2022 (11) TMI 85 - HC - GST

Appellate authority must re-examine GST appeal after Section 50 amendment on delayed tax payment interest

The Chhattisgarh HC disposed of a writ petition concerning delayed payment of taxes under GST Act 2017. The petitioner's appeal was initially rejected for ... Retrospective applicability of proviso to Section 50 - interest chargeable on net cash tax liability - requirement to pay tax as condition precedent to maintain appeal under Section 107(6) - furnishing and rectification of returns under Section 39 - stay of recovery on payment under Section 107(6)Retrospective applicability of proviso to Section 50 - interest chargeable on net cash tax liability - Whether the amendment inserting the proviso to Section 50 (providing that interest shall be payable only on the portion of tax paid by debiting the electronic cash ledger) operates retrospectively with effect from 01.07.2017 and is applicable to the petitioner. - HELD THAT: - The Court examined the legislative history, GST Council recommendations and notifications leading to the amendment and the subsequent clarification by the CBIC. Having regard to the Council's decisions (including its 39th meeting and the press release of 14.03.2020), the interim Notification No.63 of 2020 and the CBIC's clarificatory press release, and the formal amendment notified on 28.03.2021, the Court held that the proviso to Section 50 is to be given retrospective effect from 01.07.2017. The Court relied on the sequence of events showing the Council's intention to charge interest only on net cash liability and the administrative steps taken to implement that policy, and noted earlier judicial treatment of the issue. On that basis the Court concluded that the amended proviso has retrospective applicability and therefore may affect the interest demand that had been raised against the petitioner. [Paras 15, 21, 22, 24]The amendment to Section 50 is to be given retrospective effect from 01.07.2017 and may be applicable to the petitioner's case.Requirement to pay tax as condition precedent to maintain appeal under Section 107(6) - furnishing and rectification of returns under Section 39 - stay of recovery on payment under Section 107(6) - Whether the petitioner can avail the benefit of the retrospectively effective proviso to Section 50 so as to satisfy the payment condition under Section 107(6) and thereby maintain its appeal. - HELD THAT: - The Court confined itself to the question of retrospective applicability of the amendment and did not decide on the ultimate entitlement of the petitioner to relief under the amended provision. In view of the retrospective effect declared, the Court directed that the appellate authority must re-examine the petitioner's appeal afresh, determining whether the petitioner is entitled to the benefit of the amended proviso and whether the condition in Section 107(6) is thereby satisfied. The appellate authority is required to consider the matter in accordance with law after giving the petitioner an opportunity of hearing and to decide the appeal within four months. [Paras 23, 24]The matter is remitted to the appellate authority to decide afresh whether the petitioner can be extended the benefit of the amended proviso to Section 50 and thereby meet the condition of Section 107(6), after affording hearing and in accordance with law.Final Conclusion: Writ petition partly allowed: the Court held that the proviso to Section 50 is retrospectively effective from 01.07.2017 and set aside the appellate order; the appeal is remitted to the appellate authority to reconsider the petitioner's entitlement under the amended provision and to decide the appeal afresh within four months after hearing the petitioner. Issues Involved:1. Rejection of the appeal under Section 50(1) of the Central Goods and Services Tax Act, 2017.2. Demand for interest on unpaid tax liability.3. Non-availability of a mechanism for rectifying GST returns.4. Retrospective applicability of the amendment to Section 50 of the CGST Act, 2017.Issue-Wise Detailed Analysis:1. Rejection of the Appeal under Section 50(1) of the CGST Act, 2017:The petitioner challenged the order dated 11.09.2018, which rejected their appeal under Section 50(1) of the CGST Act, 2017, due to non-payment of tax, interest, fine, fee, and penalty as required under Section 107(6) of the Act. The petitioner argued that the appeal was dismissed without providing a mechanism to rectify the GST returns, which led to the incorrect calculation of tax liability.2. Demand for Interest on Unpaid Tax Liability:The petitioner was directed to pay interest amounting to Rs. 72,69,975 for the period from July 2017 to September 2017 due to differences in GSTR 1 and GSTR 3B returns. The petitioner contended that there was no tax liability as they neither availed input credit nor charged GST on pet food, which was later identified as taxable. The petitioner had set off the tax liability in the return for March 2018. The State argued that the petitioner delayed tax payment and concealed the amount received from pet food sales, thus justifying the interest levy under Section 50 of the CGST Act, 2017.3. Non-availability of a Mechanism for Rectifying GST Returns:The petitioner highlighted the absence of a mechanism to correct errors in GSTR 3B returns, which led to discrepancies in tax liability reporting. Despite several communications with the authorities, no solution was provided. The petitioner had sufficient input credit to cover the tax liability but was unable to rectify the returns due to the lack of a correction mechanism.4. Retrospective Applicability of the Amendment to Section 50 of the CGST Act, 2017:During the pendency of the writ petition, the Government of India amended Section 50 of the CGST Act, 2017, with retrospective effect from July 2017. The amendment stipulated that interest on delayed tax payment would be charged only on the net cash tax liability. The petitioner sought to benefit from this amendment, arguing that it should apply retrospectively to their case. The State opposed this, but the court examined the retrospective applicability of the amendment.Court's Findings:Retrospective Applicability of the Amendment:The court noted that the amendment to Section 50 was intended to be retrospective, as recommended by the GST Council and clarified by the CBIC. The amendment aimed to charge interest only on the net cash tax liability, effective from July 2017. The court referred to the judgment of the Madras High Court in M/s. Maansarovar Motors Private Limited, which supported the retrospective application of the amendment.Direction to the Appellate Authority:The court directed the appellate authority to re-examine the petitioner's appeal in light of the retrospective amendment to Section 50. The appellate authority was instructed to determine whether the petitioner could benefit from the amendment and overcome the condition precedent of Section 107(6) for maintaining the appeal. The appellate authority was given four months to decide the appeal afresh, ensuring a fair hearing for the petitioner.Conclusion:The writ petition was partly allowed. The impugned order dated 11.09.2018 was set aside, and the matter was remitted back to the appellate authority to re-evaluate the appeal considering the retrospective amendment to Section 50 of the CGST Act, 2017.