessee has received a demand notice or order and is willing to settle the issue without paying interest and penalties, but the department is forcing compliance with adverse proceedings? Can the assessee wait until the notification or Act has been amended?

Addressing this scenario, the Madras High Court has granted relief to a taxpayer who had been issued a demand notice and was facing recovery proceedings. Following the 53rd Council Meeting, the assessee in this case paid the disputed tax amount and was awaiting the proposed amendment.  He assessee seems to have also preferred an application before the Commissioner u/s 80 of the Act. In the meantime it seems that the department issued a recovery notice for the payment of interest and penalties.

Aggrieved by this action, the assessee filed a writ petition. The Hon’ble Madras High Court was pleased to remand the matter back with the following directions to the tax authorities:

• Dispose of the petitioner’s application within 60 days.
• Consider the GST Council’s recommendation while making the decision.
• Keep recovery proceedings in abeyance for 60 days.
• From this judgment, it can be inferred that any assessee charged with a demand and subject to recovery proceedings can cite this case and request the department to await the enactment of the Act.

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