GST interest applies on delayed payments despite Electronic Credit Ledger availability, return filing timing determines liability

The HC dismissed a writ petition challenging interest liability on delayed GST payments. The taxpayer argued that interest should only apply to cash payments, not amounts paid through Electronic Credit Ledger. The court held that GST liability offsetting occurs only upon furnishing returns, regardless of available credit ledger balance. The taxpayer had delayed filing returns until 12.05.2020 despite the deadline being the succeeding month. The court ruled that availability of input tax credit in Electronic Credit Ledger is inconsequential for interest calculation since tax payment effectiveness depends on timely return filing, not credit availability.

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Issues Involved:
1. Legality of peremptory recovery of interest for delayed tax payments.
2. Interpretation of Section 50(1) and its proviso regarding interest liability.
3. Authority of the Monitoring Committee in issuing binding orders to the Proper Officer.

Summary:

Issue 1: Legality of Peremptory Recovery of Interest for Delayed Tax Payments

The petitioner, an assessee under the Central Goods and Services Tax Act, 2017, challenged the peremptory recovery of interest for the assessment years 2017-18 and 2018-19. The audit report raised nine objections, seven of which were addressed under Section 74 of the Act. The petitioner contended that the Proper Officer should have considered objections against the interest demand as well. The court held that the interest liability is automatic under the Act and depends on the factual situation of tax payment timing and mode.

Issue 2: Interpretation of Section 50(1) and its Proviso Regarding Interest Liability

The court examined several judgments, including those of the High Court of Judicature at Madras and the High Court of Jharkhand, to interpret Section 50(1) and its proviso. It was concluded that interest is payable on delayed tax payments regardless of whether the payment is made from the Electronic Credit Ledger or the Electronic Cash Ledger. The court agreed with the later decision in M/s. India Yamaha Motor Pvt. Ltd., which held that the availability of electronic credit does not absolve the assessee from interest liability. The court emphasized that the payment of tax occurs only upon the furnishing of returns, and any delay in this process attracts interest liability.

Issue 3: Authority of the Monitoring Committee in Issuing Binding Orders to the Proper Officer

The court found that the Monitoring Committee does not have the authority to issue binding orders to the Proper Officer. Section 2(16) and Section 168 of the Act empower the Central Board of Indirect Taxes and Customs to issue instructions or directions, but this does not extend to constituting a body that can issue binding orders. The Proper Officer must independently consider the matter and arrive at a decision regarding final assessment and recovery.

Conclusion:

The court dismissed the writ petition, affirming that interest liability is automatic for delayed tax payments, whether from the Electronic Credit Ledger or the Electronic Cash Ledger. The court also clarified that the Monitoring Committee cannot issue binding orders to the Proper Officer. The petitioner was directed to suffer their respective costs.

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