Interest on belated GST remittance: mere availability of credit does not avoid interest; actual debit and return filing required.

Issue concerns levy of interest for belated remittance of GST where taxpayers relied on available balances in electronic cash and credit registers without debiting them or filing returns. The legal principle applied is that mere availability of input tax credit does not constitute utilization; protection from interest requires actual remittance by debiting the relevant electronic registers and compliance with return filing obligations. Consequently, interest on late tax payment is permissible where taxes remain unpaid despite credit balances until such credits are lawfully availed and reflected by debit entries and returns.

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Issues Involved:
1. Legality of the demand for interest on delayed GST payment without pre-intimation notice/show cause notice.
2. Impact of error in the July 2017 GSTR 3B return on subsequent returns and tax liabilities.
3. Justification for the levy of interest under Section 50 of the TNGST Act.
4. Distinction between cash balance and credit balance in the electronic ledgers for interest computation.
5. Relevance of judicial precedents and amendments to Section 50 of the TNGST Act.

Detailed Analysis:

1. Legality of the Demand for Interest Without Pre-Intimation Notice:
The petitioner challenged the order dated 10.04.2019, which demanded interest for delayed GST payment, on the grounds that it was issued without a pre-intimation notice/show cause notice. The court acknowledged this procedural lapse but did not set aside the order. Instead, it directed the jurisdictional Commissioner to consider the petitioner's representation dated 28.09.2017 and pass a fresh order after a hearing.

2. Impact of Error in July 2017 GSTR 3B Return:
The petitioner's error in the July 2017 GSTR 3B return, where data for the Faridabad plant was included instead of the Chennai plant, led to a short disclosure of liability. This error caused a delay in filing returns for subsequent months (August to October 2017), as the petitioner awaited rectification of the July return to accurately determine the tax liability for these months. The petitioner argued that the cascading effect of this error justified the delay in subsequent filings.

3. Justification for the Levy of Interest Under Section 50:
The court examined the levy of interest under Section 50 of the TNGST Act, which mandates interest on delayed tax payments. The petitioner contended that sufficient ITC credit in the electronic cash ledger and electronic credit register negated the need for interest, as there was no loss to the revenue. However, the court highlighted that interest is compensatory in nature and is levied for withholding tax payments. The court noted that the amendments to Section 50, which reduced the interest liability, were applied to recompute the interest from Rs.5,00,00,000/- to Rs.1,19,00,000/-.

4. Distinction Between Cash Balance and Credit Balance:
The court addressed the distinction between cash balance and credit balance in electronic ledgers. It was argued that while cash payments denote actual availability of funds, credits in the electronic credit register do not guarantee that resources are within reach of the Department. The court emphasized that tax payment is considered complete only when returns are filed and the respective ledgers are debited. Thus, mere availability of credit does not equate to payment and does not insulate the petitioner from interest.

5. Relevance of Judicial Precedents and Amendments:
The court referred to several judicial precedents, including the case of Refex Industries Limited and the Supreme Court's judgment in Union of India Vs Bharti Airtel Limited & Ors. These cases discussed the retrospective application of amendments to Section 50 and the scheme of the TNGST Act. The court concluded that the specific issue of interest on delayed tax payments, where returns were not filed, was not addressed by these precedents. The court upheld the demand for interest, aligning with the compensatory nature of interest as established in the case of Pratibha Processors Union of India.

Conclusion:
The court partly allowed the writ petition, granting relief as per the order dated 18.01.2021, which reduced the interest liability. The demand for interest, as per the revised computation, was confirmed. The court emphasized the importance of filing returns and debiting electronic ledgers for tax payments to be considered complete, thereby rejecting the petitioner's argument that mere availability of credit suffices to avoid interest. The connected miscellaneous petition was closed with no costs.

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