1.1 Brief of the Case

1.2 Background of the case

The petitioner claimed ITC for GST paid by sub-contractors. Discrepancies arose due to sub-contractors not uploading invoices or filing returns, resulting in mismatch of ITC. Authorities alleged an excess availment of ITC (₹2.62 crore). Demand notices were issued for tax (₹13.64 lakhs) and interest (₹81.30 lakhs) and the bank account was attached all without issuing a SCN u/s 73 CGST Act.

1.3 Key Provisions discussed

• Section-50(1) - Interest payable for delayed tax payment.
• Section-73(1) - Mandatory SCN before recovery of tax, interest, or penalty (in non-fraud cases)
• Section-75(12) - Cited by revenue to justify recovery without SCN; contested by petitioner.

1.4 Petitioner’s Arguments

The petitioner argued that:

• No SCN was issued u/s before quantifying interest and attaching the bank account.
• Actions violated principles of natural justice.
• Section-75(12) cannot override the requirement for an SCN in non-fraud cases.
• Relief sought: quash demand notice (Annexure‑J) and attachment order (Annexure‑L).

1.5 Respondent’s Arguments

• Revenue conceded that no SCN was issued u/s
• Claimed Section 75(12) allows initiating recovery for self-assessed tax and interest without SCN.

1.6 Court’s Findings and Analysis

• Section 73 mandates issuance of an SCN before recovery of tax, interest, or penalty in non-fraud scenarios.
• Interest u/s 50 was quantified without SCN - a breach of natural justice.
• SCN requirement cannot be bypassed via Section 75(12), which applies only to self-assessment, not adjudication by the authority.

1.7 Court’s Decision

• The demand notice (Annexure‑J) and bank account attachment order (Annexure‑L) were quashed.
• Authorities were granted liberty to proceed lawfully, i.e., issue SCN and follow due process.

1.8 Significance of the Judgment

• Reinforces the SCN requirement before recovery u/s 73 of CGST, upholding natural justice.
• Clarifies that Section 75(12) cannot be misused to bypass SCN in such cases.
• Validated on appeal by Karnataka Division Bench (March 2020), reaffirming SCN requirement before recovery. Authorities must comply with adjudication procedures first.

1.9 Conclusion

The Karnataka High Court judgment in LC Infra Projects Pvt. Ltd. vs UOI emphatically affirms that recovery of GST interest and penalty cannot proceed without an SCN under Section 73, safeguarding procedural fairness. Subsequent appeal decisions upheld this principle, reinforcing rule of law in GST adjudications.