2020 (4) TMI 56 - HC - GST

Court rules in favor of petitioner, discharging tax liability for August 2017, no interest owed.

The court allowed the petition, declaring the petitioner's submission in October 2019 as the discharge of tax liability for August 2017 within the ... Discharge of tax liability within the period stipulated under the GST laws - electronic liability register and Unique Identification Number under rule 88(2) of the CGST Rules - electronic cash ledger and challan identifiers (CPIN/CIN/BRN) as evidence of payment - liability to pay interest for delayed credit due to system failure - subsequent declaration/return accepted by the portal treated as discharge of earlier liabilityDischarge of tax liability within the period stipulated under the GST laws - electronic cash ledger and challan identifiers (CPIN/CIN/BRN) as evidence of payment - electronic liability register and Unique Identification Number under rule 88(2) of the CGST Rules - subsequent declaration/return accepted by the portal treated as discharge of earlier liability - Whether the petitioner had discharged its tax liability for August, 2017 within the statutory period despite system glitches and whether the declaration filed in October 2019 (with September 2019 return) should be treated as discharge of the August 2017 liability. - HELD THAT: - The court found on the record that the petitioner had paid the full tax for August, 2017 by cash payments (with generated CPINs and bank CINs/BRNs recorded) and by utilisation of input tax credit, and those amounts remained to the credit of the GST Department. The failure to reflect the discharge in the electronic liability register and zeros in GSTR-3B arose from portal glitches and crash on 20-21 September 2017, not from any default by the petitioner. Given these facts and that the petitioner thereafter followed the process suggested by respondents resulting in the portal accepting the September 2019 filing which declared the August 2017 tax, the court held that the October 2019 declaration (filed with the September 2019 return) shall be treated as constituting discharge of the August 2017 liability within the period prescribed under the GST laws. The determinative reasoning rests on the evidentiary significance of the CPIN/CIN/BRN and the fact that the sums remained credited to the Department and were not applied elsewhere, combined with the inequity of penalising the petitioner for system failures beyond its control. [Paras 9, 14, 15]The declaration submitted in October 2019 with the September 2019 return is to be treated as discharge of the petitioner's tax liability for August, 2017 within the period stipulated under the GST laws.Liability to pay interest for delayed credit due to system failure - discretion and equity in imposing interest where default arises from portal malfunction - Whether the petitioner is liable to pay interest for the period from 21.9.2017 to October 2019 on the tax amount which was paid on time but not reflected in the electronic liability register due to system failure. - HELD THAT: - The court observed that the petitioner had promptly notified authorities and pursued remedies, but remedial action was delayed by the respondents and the portal malfunction. The Circular and procedures relied upon by respondents required reporting additional liability and payment with interest for subsequent periods; applying that requirement to a case where the taxpayer had in fact paid on time but the system failed would be unreasonable. Given that the amounts were deposited with the designated bank and remained credited to the Department and the failure to record the discharge was attributable to technical glitches and delayed administrative response, it would be inequitable to fasten interest liability on the petitioner for the period in question. The court therefore declined to impose interest for the period from 21.9.2017 to October 2019. [Paras 6, 11, 14, 15]The petitioner shall not be liable to pay any interest on the tax amount for the period from 21.9.2017 to October, 2019.Final Conclusion: The petition is allowed: the October 2019 declaration filed with the September 2019 return shall be treated as discharge of the petitioner's August, 2017 tax liability within the period prescribed under the GST laws, and the petitioner is not liable to pay interest for the period 21.9.2017 to October, 2019; rule made absolute, no costs. Issues Involved:1. Validity of the Respondents' decision conveyed via letter dated 7.3.2019.2. Regularization of the Petitioner’s GSTR-3B for August 2017.3. Entry in the Petitioner’s electronic liability register for August 2017.4. Liability to pay interest for the period from 21.9.2017 to October 2019.Detailed Analysis:1. Validity of the Respondents' Decision:The petitioners challenged the decision conveyed via letter dated 7.3.2019, seeking its quashing and setting aside. The court noted that the respondents failed to provide timely remedial measures despite the petitioner's continuous follow-ups. The decision to keep the scheme of correction/amendment of errors in GSTR-3B in abeyance as per Circular dated 29.12.2017 further complicated the matter for the petitioner, who had already discharged the tax liability for August 2017.2. Regularization of the Petitioner’s GSTR-3B for August 2017:The petitioner faced difficulties in uploading GSTR-3B due to system glitches and crashing of the common portal in September 2017. Consequently, the system accepted GSTR-3B with all columns showing zero, despite the petitioner having paid the tax liability. The court acknowledged that the petitioner had complied with the procedural requirements and discharged the tax liability within the prescribed time.3. Entry in the Petitioner’s Electronic Liability Register:The petitioner’s tax payments were not reflected in the electronic liability register due to system errors. Despite the petitioner’s efforts and multiple representations to various authorities, the issue remained unresolved until the court's intervention. The court recognized that the petitioner had paid the tax liability through internet banking, generating CPINs and CINs, which confirmed the payment.4. Liability to Pay Interest:The petitioner was informed in March 2019 that it would have to pay interest for the period from 21.9.2017 to October 2019. The court found it unreasonable and inequitable to saddle the petitioner with interest, as the delay was due to system errors and not any fault on the petitioner’s part. The court held that the petitioner had discharged the tax liability within the stipulated period and should not be liable for interest.Conclusion:The court allowed the petition, holding that the declaration submitted by the petitioner in October 2019 along with the return of September 2019 shall be treated as discharge of the petitioner’s tax liability for August 2017 within the period stipulated under the GST laws. Consequently, the petitioner was not liable to pay any interest on such tax amount for the period from 21.9.2017 to October 2019. The rule was made absolute with no order as to costs.