Page 105 - GSTL_21st May 2020_Vol 36_Part 3

2020 ] MAHADEO CONSTUCTION CO. v. UNION OF INDIA 351
Daejung Moparts Pvt. Ltd. and Ors., has taken similar view. The said Writ Appeals
were initially decided by a Two Judges Bench of the Hon’ble Madras High Court
and divergent views were taken by the Hon’ble Judges on the issue of initiation
of adjudication proceedings before imposing liability of interest under Section 50
of the Act. The matter was, thus, referred to Learned Third Judge, which was
decided vide Judgment dated 19th December, 2019 in the following terms
“27. A careful perusal of the above said provision would show that every
person who is liable to pay tax, but fails to pay the same or any part thereof
within the period prescribed shall, on his own, pay interest at such rate not
exceeding 18% for the period for which the tax or any part thereof remains
unpaid. Thus, sub clause (1) of Section 50 clearly mandates the assessee to
pay the interest on his own for the period for which the tax or any part
thereof remains unpaid. The liability to pay interest is evidently fastened on
the assessee and the same has to be discharged on his own. Thus, there
cannot be any two view on the liability to pay interest under Section 50(1) of
the said Act. In other words, such liability is undoubtedly an automatic lia-
bility fastened on the assessee to pay on his own for the period for which
tax or any part thereof remains unpaid.
28. Sub-section (2) of Section 50 contemplates that the interest under sub-
section (1) shall be calculated in such manner as prescribed from the day
succeeding the day on which such tax was due to be paid. Sub-section (3) of
Section 50 further contemplates that a taxable person who makes an undue
or excess claim of input tax credit under Section 42(10) or undue or excess
reduction in output tax liability under Section 43(10) shall have to pay inter-
est on undue or excess claim or such undue or excess reduction, at the rate
not exceeding 24 per cent.
29. A careful perusal of sub-sections (2) and (3) of Section 50 thus would
show that though the liability to pay interest under Section 50 is an auto-
matic liability, still the quantification of such liability, certainly, cannot be
by way of an unilateral action, more particularly, when the assessee dis-
putes with regard to the period for which the tax alleged to have not been
paid or quantum of tax allegedly remains unpaid. Likewise, whether an
undue or excess claim of input tax credit or reduction in output tax liability
was made, is also a question of fact which needs to be considered and de-
cided after hearing the objections of the assessee, if any. Therefore, in my
considered view, though the liability fastened on the assessee to pay inter-
est is an automatic liability, quantification of such liability certainly needs
an arithmetic exercise after considering the objections if any, raised by the
assessee. It is to be noted that the term “automatic” does not mean or to be
construed as excluding “the arithmetic exercise”. In other words, though li-
ability to pay interest arises under Section 50 of the said Act, it does not
mean that fixing the quantum of such liability can be unilateral, especially,
when the assessee disputes the quantum as well as the period of liability.
Therefore, in my considered view, though the liability of interest under sec-
tion 50 is automatic, quantification of such liability shall have to be made by
doing the arithmetic exercise, after considering the objections of the as-
sessee. Thus I answer the first issue accordingly.
xxx xxx xxx
31. It is to be noted at this juncture that in both the writ petitions, the re-
spective writ petitioners are not disputing their liability to pay the interest
on the delayed payment of tax. On the other hand, they are disputing the
GST LAW TIMES  21st May 2020  105