2024 (2) TMI 120 - HC - GST

Interest on delayed tax payment only applies to cash payments, not electronic credit ledger amounts under Section 50(1)

The Calcutta HC set aside a notice dated 17.11.2022 and appellate order dated 20.04.2023 regarding interest on delayed output tax payment. The court held ... Interest on delayed payment of tax - proviso to sub section (1) of Section 50 regarding levy of interest only on portion paid by debiting the electronic cash ledger - adjustment by debiting electronic credit/electronic cash ledger - bona fide/inadvertent clerical mistake in GST returns - remand for fresh consideration in light of statutory amendmentProviso to sub section (1) of Section 50 regarding levy of interest only on portion paid by debiting the electronic cash ledger - interest on delayed payment of tax - adjustment by debiting electronic credit/electronic cash ledger - Whether interest under the GST law could be levied on tax which was paid by adjustment from the electronic ledger in view of the proviso to sub section (1) of Section 50 as substituted with retrospective effect. - HELD THAT: - The Court accepted petitioners' factual position that the short payment arising from a clerical mistake in November 2017 was rectified by filing an amended return in April 2018 and that the petitioner had balances in the electronic ledger which were used to adjust liabilities. The proviso to sub section (1) of Section 50, as inserted and subsequently substituted (by the Finance Act, 2021) and deemed to have effect from 01.07.2017, confines interest to that portion of tax which is paid by debiting the electronic cash ledger. On the admitted facts that the tax liability was adjusted through the electronic ledger and having regard to the statutory proviso (and its substitution with retrospective effect), the assessing authority ought not to have proceeded to levy interest indiscriminately on amounts adjusted through the electronic ledger. The Court therefore held that the demand for interest could not stand without reconsideration in light of the proviso and the retrospective substitution effected by the Finance Act, 2021. [Paras 11, 12, 13, 14]Demand for interest set aside and matter remanded to assessing authority to reconsider levy of interest taking into account the proviso/substitution and the fact of electronic ledger adjustment.Bona fide/inadvertent clerical mistake in GST returns - remand for fresh consideration in light of statutory amendment - Whether the admitted bona fide clerical mistake (rectified before scrutiny) barred levy of interest or required fresh adjudication. - HELD THAT: - The Court recorded that the petitioners had promptly detected and rectified the clerical error by filing an amended return before the date of scrutiny and had informed the authority. Given these facts and the existence of excess Input Tax Credit in the electronic ledger, the Court found it inappropriate for the appellate authority to mechanically reject the appeal without considering the bonafide nature of the error and the statutory amendment. Rather than deciding the factual question on merits, the Court directed remand so that the Assistant Commissioner may reconsider the matter afresh - including the petitioners' contention of a bona fide inadvertent mistake and the effect of electronic ledger balances - and proceed in accordance with law. [Paras 11, 14]Appellate order set aside and matter remitted for fresh consideration of the bonafide mistake and related relief in light of the statutory proviso/substitution.Final Conclusion: Writ petition allowed in part: the notice dated 17.11.2022 and the appellate order dated 20.04.2023 are set aside and the matter is remanded to the Assistant Commissioner for fresh adjudication in accordance with law (including the proviso/substitution to sub section (1) of Section 50 and the petitioners' plea of a bona fide inadvertent mistake). No order as to costs. Issues involved:The judgment involves assailing an order passed by the 1st Appellate Authority under Section 107 of the West Bengal Goods and Services Tax, 2017, seeking directions to recall, cancel, or rescind an order regarding discrepancies found during scrutiny of returns. The petitioners challenge the rejection of their appeal by the Appellate Authority and the demand for interest under Section 50(1) of the WBGST/CGST Act, 2017.Details of the Judgment:Issue 1: Clerical Error in Filing ReturnsThe petitioners' accountant made an inadvertent error while filing the return for November 2017, resulting in incorrect reduction of total GST Output Tax and Input Tax. The mistake was rectified by filing GSTR 3B for April 2018, correcting the values.Issue 2: Discrepancies Found During ScrutinyDespite rectifying the error and informing the authorities, discrepancies were found during scrutiny under Section 61 of the CGST Act, 2017. The authorities alleged short tax payment on outward supply, leading to a demand for interest, which the petitioners contested.Issue 3: Appeal and Rejection by Appellate AuthorityThe petitioners appealed the order demanding interest, but the Appellate Authority rejected the appeal, overlooking the petitioners' explanations and the availability of more Input Tax Credit in the electronic ledger account with the Government.Issue 4: Legal Arguments and PrecedentsThe petitioners argued that interest should not be charged on amounts adjusted through the electronic ledger account, citing amendments to Section 50 of the CGST Act and referring to legal judgments supporting their contention.Judgment and ConclusionThe Court noted the bonafide mistake made by the petitioners and the availability of more Input Tax Credit. It highlighted the provision in Section 50(1) of the WBGST Act, 2017, stating that interest should be levied only on the tax paid in cash. The Court set aside the demand notice and the Appellate Authority's order, remanding the matter for reconsideration in light of the legal amendments and the petitioners' arguments. The judgment was disposed of with no order as to costs.