2021 (12) TMI 521 - HC - GST

Payment terms set in GST dispute resolution, annulment of registration upon installment, compliance crucial

The Court finalized the payment terms and modalities agreed upon by the parties, with specific instructions for the adjustment of figures, input tax ... Payment in installments of tax demand - adjustment of appellate orders and input tax credit against last installment - interest on reducing balance - calculation of interest excluding penalty and earlier interest - restoration and cancellation of GST registration on compliance or default - continuance of current GST dues during instalment periodPayment in installments of tax demand - Whether the total demand admitted in the December 3, 2021 letter could be discharged by payment in 24 monthly installments and on what schedule. - HELD THAT: - The Court recorded the parties' agreement that the total amount as per the December 3, 2021 letter would be paid in 24 equal or nearly equal monthly installments beginning December 15, 2021 and payable by the 15th day of the 23 succeeding months. The appellants accepted the figures subject to adjustment arising from appeals for the period 2017-18. The Court directed that in default of any installment the entire outstanding balance would become immediately payable and the CGST authorities would be entitled to proceed for realization in accordance with law. [Paras 4, 5, 7]The admitted total demand shall be paid in 24 monthly installments on the specified schedule, with default accelerating the balance and permitting recovery by the authorities.Adjustment of appellate orders and input tax credit against last installment - Treatment of adjustments on account of appellate orders and claimed input tax credit (ITC). - HELD THAT: - The Court accepted the appellants' submission that figures were subject to adjustment upon conclusion of appeals for 2017-18 and that any ITC entitlement, which the CGST authorities accepted might arise upon payment of the tax due, would be adjusted. The parties agreed that such adjustments (from appellate orders and ITC, if any) shall be made only against the last installment, subject to the assessee establishing entitlement in accordance with law. [Paras 2, 3, 6]Adjustments arising from appellate outcomes and any ITC will be applied only against the last installment, subject to lawful entitlement being established.Interest on reducing balance - calculation of interest excluding penalty and earlier interest - Computation and timing of interest payable on the admitted demand. - HELD THAT: - The Court directed that interest shall be payable by the assessee on a reducing balance basis on the tax-due component of the admitted amount (i.e., after excluding any penalty or interest already included in the admitted figure). The interest on the reducing balance will be calculated after completion of payment of the last installment and the entire interest component will be payable within 60 days of the last scheduled date for payment of installments. It was made explicit that interest ordered is to apply only to the tax due component and not to penalty or interest already added into the figure. [Paras 8, 9]Interest will be calculated on a reducing balance basis on the tax-due component (excluding penalty and earlier interest), computed after the last installment and payable within 60 days thereafter.Restoration and cancellation of GST registration on compliance or default - continuance of current GST dues during instalment period - Effect of compliance with the installment regime on GST registration and portal access, and obligations to pay current GST liabilities. - HELD THAT: - The Court directed that upon payment of the first installment the order cancelling the assessee's GST registration dated February 10, 2021 shall stand annulled and the respondent shall restore the assessee's portal access and facilities. The authorities retain the power to cancel registration again within 15 days of any default and to deny portal access within seven days of such default unless the default is rectified beforehand. Separately, the assessee is required to continue paying current GST dues without seeking concessions by reason of the installment arrangement. [Paras 10, 11]First-installment payment will annul the prior cancellation and restore registration access; on any subsequent default authorities may cancel registration and deny access; the assessee must continue to pay current GST dues during the installment period.Final Conclusion: WP(C) No. 344 of 2021 is disposed by directing payment of the admitted demand in 24 monthly installments beginning December 15, 2021, permitting adjustments from appellate outcomes and ITC only against the last installment (subject to lawful entitlement), requiring interest on a reducing-balance basis on the tax-due component payable after completion of installments, restoring GST registration and portal access upon first payment while permitting re-cancellation on default, and mandating continuance of current GST payments; no order as to costs. Issues:1. Agreement on payment terms and modalities between parties.2. Adjustment of figures indicated in the letter dated December 3, 2021.3. Overlooking input tax credit due to non-payment of tax.4. Total amount due and proposed payment in monthly installments.5. Schedule and mode of payment for the total amount due.6. Adjustment against last installment for appeals and input tax credit.7. Consequences of default in payment of installments.8. Liability to pay interest on reducing balance basis.9. Clarification on calculation of interest component.10. Requirement to continue paying current GST dues.11. Annulment of GST registration cancellation upon first installment payment.12. Retention of the letter dated December 3, 2021 in records.13. Disposal of WP (C) No. 344 of 2021.14. No order as to costs.Analysis:1. The judgment records that the parties have agreed in principle to the payment terms but have left the modalities to be determined by the Court. This indicates a mutual understanding on the payment structure, with the Court tasked to finalize the specifics.2. The appellants have accepted the figures mentioned in the letter dated December 3, 2021, issued by the Assistant Commissioner, CGST. However, they assert that these figures are subject to adjustment based on pending appeals for the period of 2017-18. This highlights the need for potential modifications to the indicated figures.3. The appellants claim that the input tax credit has been overlooked due to non-payment of tax. The CGST authorities acknowledge this and agree that upon tax payment, the appellants may be eligible for the input tax credit. The agreement is to adjust this credit with the last installment payment, subject to compliance with legal requirements.4. The total amount due is &8377; 43,49,50,071, and the appellants propose to pay this sum in 24 monthly installments. This structured payment plan aims to facilitate the settlement of the outstanding amount over a defined period.5. The judgment specifies that the entire outstanding amount should be paid in 24 equal or nearly equal monthly installments, starting from December 15, 2021, and payable by the 15th day of the following 23 months. This delineates the timeline and mode of payment for the appellants.6. Any adjustments related to pending appeals and input tax credit will only be made against the last installment. This provision ensures that any modifications to the initial figures are accounted for in the final payment.7. In case of default in installment payment, the balance amount becomes immediately due, empowering the CGST authorities to take necessary actions for recovery in accordance with the law. This clause emphasizes the consequences of non-compliance with the payment schedule.8. The appellants are liable to pay interest on a reducing balance basis on the tax due component of the total amount, excluding adjustments for appellate orders or input tax credit. The interest calculation occurs after the final installment payment, with the entire interest amount due within 60 days of the last installment deadline.9. The judgment clarifies that the interest calculation is based on the reducing balance of the tax due component, distinct from penalties or previously added interest. This distinction ensures a specific calculation method for the interest component.10. The appellants are instructed to continue paying their current GST dues without seeking concessions based on the payment arrangement outlined in the judgment. This directive underscores the ongoing obligation to fulfill regular GST obligations.11. Upon the first installment payment, the order canceling the GST registration of the appellants will be annulled, restoring their access to relevant portals and facilities. However, failure to adhere to the payment terms may result in registration cancellation and portal access denial, unless rectified promptly.12. The judgment mandates the retention of the letter dated December 3, 2021, in the records for future reference and documentation purposes.13. The case WP (C) No. 344 of 2021 is disposed of based on the terms and agreements outlined in the judgment, signifying the resolution of the legal matter under consideration.14. No costs order is issued, indicating that each party is responsible for their respective expenses related to the legal proceedings.