Recovery of Interest on Delayed Tax Payment Quashed for Failure to Issue Form GST DRC-01D

Issue

Whether the GST department can directly initiate recovery proceedings (such as attaching a bank account via Form GST DRC-13) for short payment of interest on delayed tax, without first following the mandatory procedure of issuing an intimation in Form GST DRC-01D and affording the taxpayer an opportunity to be heard.

Facts

The Petitioner: A Hindu Undivided Family (HUF).
The Demand: The department issued a notice regarding the short payment of interest on delayed payment of tax (self-assessed in returns).
The Recovery Action: Without further adjudication or specific statutory notice, the department issued a notice in Form GST DRC-13 to the petitioner’s bank, directing the bank to hold a lien/attach an amount of ₹23.17 lakh from the petitioner’s accounts.
Payment under Protest: Following the attachment, the petitioner paid ₹7.5 lakh under protest.
Petitioner’s Plea: The petitioner challenged the action, arguing that no recovery proceeding could be contemplated under Section 79 without first providing an opportunity for a hearing and considering their submissions regarding the liability.

Decision

The Gujarat High Court ruled in favour of the assessee and quashed the impugned recovery notice (DRC-13).
Mandatory Procedure (Rule 142B): Relying on its recent ruling in Reliance Formulation (P.) Ltd., the Court held that recovery of interest on self-assessed tax under Section 79 cannot be automatic. It must be preceded by the specific procedure prescribed under Rule 142B of the CGST Rules.
Form GST DRC-01D: The proper officer is statutorily required to issue an intimation in Form GST DRC-01D for any amount (tax or interest) recoverable under Section 79 due to differences in self-assessment.
Natural Justice: The issuance of DRC-01D must be followed by an opportunity for the taxpayer to file a reply and, if requested, a personal hearing. Direct recovery without this step violates principles of natural justice.
Directions: The department was directed to initiate proceedings afresh by adopting the proper procedure (issuing DRC-01D) and allowing the petitioner to contest the demand.

Key Takeaways

No Direct Recovery for Interest: Tax authorities cannot jump straight to bank attachment (Section 79) for interest dues. They must follow the “Intimation $\rightarrow$ Reply $\rightarrow$ Order” route.
Form GST DRC-01D is the Key: This specific form is the statutory trigger for recovering unpaid self-assessed liability or interest thereon (Rule 88C/142B). A generic letter or advisory is insufficient to ground coercive recovery.
Right to be Heard: Even for “automatic” liabilities like interest under Section 50, the taxpayer has a right to explain calculation errors or dispute the delay before money is taken from their bank account.
Precedents: The judgment solidifies the ratio of Rajkamal Builder and Reliance Formulation, making it clear that procedural shortcuts in recovery will not be tolerated by the courts.

HIGH COURT OF GUJARAT

Bombay Art

Union of India^*

BHARGAV D. KARIA and Pranav Trivedi, JJ.

R/SPECIAL CIVIL APPLICATION NO. 16855 of 2024

OCTOBER 10, 2025

Hardik V. Vora, Adv. for the Petitioner. Siddharth H. Dave and Utkarsh R. Sharma, Advs. for the Respondent.

JUDGMENT

Pranav Trivedi, J.- Heard learned advocate Mr. Hardik Vora appearing for the petitioner and learned Assistant Government Pleader Mr. Utkarsh Sharma for the respondent Nos. 3 and 4.

2. Rule returnable forthwith. Learned Assistant Government Pleader Mr. Utkarsh Sharma waives service of notice of Rule for the respondents.

3. Having regard to the controversy in narrow compass, this matter is taken up for hearing with the consent of learned advocates for both the parties.

4. This petition is filed under Article 226 of the Constitution of India with following prayers:

A writ of certiorari, or any other appropriate writ, order and/or directions in the nature of certiorari to quash the notice dated 27.03.2023 and all the subsequent notices issued by the respondent no. 3 determining the demand of Rs. 28,16,834/- on account of short payment of interest on delayed payment of tax u/s 50 of the CGST Act r.w.s. GGST Act by invoking provisions u/s 75(12) of CGST Act r.w.s. GGST Act and without initiating assessment proceedings. (Annexure A);

A writ of mandamus, or any other appropriate writ, order and/or directions in the nature of mandamus to quash the notice dated 20.05.2024 issued in Form GST DRC-13 u/s 79(1)(c) to hold lien the amount of Rs. 23,17,702/- in bank account no. 50200005197811 maintained with HDFC Bank, account no. 18330200000287 maintained with Bank of Baroda and account no. 111010200016773 maintained with Axis Bank and directing the Respondent to release the bank accounts. (Annexure B).

A writ of Mandamus or writ, order, or direction in the nature of Mandamus directing the respondent to refund the amount of interest of Rs. 7,50,000/- which was paid under pressure.

A writ of mandamus, or any other appropriate writ, order and/or directions in the nature of mandamus to strike down and declare sub-section (12) section 75 of CGST Act and GGST Act as ultra vires, illegal, discriminatory, arbitrary and in principles of natural justice;

Pending the admission, hearing and final disposal of this petitio stay the notice dated 20.05.2024 and/ or direct the respondent to release the attachment over the bank accounts;

Pass any other order(s) as this Hon’ble Court may deem fit and more appropriate in order to grant interim relief to the Petitioner;

Any other and further relief deemed just and proper be granted in g. the interest of justice;”

5. Brief facts of the case are as under:

5.1 The petitioner is a Hindu Undivided Family Firm registered under the provisions of Gujarat Goods and Service Tax Act,2017 (hereinafter referred to as ‘the Act’ for short) with effect from 1.7.2017, having registration No. 24AABHS0396A1ZK.

5.2 Notice dated 24.3.2023 was issued to the petitioner with regard to the short payment of interest on delayed payment of tax pursuant to filing of return. The Superintendent, Central GST and Central Excise,(hereinafter referred to as ‘the respondent’ for short) issued Notice to pay differential interest on late payment of GST on delayed filing of return. Thereafter reminder letters were issued by the respondent on 24.4.2023, 22.5.2023 and 31.5.2023 invoking the provisions of Section 75(12) of the Act, directing the petitioner to make payment of Rs.28,16,834/- on account of short payment of interest on delayed payment, failing which, recovery proceedings shall be initiated under Section 79 without any assessment proceedings.

5.3 Pursuant to the reminders sent by the petitioner, the respondent issued notice in Form DRC-13 to the Branch Manager of the Bank of the petitioner directing them to hold lien to the amount of Rs.23,17,702/- with regard to the Accounts maintained by the petitioner. Subsequent to such stand taken by the respondent, the petitioner made payment of Rs.7,50,000/- under protest towards the demand made by the respondent.

6. Learned advocate Mr. Hardik Vora for the petitioner submitted that the respondentAuthority could not have issued the advisory as per the provisions of Section 50(1) of the GST Act which provides that if any person who is liable to pay self- assessment tax, then he will be liable to pay interest at the rate of 18% per annum or as may be recommended by the GST Council. It was submitted that without giving an opportunity of hearing and without considering the submissions of the petitioner, no recovery proceedings could have been contemplated by the respondent-Authority being the impugned advisory.

6.1 It was also pointed out that there is no provision for issuance of the advisory under Section 50(1) of the GST Act and thereto, referring to the provisions of Section 79 of the GST Act to initiate the recovery proceedings.

6.2 It was submitted that on perusal of the advisory, it appears that it only refers to the provisions of Sections 50 and 75(12) of the GST Act read with Rule 88B of the Central/State Goods and Services Tax Rules (for short ‘the GST Rules’) which provides for manner of calculating interest on delayed payment of tax.

7. On the other hand, learned Assistant Government Pleader Mr. Utkarsh Sharma for the respondent submitted that the issuance of the advisory for ensuring payment of interest under Section 50(1) of the GST Act is only to intimate the petitioner with regard to the outstanding interest liability as per the provisions of Section 50(1) of the GST Act which provides for interest on delayed payment.

7.1 It was submitted that as per Section 75(12) of the GST Act, where any amount of self-assessed tax in accordance with the return furnished under Section 39 of the GST Act remains unpaid either wholly or partly or any amount of interest payable on such tax remains unpaid notwithstanding anything contained in Sections 73 and 74 of the GST Act, the same is to be recovered under the provisions of Section 79 of the GST Act.

7.2 It was further submitted that the newly inserted Rule 142B of the GST Rules with effect from 04.08.2023 provides to issue the intimation for certain amounts liable to be recovered under Section 79 of the GST Act and therefore, without issuance of intimation in Form GST DRC-01D, as referred to in the said Rule, no recovery as contemplated in Section 79(1) of the GST Act can be made by the respondent-Authorities and therefore, merely issuance of advisory by the respondentAuthority after 04.08.2023 would not result into taking any action of recovery as per the mode prescribed in Section 79(1) of the GST Act without issuing the intimation as per Rule 142B of the GST Rules.

7.3 It was submitted that as per Sub-rule (2) of Rule 142B of the GST Rules, the intimation referred to in Form GST DRC-01D is to be treated as a notice for recovery. It was therefore submitted that the petitioner will have an opportunity to file a reply to such notice for recovery and after considering the reply only, the respondent-Authority have to apply the mode of recovery prescribed under Section 79(1) of the GST Act.

7.4 It was therefore submitted that the impugned advisory issued by the respondentAuthority is only to put the petitioner on guard with regard to the proposed recovery proceedings for outstanding liability of payment of interest as computed by the respondent-Authority under Rules 88B and 88C of the GST Rules.

8. Per contra, learned advocate Mr. Utkarsh Sharma relying on the affidavit-in-reply has submitted that Section 75(12) of the Act clearly demonstrate about the recovery proceedings wherein Sections 73 and 74 of the Act is not involved and where the tax has not been paid or short-paid or erroneously refunded or where ITC has been wrongly availed or utilised. In the instant matter, there is a disputed matter of recovery of interest only for which proper Officer has to take action against the tax payer as per Section 75(12) of the Act. In view of the provision of Section 75(12) of the Act read with Section 79 of the Act, the proceedings were initiated by the department without issuing show-cause notice under Sections 73 and 74 of the Act. The proceedings were initiated for the recovery of interest which were not paid by the tax payers even after issuance of multiple letters dated 24.3.2023, 24.4.2023, 22.5.2023 and 31.5.2023. The Office had clearly mentioned that further proceedings as per Section 75/79 of the Act shall be carried out by the department. Therefore, issuance of show-cause notice is not necessitated at the instance of the department. The department has given sufficient opportunities to the tax payers to file its reply before the department and has followed the criteria of principles of natural justice. Therefore, in view of the above provisions, the department has rightly invoked the provisions of Section 75(12) of the Act read with Section 79 of the Act and, therefore, the petition is misconceived.

9. In case of Reliance Formulation (P.) Ltd. v. Assistant Commissioner of State Tax (Gujarat)/SCA No. 5453 of 2025, it has been held by this Court as under:

“11. On perusal of the above Form GST DRC-01D, it is clear that the petitioner is put to notice to pay the outstanding interest amount as per Section 75(12) of the GST Act within seven days, failing which, the proceedings to be initiated to recover the outstanding dues which may include the outstanding interest as per the provisions of Section 79 of the GST Act which provides for recovery of the dues as per the modes prescribed therein. Therefore, the reference to Section 79 of the GST Act in the impugned advisory is only to put the petitioner on guard as to such outstanding liability as per the record of the respondent-Authority so that the petitioner can either make the payment of such liability if agreed or may oppose the same when the notice in Form GST DRC-01D is received by the petitioner for recovery of such amount as stated hereinabove. Therefore the anxiety of the petitioner that the respondent Authority will directly apply the mode of recovery prescribed under Section 79(1) of the GST Act, is without any basis in view of the insertion of Rule 142B in the GST Rules with effect from 04.08.2023 which requires intimation/notice of recovery to the petitioner so as to enable the petitioner to reply the same.”

10. Having heard learned advocates for the respective parties and perused the material on record, the controversy involved in the present petition is no more res-integra in view of decision in case of Rajkamal Builder Infrastructure (P.) Ltd. v. Union of India (Gujarat) and in case of Reliance Formulation Private Ltd. (supra).

12. On perusal of the above dictum of law and provisions and the Rules, it appears that as per the provisions of Section 39(7) of the GST Act, the petitioner is required to file the return of income by self-assessment and if the petitioner does not pay the interest as per the self- assessment procedure prescribed under Section 39 of the GST Act, the petitioner is liable to pay the interest as provided under Section 50(1) of the GST Act which provides that any person who is liable to pay tax interest in accordance with the provisions of the GST Act and Rules but fails to pay the tax or any part thereof, then such person is liable to pay the interest on his own at the rate of 18% per annum as may be recommended by the GST Council.

13. The manner in which the interest is to be computed is provided under Rule 88B of the GST Rules for delayed payment of tax, whereas, Section 75(12) of the GST Act provides that notwithstanding anything contained in Sections 73 or 74 of the GST Act, where any amount of self-assessed tax or interest payable on such tax remains unpaid, then the same shall be recovered under the provisions of Section 79 of the GST Act. At the same time, Rule 88C of the GST Rules provides the manner of dealing with difference in liability reported in statement of outward supplies and that reported in return, whereas, Rule 142B of the GST Rules which is inserted by the Central Goods and Services Tax (with an Amendment) Rules, 2023 with effect from 04.08.2023 provides for intimation of certain amounts liable to be recovered under Section 79 of the GST Act which includes the tax or interest which has become recoverable in accordance with Section 75 of the GST Act read with Rule 88C of the GST Rules or otherwise. Therefore, on conjoint reading of the Scheme of the GST Act and the Rules, it appears that the respondent-Authority can recover the amount of interest which has become due as per the provisions of Section 50(1) of the GST Act read with Rules 88B and 88C of the GST Rules under Section 79(1) of the GST Act only after issuance of intimation in Form GST DRC-01D which will be treated as notice for the recovery as provided under Rule 142B of the GST Rules and without following such procedure, the respondent-Authority cannot make any effective recovery of interest which may become payable by the assessee under the provisions of the GST Act and Rules on self-assessment to be made by such assessee.

14. In such circumstances, it would be germane to refer to the Form GST DRC-01D as prescribed under Rule 142B of the GST Rules, which is reproduces hereunder:

“FORM GST DRC-01D

[See rule 142B]

Intimation for amount recoverable under section 79

Reference No.-

Date-

1. Details of intimation:

(a) Financial year:

(b) Tax period: Form……..To…….

2. Section(s) of the Act or rule(s) under which intimation is issued: section 75 L12) r/w 79 may be provided

3. Details of tax, interest or any amount payable: (Amount in Rs.)

Tax Period		Act	POS (Place of Supply)	Tax	Interest	Penalty	Fee	Others	Total
From	To
L	2	3	4	5	6	7	8	9	L0

Total

You are hereby directed to make the payment within seven days failing which proceedings shall be initiated against you to recover the outstanding dues as per the provision of section 79 of the Act.

Signature:…

Name:..

Designation:..

Jurisdiction:…

Address:..

To,

GSTIN/ID Name Address

Note –

1.Only applicable fields may be filled up.”

15. On perusal of the above Form GST DRC-01D, it is clear that the petitioner is put to notice to pay the outstanding interest amount as per Section 75(12) of the GST Act within seven days, failing which, the proceedings to be initiated to recover the outstanding dues which may include the outstanding interest as per the provisions of Section 79 of the GST Act which provides for recovery of the dues as per the modes prescribed therein. Therefore, the reference to Section 79 of the GST Act in the impugned advisory is only to put the petitioner on guard as to such outstanding liability as per the record of the respondent-Authority so that the petitioner can either make the payment of such liability if agreed or may oppose the same when the notice in Form GST DRC-01D is received by the petitioner for recovery of such amount as stated hereinabove. Therefore the anxiety of the petitioner that the respondent-Authority will directly apply the mode of recovery prescribed under Section 79(1) of the GST Act, is without any basis in view of the insertion of Rule 142B in the GST Rules with effect from 04.08.2023 which requires intimation/notice of recovery to the petitioner so as to enable the petitioner to reply the same.

16. We also clarify that after issuance of the notice in Form GST DRC-01D, as per the provisions of Section 75(4) of the GST Act, the respondent-Authority is bound to provide an opportunity to file reply as well as an opportunity of hearing, if requested by the assessee in compliance of the principles of natural justice. Reliance placed by learned advocate Mr. Ashutosh Dave on the decision of Mahadeo Construction Co. v. Union of India (Jharkhand) would not have bearing inasmuch as it was rendered prior to amendment and insertion of Rule 142B of the GST Rules and Form DRC-01D. On conjoint reading of Scheme of the Act and the Rules, the Authority can proceed in the manner referred hereinabove.

17. In view of the above, no interference is required to be made at the stage of issuance of advisory by the respondent-Authority as the same is subject to further proceedings as contemplated in Rule 142B of the GST Rules read with Section 79 of the GST Act.

18. In view of the same, it has been categorically accepted that the respondent authority can recover the amount of interest which has become due as per the provisions of Section 50(1) of the Act read with Rule 88(B) and 80(C) of the GST Rules under Section 79(1) of the Act only after issuance of intimation in Form GST DRC-01D. Once the relevant Form GST DRC-01D is issued by the department, it will be treated as notice for recovery as provided under Rule 142B of the GST Rules. Without following the procedure of issuance of Rule 142B of the GST Rules, the respondent authority cannot make any effective recovery of interest.

19. Therefore, on the basis of such observation the impugned notice dated 20.5.2024 is quashed and set-aside with a direction that the department can initiate proceedings by adopting proper procedure with issuance of notice in Form GST DRC 01D. However, the same would be subject to providing opportunity to file reply as well as opportunity of hearing.

In view of the above observations, the present petition is allowed to the aforesaid context. Rule is made absolute.