2025 (2) TMI 200 - HC - GST

Petitioner Granted Opportunity to Contest Interest on GST Short Payment; Rule 88B Interest Calculation Highlighted

The HC set aside the impugned order concerning the petitioner's liability to pay interest on the short payment of GST. The Court allowed the petitioner to ... Liability to pay interest on the short payment of GST - petitioner would submit that if they are given an opportunity, they would be able to demonstrate that there was adequate balance in the electronic cash ledger during the relevant period and would thus request one final opportunity to put forth their case before the respondent authority - HELD THAT:- The impugned Order is set aside. It is open to the petitioner to treat the impugned order as a Show Cause Notice and submit its objections along with supporting documents/material within a period of two (2) weeks from the date of receipt of a copy of this order. Petition disposed off. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment revolve around the following questions: Whether the petitioner was liable to pay interest on the short payment of GST amounting to Rs. 24,26,988/- for the tax period in question. Whether Rule 88B of the GST Rules, which provides the manner of calculating interest on delayed payment of tax, was applicable and correctly interpreted in the context of the petitioner's case. Whether the petitioner maintained an adequate balance in the electronic cash ledger during the relevant period, thereby impacting the interest calculation. Whether the petitioner should be granted an opportunity to present additional evidence or arguments to the respondent authority.ISSUE-WISE DETAILED ANALYSIS1. Liability to Pay Interest on Short Payment of GST Relevant Legal Framework and Precedents: The determination of interest liability is governed by the provisions of the Goods and Services Tax Act, 2017, particularly Section 50, which deals with interest on delayed payment of tax. Rule 88B of the GST Rules, inserted via Notification No.14/2022, provides specific guidelines on calculating interest. Court's Interpretation and Reasoning: The Court considered the petitioner's argument that the short payment was reflected in the GST PMT-06 Challan and that there was an adequate balance in the electronic cash ledger. The petitioner argued that interest should not be levied based on these circumstances. Key Evidence and Findings: The petitioner presented a table showing the opening and closing balances in the electronic cash ledger for the years 2020-21 to 2023-24, indicating a sufficient balance throughout the period. Application of Law to Facts: The Court noted the petitioner's contention that the amount was debited on 08.02.2024, and argued that interest should not be applicable if Rule 88B was considered. Treatment of Competing Arguments: The respondent disputed the petitioner's claim, asserting that the taxpayer had not maintained sufficient balance in the electronic cash ledger, which justified the interest levy. Conclusions: The Court decided to set aside the impugned order and allowed the petitioner to treat it as a Show Cause Notice, providing an opportunity to present objections and evidence.2. Applicability and Interpretation of Rule 88B of the GST Rules Relevant Legal Framework and Precedents: Rule 88B outlines the method of calculating interest on delayed tax payments, with retrospective effect from 01.07.2017. It differentiates between interest calculations based on whether returns were filed after due dates or during proceedings under Sections 73 or 74. Court's Interpretation and Reasoning: The Court considered the petitioner's reliance on Rule 88B, which suggests that interest should be calculated based on the portion of tax paid through the electronic cash ledger beyond the due date. Key Evidence and Findings: The petitioner argued that the retrospective application of Rule 88B should negate the interest levy due to sufficient ledger balance. Application of Law to Facts: The Court acknowledged the petitioner's argument that Rule 88B, if applied, could potentially alter the interest calculation. Treatment of Competing Arguments: The respondent maintained that the taxpayer did not have a sufficient balance, thus justifying the interest imposition. Conclusions: The Court provided the petitioner an opportunity to submit further evidence and arguments regarding the application of Rule 88B.3. Adequacy of Balance in Electronic Cash Ledger Relevant Legal Framework and Precedents: The adequacy of the electronic cash ledger balance is crucial in determining the applicability of interest under Rule 88B. Court's Interpretation and Reasoning: The Court noted the petitioner's claim of maintaining an adequate balance and the respondent's counter-argument. Key Evidence and Findings: The petitioner provided a detailed table of balances, asserting sufficiency during the relevant period. Application of Law to Facts: The Court considered the potential impact of the ledger balance on interest calculations. Treatment of Competing Arguments: The respondent's position was that the ledger balance was insufficient to prevent interest accrual. Conclusions: The Court allowed the petitioner to present further evidence to support their claim of adequate balance.4. Opportunity for Additional Evidence and Arguments Relevant Legal Framework and Precedents: The principles of natural justice require that parties be given a fair opportunity to present their case. Court's Interpretation and Reasoning: The Court acknowledged the petitioner's request for an opportunity to demonstrate ledger sufficiency and present objections. Key Evidence and Findings: The Court noted the absence of objection from the respondent to the petitioner's request for additional opportunity. Application of Law to Facts: The Court decided to grant the petitioner a chance to submit objections and supporting documents within two weeks. Treatment of Competing Arguments: The respondent did not object to this procedural opportunity. Conclusions: The Court set aside the impugned order, allowing the petitioner to treat it as a Show Cause Notice and submit further evidence.SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Court emphasized, 'It is open to the petitioner to treat the impugned order as a Show Cause Notice and submit its objections along with supporting documents/material within a period of two (2) weeks from the date of receipt of a copy of this order.' Core principles established: The judgment underscores the importance of allowing parties an opportunity to present evidence and objections, especially when procedural fairness is in question. Final determinations on each issue: The Court set aside the impugned order, granting the petitioner an opportunity to submit objections and evidence regarding the sufficiency of the electronic cash ledger balance and the applicability of Rule 88B.