Assessee should approach the Commissioner under Section 80 of the CGST Act to seek relief for payment of interest in instalments

The Hon’ble Madras High Court in M/S. THE BEST RECHARGE REP BY ITS PROPRIETRIX MRS. MONNA MOHAMMED SAHIRA BANU VERSUS THE DEPUTY COMMISSIONER (ST) , THE COMMERCIAL TAX OFFICER, THE STATE TAX OFFICER - 2024 (4) TMI 778 - MADRAS HIGH COURT directed the assessee to approach the Commissioner under Section 80 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) for seeking relief for payment of interest in monthly instalments pertaining to disputed tax already paid on account of excess wrongful availment of Input Tax Credit (“ITC”).

Facts:

M/s. Best Recharge (“the Petitioner”) had availed excess ITC than available in GSTR-2A; hence, the adjudicating authority initiated the proceedings to recover the tax along with interest on the excess credit availed by the Petitioner.

The Petitioner, prior to the adjudication order, deposited the excess claimed ITC. However, the adjudicating authority in the Order in Original dated September 02, 2022 levied the interest @ 24% on the excess ITC availed.

Aggrieved by the levy of interest, the Petitioner filed an appeal before the first appellate authority under Section 107 of the CGST Act.

The Appellate Authority vide Appeal No. AP/GST/T/13/2023, dated March 07, 2024 rejected the contention of the Petitioner of reducing the interest rate from 24% to 18% and making payment of interest in instalments.

The appellate authority rejected the appeal on the ground that the same is not under the jurisdiction of section 107 of the CGST Act.

Aggrieved by the order of the first appellate authority, the Petitioner filed a writ petition before the Madras High Court praying to quash the order passed by the first appellate authority and consequently direct the waiver of all further payments demanded.

The Petitioner contended that it had paid the excess claimed tax prior to the issuance of an order by the adjudicating authority. Thus, there should not be any further demand of interest.

Issue:

Whether the Appellate Authority u/s 107 of the CGST Act has the jurisdiction to reduce the rate of interest on tax liability arising due to the reversal of wrongfully availed ITC before passing the adjudication order under GST?

Held:

The Hon’ble Madras High Court in M/S. THE BEST RECHARGE REP BY ITS PROPRIETRIX MRS. MONNA MOHAMMED SAHIRA BANU VERSUS THE DEPUTY COMMISSIONER (ST) , THE COMMERCIAL TAX OFFICER, THE STATE TAX OFFICER - 2024 (4) TMI 778 - MADRAS HIGH COURT, held as under:

• Observed that, the order passed by the first appellate authority does not require any interference as the order does not suffer from any of the vices which requires it to be reviewed under Article 226 of the Constitution of India.
• Stated that, since the Petitioner has paid the disputed tax, the only relief the Petitioner can seek is for payment of interest in instalment for which the Petitioner has to approach the Commissioner under Section 80 of the CGST Act.
• Dismissed the Writ Petition.

Our Comments:

As per the amendment made vide Section 116 of the Finance Act, 2022, the Central Government has reduced the rate of interest from 24% to 18% on the ITC wrongly availed and utilised ITC with a retrospective date of July 01, 2017.

Therefore, the interest that would have been levied by the adjudicating authority should be 18% and not 24%.

(Author can be reached at [email protected])