TaxTMI 
TaxTMI 
2024 (7) TMI 239
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....the petitions are similar, the same were heard analogously and are being disposed of by this common order. 5. In these petitions, the petitioners have challenged the order raising demand for short payment of interest under Section 50 of the under Central Goods and Services Tax Act, 2017 (for short 'the CGST') for the period after deposit of tax by the petitioners in the electronic cash ledger. 6. For sake of convenience, Special Civil Application No.17657 of 2022 is treated as a lead matter. 6.1. The petitioner-Company converted limited liability partnership into the limited Company in the year 2017-18 and claimed transfer of unutilised input tax credit balance in the accounts of the petitioner No.1-Company, however, due to technical issues, the petitioner-Company was not able to get such credit transfer. 6.2. The petitioners therefore made correspondence with the authorities with regard to the transfer on multiple occasion. Section 39(7) of the CGST Act requires full payment of tax due as per returns as a precondition for filing of returns. Since the petitioners were not permitted to transfer input tax credit, they were not in position to pay the tax and could not file....
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....ing of the return relying upon the provisions of Section 50 of the CGST Act and Rule 88A and 88B of the Rules. In case of the petitioner of Special Civil Application No.8871 of 2022 also similar issue has arisen by the Superintendent of CGST demanding the interest under Section 50 of the CGST Act from date of deposit of the amount towards tax in electronic cash ledger of the petitioner till the date of filing of return. 7. Learned advocate Mr.Uchit Sheth for the petitioners submitted as under : 7.1. Section 50 of the GST Acts provides for imposition of interest if the taxable person fails to pay the tax. Where the taxable person has sufficient balance in the electronic cash ledger, there is no failure to pay tax and therefore charge of interest under Section 50 of the GST Acts is not attracted. 7.2. There is internal indication in the scheme of the GST Acts that credit amount in the electronic cash ledger is nothing but payment of tax. The following provisions are relevant in this regard: (a) Section 49(1) according to which every deposit made towards tax, interest, penalty, fee or any other amount shall be credited to the electronic cash ledger. (b) Sect....
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....4.1 and 5). It was held by this Hon. Court that interest could not be imposed for the period between the date of adhoc payment of tax and date of passing of assessment order as the State had already received the amount of tax. 7.6. It is well settled that imposition of interest is compensatory in nature. Reliance is placed in this regard on the judgment of Hon. Supreme Court in the case of Indodan Industries Ltd. /s State of U.P. & Others Civil Appeal No. 2352 of 2007 decided on 20.10.2009 (Compilation Vol.II - Page 99 - Relevant paras 7,8) and Mahalaxmi Sugar Milla Co. V/S C.I.T. Delhi (1930) 3 SCC 475 (Compilation Vol.II - Page 102 - Relevant Para 11). In the present case, since the amount gets credited 10 the electronic cash ledger only after actual deposit of amount into Government treasury, there is no loss of revenue to the Government merely because it gets adjusted against actual liability at a later date at the time of filing returns. Therefore also imposition of interest is not justifiable. 7.7. Judgment of Hon. Madras High Court in the case of Eicher Motors Ltd. V/S Superintendent of GST & Central Excise W.P. No. 16866 of 2023 decided on 23.1.2024 squarely supports ....
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....n by the Respondents, was also introduced in the context of amendment to Section 50(3) of the GST Acts. This is apparent from the discussion in the 47th GST Council meeting which was followed by insertion of Rule 88B by Notification No. 14/2022 dated 5.7.2022. In any case rule cannot go beyond the provisions of the GST Acts and if it does so, then the same needs to be struck down/read down to bring it in conformity with the statutory provision. 7.12. If at all the submission of the Respondents is accepted that there cannot be any tax payment before the same is adjusted against liability at the time of filing of returns, then as such the liability can be said to have arisen only at the time of filing of returns and therefore the question of delayed payment of tax cannot arise. Reliance is placed in this regard to the judgment of Hon. Supreme Court in the case of Maruti Wires Industries Pvt. Ltd. v/s S.I.O. (2001) 3 SCC 735 wherein it was held that there can be no interest liability if no return is filed at all by the assessee as the tax liability would get crystalized only upon filing of returns. 7.13. Thus, looked at from any angle, the impugned demand of interest for the per....
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....ty, fees and other charges for the respective major heads and minor heads. 8.3. Reliance was placed on the circular issued by the Central Board of Indirect Taxes and Customs vide F.No.CBEC-20/01/08/2019-GST dated 18.09.2020 on recovery of interest on net cash liability with effect from 01.07.2017 wherein, it is clarified that for the period 01.07.2017 to 31.08.2020, field formations in your jurisdiction may be instructed to recover interest only on the net cash liability i.e. that portion of the tax that has been paid by debit in the electronic cash ledger or is payable through cash ledger. 8.4. Relying upon the above clarification, it was submitted that amount lying in the electronic cash ledger cannot be assigned to any liability unless a tax payer makes a debit entry from a cash ledger for a specific liability. 8.5. Learned advocate for the respondent, referred to and relied upon the provisions of Section 49(1) of the CGST Act which provides that if an amount is deposited towards tax than the amount which is credited in the electronic credit ledger is nothing but actual tax payment for discharging duty, interest, penalty and other amounts and therefore, learned advocate....
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.... tax. In support of his submissions, reliance was placed on the following decisions : (1) Shree Automotive (P) Ltd. & Another versus Joint Commissioner of State Tax, Government of West Bengal & Others (W.P.A. 16781 of 22019 with CAN 1 of 2020 CAN 2 of 2020 CAN 5406 of 2020) decided on 07.09.2021; (2) Pratibha Processors Versus Union of India reported in AIR 1997 SC 138; (3) Maithan Steel and Powers Ltd. versus Commissioner of Central Excise-2016 (344) ELT 792 (Sett.Com). 8.9. Referring to the above provisions, it was further submitted that mere credit in electronic cash ledger and considering the date of credit of cash ledger as a date of payment of tax in respect of net cash liability cannot be considered in view of the provisions of Section 50 of the Act which clearly stipulates that the interest is payable till the date of debit of electronic cash ledger for payment of tax, interest, penalty, etc. Reliance was also placed in the newly inserted rule 88B of the Rules which provides for manner of calculating interest on belayed payment of tax. It was submitted that as per Rule 88B, interest on tax payable by the assessee is required to be calculated on....
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....whether there could be interest levied, deeming such delayed filing of returns to be a circumstance which attracts Section 50 of the GST Act. Therein, the period was between July 2017 to 2019 and the amount of tax had already been deposited in the Electronic Cash Ledger, even prior to the filing of the return. We have to immediately notice that the facts indicate a circumstance clearly covered under the proviso to Section 50(1). The learned Division Bench found that the Electronic Cash Ledger is an account of tax ledger (sic) maintained with the department reflecting online deposits; made from accounts maintained by the assessee Patna High Court CWJC No.11621 of 2023 dt. 19-04-2024 with banks, from which payments can be made as tax. The mere deposit of an amount in an Electronic Cash Ledger does not make it a tax deposit or payment to a government account. After extracting the various provisions especially Section 49 it was found that Explanation to subsection (11) deems the date of deposit in the Electronic Cash Ledger to be a mere deposit which does not amount to payment of the tax liability. Only when the Electronic Cash Ledger is debited towards payment of tax, interest or pena....
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.... Patna High Court CWJC No.11621 of 2023 dt. 19-04-2024 have to be as against payment of tax, interest, penalty or any other dues under the GST Act. Section 49(1) read with the provisions of Section 39 as spoken of by us hereinabove, would indicate that the payment of tax occurs only on the furnishing of returns, which payment is by way of a debit made from the cash ledger. 21. On the interpretation placed by us on the various provisions under the Act, which also is the proper understanding of the very scheme of the enactment, we are persuaded to reject the claim of the petitioner that the proviso of Section 50(1) mandates a levy of interest only when there is a delayed furnishing of return and debit made and payment effected from the Electronic Cash Ledger. As we found Section 50(1) specifically mulcts liability of Patna High Court CWJC No.11621 of 2023 dt. 19- 04-2024 interest on any delayed furnishing of return, since it is the furnishing of the return which results in payment of tax, interest, penalty or other amounts due under the Act as selfassessed in the return. Neither the deposit made in the cash ledger nor the remittances made on the tax paid on purchases, result....
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.... subsection (1), other than the person referred to in the proviso thereto, or sub-section (3) or sub-section (5), shall pay to the Government the tax due as per such return not later than the last date on which he is required to furnish such return: 4[Provided that every registered person furnishing return under the proviso to sub-section (1) shall pay to the Government, in such form and manner, and within such time, as may be prescribed,- (a) an amount equal to the tax due taking into account inward and outward supplies of goods or services or both, input tax credit availed, tax payable and such other particulars during a month; or (b) in lieu of the amount referred to in clause (a), an amount determined in such manner and subject to such conditions and restrictions as may be prescribed.] Provided further that every registered person furnishing return under subsection (2) shall pay to the Government, the tax due taking into account turnover in the State or Union territory, inward supplies of goods or services or both, tax payable, and such other particulars during a quarter, in such form and manner, and within such time, as may be prescribed. ....
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....on; (b) the amount of tax, interest, penalty or any other amount payable as determined by a proper officer in pursuance of any proceedings under the Act or as ascertained by the said person; (c) the amount of tax and interest payable as a result of mismatch under section 42 or section 43 or section 50; or (d) any amount of interest that may accrue from time to time. (3) Subject to the provisions of section 49, every liability by a registered person as per his return shall be made by debiting the electronic credit ledger maintained as per rule 86 or the electronic cash ledger maintained as per rule 87 and the electronic liability register shall be credited accordingly. (4) The amount deducted under section 51, or the amount collected under section 52, or the amount payable on reverse charge basis, or the amount payable under section 10, any amount payable towards interest, penalty, feeor any other amount under the Act shall be paid by debiting the electronic cash ledger maintained as per rule 87 and the electronic liability register shall be credited accordingly. (5) Any amount of demand debited in the electronic liabili....
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.... the purposes of this rule, it is hereby clarified that a refund shall be deemed to be rejected, if the appeal is finally rejected or if the claimant gives an undertaking to the proper officer that he shall not file an appeal. [86A. Conditions of use of amount available in electronic credit ledger.- (1) The Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible in as much asa) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36- i. issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or ii. without receipt of goods or services or both; or b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Gove....
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....section (3) of section 54; or (d) the registered person has discharged his liability towards output tax through the electronic cash ledger for an amount which is in excess of 1% of the total output tax liability, applied cumulatively, upto the said month in the current financial year; or (e) the registered person is - (i) Government Department; or (ii) a Public Sector Undertaking; or (iii) a local authority; or (iv) a statutory body: Provided further that the Commissioner or an officer authorised by him in this behalf may remove the said restriction after such verifications and such safeguards as he may deem fit. Rule 88B: Manner of calculating interest on delayed payment of tax (1) In case, where the supplies made during a tax period are declared by the registered person in the return for the said period and the said return is furnished after the due date in accordance with provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, the interest on tax payable in respect of such supplies shall be calculated on the po....
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....des for self assessment by the assessee. Section 39 provides for furnishing of returns. Section 39(1) provides for furnishing of return electronically of inward and outward supplies of goods or services of both input tax credit availed, tax payable, tax paid and such other particulars in such form on manner and within such time as may be prescribed. Sub-section (7) of Section 39 stipulates that every person who is required to furnish return under Sub- section (1) shall pay to the Government the tax due as per such return not later than the last date on which he is required to furnish such return. Section 49 of the CGST Act provides for payment of tax, interest, penalty and other amounts. Sub-section (1) of Section 49 stipulates that every deposit made toward tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards etc. shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed whereas, Sub-section (3) provides that amount available in electronic cash ledger may be used for making any payment towards tax, interest, penalty, etc. under the provisions of the CGST Act or th....
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....on that portion of the tax which is paid by debit in the electronic cash ledger". The debit in electronic cash ledger is on the date of filing of the return and therefore, interest is calculated till date of filing of return ignoring the fact that the assessee might have deposited the amount in electronic cash ledger prior to the date of filing of return and return may be filed belatedly for various reasons. Debiting of electronic cash ledger is only adjustment of the amount of deposit made in the electronic cash ledger. Therefore, on plain reading of the provisions of Section 50(1) which applies for calculating levy of interest on delayed payment of tax cannot be literally interpreted to the effect that interest is payable on the amount which is already deposited and utilised for the payment and thereafter adjusted for payment of tax is contrary to the fundamental principle for charging interest which is compensatory in nature. If the mechanical and literal interpretation is done by the respondent is accepted, the same would convert the interest into the nature of penalty. It appears that for the purpose of introduction of the proviso to Section 50(1), is with regard to remove the....
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....ir constriction, the principal provision is clear, a proviso cannot expand or limit it. Sometimes a proviso is engrafted by an apprehensive draftsman to remove possible doubts, to make matters plain, to light up ambiguous edges. Here, such is the case. In a country where factories and industries may still be in the developmental stage, It is not unusual to come across several such units which may not have costly machinery `or plant or fittings and superficially consist of bare buildings plus minor fixtures. For example, a beedi factory or handicraft or carpentry unit a few tools, some small contrivances or connection of materials housed in a building, will superficially look like a mere 'accommodation' but actually be a humming factory or business with a goodwill as business, with a prosperous reputation and a name among the business community and customers. Its value is qua business, although it has a habitation or building to accommodate it. The personality of the thing let out is a going concern or enterprise, not a lifeless edifice. The legislature, quite conceivably, thought that a marginal, yet substantial, class of buildings with minimal equipments may still be good ....
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....on each other and result in a harmonious construction." 17. The Hon'ble Supreme Court in case of Commissioner of Income Tax versus Indo Merchantile Bank Limited has held as under with regard to the function of a proviso to a section of the statute as under : "10. Thus the Privy Council emphasised that the object of s. 24(1) was to allow a set off of profits against losses arising under different heads and Only in such cases could recourse be had to s. 24(1). In cases where profits and losses arose under the same head they had to be adjusted against each other. This Court in Anglo-French Textiles Co. Ltd. v. Commissioner of Incometax, Madras (1) again emphasised that distinction in the following words:- " Next, a, set off under section 24(1) can only be claimed when the loss arises under one head and the profits against which it is sought to be set off arises under a different head. When the two arise under the same head, of course the loss can be deducted but that is done under section 10 and not under section 24(1) (Per Bose, J.)" Indeed it is not disputed that when profit and loss arose under the same head in any place which was not an Indian State recourse h....
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....e of a proviso as follows :- " The proper function of a proviso is to except and deal with a case which would otherwise fall within the general language of the main enactment, and its effect is confined to that case. Where, as in the present case, the language of the main enactment is clear and unambiguous, a proviso can have no repercussion on the interpretation of the main enactment, so as to exclude from it by implication what clearly falls within its express terms ". The territory of a proviso therefore is to carve out an exception to the main enactment and exclude something which otherwise would have been within the section. It has to operate in the same field and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly says unless the words of the proviso are such that that is its necessary effect. (Vide also Corporation of The City of Toronto v. Attorney-General for Canada) (1)." 18. The Hon'ble Supreme Court in case of Commissioner of Income Tax versus Modipon Limited has held that the amount deposited in personal ledger account "PLA" under....
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....s of the assessee. We do not see why the same analogy would not be applicable to the case in hand." 19. This Court in case of State of Gujarat v/s T.J. Agro Fertilizer Pvt. Ltd. held that the interest could not be imposed for the period between the date of ad-hoc payment of tax and date of passing of assessment order as the amount was already received by the State as under : "4.1. Considering the aforesaid provisions and even otherwise considering the fact that once the dealer has made payment before the actual order of assessment, may be on ad-hoc basis, meaning thereby, the amount of tax due and payable as per the assessment order, already paid prior to the assessment order and the State/Department received the said amount of tax, there cannot be any interest levied during the aforesaid period. It cannot be disputed that levy of interest would be on delayed payment of tax due and payable. It is not the case that on finalization of the assessment, any amount more than the amount paid on ad-hoc basis, was assessed and/or required to be paid by the assessee." 20. The Hon'ble Apex Court in case of Indodan Industries Limited versus State of U.P. & Others has held as und....
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.... As soon as the prescribed date is crossed without payment of the cess, interest begins to accrue. It is not a penalty, for which provisions has been separately made by s.3(5). Nor is it a penalty within the meaning of s.4, which provides for a criminal liability and a criminal prosecution. The penalty payable under s.3(5) lies in the discretion of the collecting officer or authority. In the case of the penalty under s.4, no prosecution can be instituted unless, under s.5(1), a complaint is made by or under the authority of the Cane Commissioner or the District Magistrate. There is another consideration distinguishing the interest payable under s.3(3) from the penalty imposed under s.3(5). Section 3(6) provides that the officer or authority empowered to collect the cess may forward to the Collector a certificate under his signature specifying the amount of arrears including interest due from any person, and on receipt of such certificate the Collector is required to proceed to recover the amount specified from such person as if it were an arrear of land revenue. The words used in s.3(6) are "specifying the amount of arrears including interest", that is to say that the interest is p....
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....red person in filing the GSTR-3B, the utilisation of tax amount, which was already deposited into the account of Government, cannot be postponed. The GST collections made by the registered person, have been made on behalf of Government and once the said collections were deposited to the Government account and the same is made available to the Government for its use at once, otherwise the rights of the exchequers in utilising the GST collections in time for welfare measures of public will be deprived, which is not permissible under the Act. 72. In view of the above finding and following the law laid down by the Gujarat High Court in the aforesaid Vishnu Aroma case, since in the present case, the tax amount has already been credited to the Government within the prescribed time limit, i.e., before due date, the question of payment of interest would not arise. Under these circumstances, this Court passes the following orders: 1) The credit to the account of Government would always occur not later than the last date for filing the monthly returns in terms of the provisions of Section 39(7) of the Act. 2) Once the amount is paid by generating GST PMT-06, the sa....