2024 (1) TMI 1111 - HC - GST

GST Electronic Cash Ledger deposits via PMT-06 and delayed GSTR-3B filing: interest u/s50(1) limited to late deposits only

The dominant issue was whether depositing GST into the Electronic Cash Ledger (via PMT-06) within the statutory due date constitutes 'payment of tax' so ... Deposit in Electronic Cash Ledger constitutes deposit in Government account - date of credit to Government account is date of deposit for ECL purposes - tax liability discharged if amount credited to Government not later than last date for furnishing return - Electronic Cash Ledger and Electronic Credit Ledger are accounting ledgers - interest under Section 50(1) attracted only for tax unpaid beyond prescribed date - proviso to a section cannot be read so as to override the enacting part of that sectionDeposit in Electronic Cash Ledger constitutes deposit in Government account - date of credit to Government account is date of deposit for ECL purposes - Electronic Cash Ledger and Electronic Credit Ledger are accounting ledgers - Whether payment made by generating GST PMT-06 and credited to the Electronic Cash Ledger constitutes payment to the Government and discharges tax liability if credited not later than the due date - HELD THAT: - The Court held that amounts paid by generating Form GST PMT-06 are first credited to the Government account in the authorised bank and, by virtue of Explanation (a) to Section 49(11), the date of such credit to the Government account shall be deemed to be the date of deposit in the Electronic Cash Ledger. The Electronic Cash Ledger and Electronic Credit Ledger operate as accounting ledgers to quantify and verify liabilities; they do not mean that the Government cannot receive or utilise funds until a return is filed. Consequently, when the amount is credited to the Government account not later than the last date for furnishing the return, the tax liability is discharged to the extent of that deposit even if the GSTR-3B is filed later. [Paras 34, 35, 36, 41, 46]Payment made via GST PMT-06 and credited to the Government account (and thereby deemed credited to the ECL) constitutes payment to the Government and discharges the tax liability to the extent of such deposit.Tax liability discharged if amount credited to Government not later than last date for furnishing return - interest under Section 50(1) attracted only for tax unpaid beyond prescribed date - Whether interest under Section 50(1) is leviable where the tax amount was deposited to the Government account on or before the last date for payment but the GSTR-3B was furnished belatedly - HELD THAT: - The Court interpreted Sections 39(1), 39(7) and 50(1) together and concluded that the prescribed period for payment is the last date for furnishing the monthly return. If the tax has been credited to the Government account not later than that last date, the tax liability is discharged from that date and no interest under Section 50(1) is attracted for that amount. Interest under Section 50(1) is payable only for the period for which tax or any part thereof remains unpaid beyond the prescribed date; thus interest would be attracted only in respect of amounts actually paid after the prescribed date. [Paras 33, 41, 44, 51, 72]No interest under Section 50(1) is payable in respect of tax amounts credited to the Government account on or before the last date for furnishing the return; interest is chargeable only for amounts unpaid beyond that prescribed date.Proviso to a section cannot be read so as to override the enacting part of that section - proviso to Section 50(1) cannot alter prescribed date under Section 39(7) - Whether the proviso to Section 50(1) may be interpreted to mean that payment is only complete on debit in ECL at time of filing GSTR-3B, thereby altering the prescribed date for payment under Section 39(7) - HELD THAT: - The Court reasoned that a proviso ordinarily qualifies or excepts from the main enactment and cannot be construed to import into the enacting part something not there or to override the main provision. The prescribed date for payment is provided by Section 39(7); the proviso to Section 50(1) must be read within the scope of Section 50(1) and cannot be interpreted to displace the date prescribed by Section 39(7). Therefore, the view that payment occurs only upon debit entry in ECL at the time of filing GSTR-3B (as held by some earlier decisions) was rejected as impermissible. [Paras 55, 56, 58]The proviso to Section 50(1) cannot be read to override or alter the prescribed date for payment under Section 39(7); it does not make payment dependent solely on debit entries in ECL upon filing returns.Interest under Section 50(1) attracted only for tax unpaid beyond prescribed date - quashing of recovery proceedings and consequential orders - Whether the recovery notice dated 16.05.2023 and the order dated 12.07.2023 demanding interest are sustainable where tax had been credited to the Government account within the prescribed period - HELD THAT: - Applying the above legal principles to the facts, the Court found that the petitioner had paid the tax amounts by generating GST PMT-06 and those amounts were credited to the Government account not later than the last date for payment for the respective months. Therefore, the tax liability stood discharged and no interest under Section 50(1) was due for the amounts so paid. On that basis the Court held the impugned recovery notice and the confirming order to be unsustainable and liable to be set aside. [Paras 16, 18, 72, 73]The recovery notice dated 16.05.2023 and order dated 12.07.2023 are quashed insofar as they demand interest for amounts that were credited to the Government account within the prescribed period.Final Conclusion: The writ petitions are allowed. The Court held that amounts paid by generating Form GST PMT-06 and credited to the Government account (deemed credited to the ECL) within the last date for furnishing returns discharge the tax liability and do not attract interest under Section 50(1); consequently the impugned recovery notice dated 16.05.2023 and order dated 12.07.2023 demanding interest are quashed. No costs. Issues Involved:1. Challenge to Recovery Notice dated 16.05.2023.2. Challenge to Order dated 12.07.2023.3. Liability to pay interest on GST amount deposited in Electronic Cash Ledger (ECL).Summary:Issue 1: Challenge to Recovery Notice dated 16.05.2023The petitioner, a renowned motorcycle manufacturer, challenged the Recovery notice dated 16.05.2023, demanding interest of Rs. 23,76,26,657/- for alleged belated payment of GST from July 2017 to December 2017. The petitioner argued that the tax was duly remitted to the Government's account through the Electronic Cash Ledger (ECL) within the due dates, and thus, no interest should be levied. The Department contended that the deposit in ECL does not amount to payment of tax until debited through GSTR-3B returns.Issue 2: Challenge to Order dated 12.07.2023Following an interim order by the Division Bench, the Department passed an order on 12.07.2023, confirming the demand of interest. The petitioner challenged this order, maintaining that the tax was paid on time and no interest liability should arise. The Department argued that the petitioner failed to file monthly returns on time, thereby attracting interest under Section 50 of the GST Act.Issue 3: Liability to Pay Interest on GST Amount Deposited in ECLThe core issue was whether the petitioner is liable to pay interest on the GST amount deposited in ECL within the due dates. The petitioner argued that once the tax is deposited in the Government's account via ECL, it should be considered as payment of tax. The Department maintained that the tax is considered paid only when debited from ECL through GSTR-3B returns. The Court examined various provisions of the GST Act and concluded that the date of credit to the Government's account should be deemed the date of deposit in ECL. Thus, the tax liability is discharged upon deposit, and interest is applicable only for any delayed period beyond the due date for filing returns.Judgment:1. The credit to the Government's account occurs not later than the last date for filing monthly returns as per Section 39(7) of the GST Act.2. Once the amount is paid via GST PMT-06, it is credited to the Government's account, discharging the tax liability to that extent. For accounting purposes, it is deemed credited to the ECL.3. If GST is credited to the Government's account by the due date, the tax liability is discharged from the date of credit. Interest is applicable only for any delayed period beyond the due date.The impugned Recovery notice dated 16.05.2023 and the order dated 12.07.2023 were quashed. The writ petitions were allowed, and no costs were imposed.