2026 (1) TMI 1501 - HC - GST

GST liability and tax invoice obligations: supplier must issue invoice and cannot shift interest burden; refund directed

GST liability and issuance of tax invoices require the supplier to issue a tax invoice within the prescribed period and remain primarily liable to pay GST ... Liability to pay GST by the supplier - issue of tax invoice within thirty days - interest on delayed payment of tax - transfer of tax burden to the recipient - penalty for failure to issue invoice - HELD THAT:- The responsibility was upon the respondent to pay the GST in terms of Section 39 of the Act of 2017 read with Rule 61 of the Rules of 2017. Secondly, the respondent was duty bound to issue invoice within thirty days in terms of the provisions quoted above. Having not done so, the expectation of the respondent that the petitioner ought to have paid GST voluntarily in terms of the agreement of lease appears to us to be a plea taken contrary to law. We do not find from both the provisions that the petitioners were under obligation to pay GST or any other tax, without invoice of tax raised by the respondent in terms of the provisions of the Act of 2017 read with Rules of 2017. We may note here that Section 122 of the Act of 2017, provides for penalty for certain offences Clause (i) of Subsection 1 of Act of 2017, provided that where a taxable person who supplies any goods or services or both without issuance of any invoice or issues an incorrect or false invoice with regard to any such supply shall be liable to pay the penalty of Rs.10,000/- or an amount equivalent to the tax evaded or not paid, etc., whichever is higher. This provisions would highlight importance of issuance of tax invoice by the taxable person like the respondent, who supplied the service. The non-compliance invites penalty. Further, Section 50 of the Act of 2017, provides that every person who is liable to pay tax in accordance with the provisions of this Act or Rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remained unpaid, pay, on his own, interest at such rate, not exceeding 18%. Thus it is the respondent, who is liable to pay interest. It has however transferred the burden on the petitioners for no valid reason. Such action is apparently illegal and thus unsustainable in law. Accordingly, we allow the petition and direct the respondent to refund the amount of Rs. 3,94,98,383/-, recovered from the petitioners towards interest. Issues: Whether the respondent could validly charge and recover interest on delayed payment of GST from the petitioners where the respondent failed to issue the tax invoice within the statutory period and remained responsible for payment of GST.Analysis: The Court examined the statutory framework under the Central Goods and Services Act, 2017 and the Central Goods and Services Tax Rules, 2017, including the obligation of a supplier to issue a tax invoice within thirty days of supply, the requirement to file returns and pay tax within the prescribed period, the relevance of particulars to be contained in the tax invoice, and the statutory provisions regarding penalty for non-issuance of invoice and interest for delayed payment of tax. Applying these provisions, the Court found that the respondent, as the supplier/lessor, bore the legal responsibility to issue the invoice and to pay GST within the statutory time; failure to issue the invoice and to discharge the tax liability could not be converted into a lawful basis to shift interest liability onto the petitioners.Conclusion: Held in favour of the petitioners (assessee). The respondent is directed to refund Rs. 3,94,98,383/- recovered towards interest and to pay interest at 18% p.a. if refund is not made within six weeks; respondent may recover the amount from the responsible official.