Balance in electronic cash ledger

[Umesh Babu]

Sir/Madam,

after calculating March month liability,a company paid the amount in cash on 31st March.

Inadvertently, the cash payment was shown as ITC and GSTR-3B was filed. After 21 months the mistake was realized and DRC-03 with interest @ 18%, was filed voluntarily appropriating the balance in cash ledger which was not appropriated for 21 months.

Now in SCN, the interest is demanded for the 21 months @ 24%.

The query is, since the cash payment was genuine and appropriation was delayed, and amount was not utilised throughout the period of 21 months, can we escape from interest liability ,

Kindly clarify,

Umesh Babu

[V Rajalakshmi]

Chances are very remote, there is no explicit exclusion like ITC is made available in Sec 50,Kindly ref Judgement M/s Narsingh Ispat Limited through its Director Sri Ajay Kumar Singh - 2022 (3) TMI 1047 - JHARKHAND HIGH COURT --- --- Petitioner [All cases] IN THE HIGH COURT OF JHARKHAND AT RANCHI A very good judgement on levy of interest u/s 50 of the CGST / SGST Act. and use prov- Explanation( a) to sec 49(9) as a defense.

[KASTURI SETHI]

In such a situation, you have not caused any loss of revenue.Interest for what ? This is all procedural lapse nothing else. Issuance of SCN is not unexpected. Such SCN would not sustain at first stroke in the Court.

[Shilpi Jain]

Interest even if liable should be demanded only @18 percent.

Also no interest liabilty is some relief which you can get in courts . But I agree with Kasturi sir that there is no loss of revenue to government. I am pretty sure there will be a decision of the court on this matter in future. So consider paying interest on protest @18 percent and go for refund when any favourable order comes.

[Ganeshan Kalyani]

If at all interest is payable it will be 18%.

[Amit Agrawal]

Please see if you got SCN denying ITC (which can technically invite interest @ 24% p.a.) or only issue is 'delay in payment of taxes' (which can technically invite interest @ 18% p.a.).

Is there any proposal for penalty in the SCN?

Depending upon type of issues raised in SCN as well as submissions made by you during enquiry, read with how Form DRC-03 filed by you, one needs to take a call about how to go defending your case.

AI Summary

Company Disputes 24% Interest Demand for ITC Error; Argues No Revenue Loss, Seeks 18% Interest Instead A company mistakenly recorded a cash payment as Input Tax Credit (ITC) in their GSTR-3B filing for March, realizing the error 21 months later. They filed DRC-03 with 18% interest to rectify this. However, a Show Cause Notice (SCN) demands 24% interest for the 21-month delay. Respondents in the forum suggest that since there was no revenue loss, the interest demand may not be justified, and the interest should be 18%. They advise considering court action for relief, suggesting that procedural lapses should not incur penalties, and to pay interest under protest if necessary.