1.1 Brief of the Case

1.2 Background of the case

Petitioner received a letter dated 6 February 2019, demanding payment of ₹11,58,643 towards short-paid interest on delayed GST payment; their bank account was frozen until payment was made.

Petitioner argued the demand letter was illegal because no SCN was issued prior, as required under Section 73(1) of the CGST Act

1.3 Key Provisions discussed

• Section-50(1) - Mandates interest on delayed payment of tax at notified rates
• Section-73(1) - Requires issuance of a SCN when tax is not paid or short-paid for reasons other than fraud, to allow the assessee to show cause before demanding tax, penalty, or interest

1.4 Petitioner’s Arguments

Contended that the impugned letter was issued without following prescribed statutory procedure—specifically, without issuing a SCN u/s Section 73(1)

1.5 Respondent’s Arguments

• The CGST authorities argued Section 73(1) is inapplicable because the petitioner had already paid the admitted tax and some interest; only a shortfall in interest was involved
• They contested the need for an SCN, stating the situation did not call for one under the Act.

1.6 Court’s Findings and Analysis

• The Court rejected the respondent’s interpretation, holding that because the tax wasn't deposited on time into the government account, Section 73(1) was indeed triggered.
• Emphasized that regardless of statutory provisions, any penal action must adhere to the principles of natural justice.
• Held that the 6 February 2019 letter must “be treated as a Show Cause Notice” under Section 73(1)

1.7 Court’s Decision

• Directed that the petitioner must be given a personal hearing before the adjudicating authority to determine whether they were liable for the short-paid interest.
• If adjudication finds the petitioner was not liable, the amount should be refunded with statutory interest.
• The adjudicating authority was ordered to pass a reasoned order within three months of this judgment.

1.8 Significance of the Judgment

Procedural safeguard: Reinforces that procedural requirements like issuing SCNs and granting hearings are mandatory, even for interest recovery scenarios.

1.9 Conclusion

The Jharkhand High Court in Godavari Commodities Ltd. v. Union of India held that recovery of short-paid interest on delayed tax payments must comply with Section 73(1)’s requirement of a SCN followed by personal hearing. The failure to follow such procedure renders any demand or enforcement action invalid, upholding both statutory mandate and natural justice.