TaxTMI 
TaxTMI 
2026 (10) TMI 293
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.... had, to the extent now material, credited sufficient amounts to its Electronic Cash Ledger ("ECL") on or before the due dates and such balances continued to remain available until debit at the time of filing the returns. 2. The appeals relate to three successive periods and were heard together because the material statutory provisions, the reasoning adopted by the adjudicating and first appellate authorities, the principal grounds of challenge and the submissions at final hearing are common. They are therefore being disposed of by this common order, while the period-wise figures and proceedings are kept distinct as under: Appeal / period DRC-01 / OIO OIA / APL-04 Interest confirmed Admitted / disputed APL/171 FY 2017-18 (Jul 2017-Mar 2018) DRC-01: ZA220220000274M 07.02.2020 OIO: ZA220320000454I 07.03.2020 OIA 101/GST/2020 14.12.2020 APL-04: ZD221220001553C 31.12.2020 IGST 50,688 CGST 3,46,450 SGST 3,78,782 Total 7,75,920 Admitted 2,279 Disputed 7,73,641 APL/172 FY 2018-19 DRC-01: ZA220220000272Q 07.02.2020 OIO: ZA220320000453K 07.03.2020 OIA 102/GST/2020 14.12.2020 APL-04: ZD2212200015574 31.12.2020 IGST 1,83,793 CGST 8,40,3....
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....s an annexure to DRC-01 are considered hereinafter. 6. The DRC-01 forms themselves recorded "NA" against the date, time and venue of personal hearing. Notwithstanding the written request in DRC-06 and the contemplated adverse decision, no personal hearing was fixed before the adjudication orders dated 07.03.2020. The adjudicating authority nevertheless considered the written replies and confirmed the demands. The common reasoning was that, under Section 49 read with Rule 85(3), depositing money into the ECL and paying a tax liability are distinct acts; payment of the return liability takes place only when the electronic credit ledger or electronic cash ledger is debited and the electronic liability register is credited accordingly. 7. The appellant preferred three first appeals. It accepted only the small interest amounts referred to above arising from cash actually deposited after the respective due dates and disputed the balance. By three separate Orders-in-Appeal Nos. 101/GST/2020, 102/GST/2020 and 103/GST/2020, all dated 14.12.2020, the Joint Commissioner (Appeals), State Tax, Bilaspur, dismissed the appeals. The appellate authority substantially affirmed the distinction ....
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.... deposited through prescribed challans and stood credited in the Government account/ECL on or before the applicable due dates, except to the limited extent for which interest of Rs. 2,279 Rs. 638 and Rs. 660 respectively has been admitted and paid. It relies upon the Challan Identification Numbers (CINs), Rule 87(6), the Explanation to Section 49 and the electronic cash ledger extracts to submit that, once the amount reached the Government account, tax could no longer be regarded as "unpaid" for purposes of Section 50(1). 12. It is further pleaded that interest is compensatory and cannot be charged for a period during which the Government was already in possession of the requisite money. Reliance is placed, inter alia, on Pratibha Processors v. Union of India, (1996) 11 SCC 101: 1996 (88) E.L.T. 12 (S.C.), and upon the earlier indirect-tax jurisprudence concerning deposits in statutory accounts. The appellant also relies on the accounting procedure of the Controller General of Accounts and submits that credit in the designated Government banking channel is a real receipt by Government, not a notional private wallet balance. 13. The appellant challenges the description of ECL ....
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....n liability is discharged only by debit of the ledger in the manner contemplated by Rule 85(3) and the return-payment mechanism. 18. The respondent further relies upon Section 39(7), the proviso to Section 50(1) and Rule 88B(1). It submits that the proviso itself describes the relevant tax as the portion "paid by debiting the electronic cash ledger" and Rule 88B(1), with retrospective operation from 01.07.2017, directs calculation on that cash-ledger portion "for the period of delay in filing the said return beyond the due date". The statutory text therefore links the interest period to delayed filing/debit and not to an earlier unappropriated cash deposit. 19. The respondent relies principally upon M/s RSB Transmissions (India) Ltd. v. UOI, (2023) 120 GSTR 71 (Jharkhand High Court, 18.10.2022), Sincon Infrastructure (P) Ltd. v. Union of India, (2024) 130 GSTR 66 (Patna High Court, 19.04.2024), and India Yamaha Motor (P) Ltd. v. Commr., (2024) 130 GSTR 56 (Madras High Court, 29.08.2022), for the proposition that mere ECL credit is not discharge of the return liability. It submits that Eicher Motors and Arya Cotton adopt a contrary construction which should not be followed. ....
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....ccompanied and formed part of the respective DRC-01. The appellant did not admit that the said communication was annexed to or formed part of DRC-01. It was, however, pointed out during the course of hearing that the appellant had filed detailed replies in FORM GST DRC-06 dated 09.02.2020 dealing with the very basis on which interest was proposed, referring to the relevant challans/CINs and specifically contesting the proposition that interest continued to run notwithstanding the earlier availability of sufficient balance in the Electronic Cash Ledger. No material defence on the computation or on the legal basis of the demand was identified as having been prevented from being raised for want of particulars in DRC-01. The rival submissions regarding the status of the communication dated 07.02.2020 are, therefore, required to be considered together with the contemporaneous DRC-06 replies and the question of actual prejudice, if any. 25. The appellant has specifically raised in the statement of facts and grounds of appeal that, despite having requested a personal hearing in its replies, no such hearing was granted by the adjudicating authority before passing the orders impugned in ....
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....lso invited our attention to the subsequent legislative insertion concerning amounts lying in the Electronic Cash Ledger. The learned Counsel for the respondent, in reply, placed reliance upon the scheme of Sections 39, 49 and 50, Rule 85(3) and Rule 88B(1), and the decisions in RSB Transmissions (supra), Sincon Infrastructure (supra) and India Yamaha Motor (supra), to contend that availability of money in the Electronic Cash Ledger cannot be equated with discharge of the return liability prior to the actual debit. 28. Both sides rendered detailed assistance on the relevance of the recommendations of the 53rd GST Council, the subsequent insertion of the proviso to Rule 88B(1) by Notification No. 12/2024-Central Tax dated 10.07.2024, and the judicial developments bearing upon whether that amendment is clarificatory or operates prospectively. Learned Counsel for the appellant and the learned Counsel for the respondent were also heard on the distinction between the statutory incidence of late fee for delayed filing of the return and interest under Section 50 on delayed payment of tax. 29. We have considered the authorities and statutory provisions cited by both sides while answe....
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....dues in the prescribed manner. Section 49(4) separately permits use of the amount available in the electronic credit ledger towards payment of output tax subject to the prescribed manner and conditions. The statutory vocabulary therefore distinguishes availability of a balance from its subsequent use in discharge of an identified liability. 33. The Explanation to Section 49 treats the date of credit to the account of Government in the authorised bank as the date of deposit in the electronic cash ledger. Rule 87(6) similarly provides for generation of the CIN on successful credit of the amount to the concerned Government account and communication of that CIN to the common portal. We therefore accept the appellant's factual proposition that the ECL credit represents money which has reached the Government banking channel. The legal question remains whether such a general deposit is, by that fact alone, the statutory payment of the particular return liability. 34. Rule 85(3), as applicable, provides that payment of every liability by a registered person as per his return shall be made by debiting the electronic credit ledger maintained under Rule 86 or the electronic cash led....
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...., or interest payable on such tax, remains unpaid, the same shall be recovered under Section 79. The provision thus proceeds on the existence of an unpaid self-assessed tax liability or interest thereon. It does not itself prescribe the statutory event by which such liability stands discharged; that question has to be determined from Sections 39, 49 and 50 read with the applicable Rules. 39. Section 75(4) mandates an opportunity of hearing where a written request is received from the person chargeable with tax or penalty, or where an adverse decision is contemplated. Section 113(1), on the other hand, empowers this Tribunal, after giving the parties an opportunity of being heard, to pass such orders as it thinks fit confirming, modifying or annulling the decision or order appealed against, or to refer the case back for fresh adjudication or decision. Remand is therefore an available remedy, but not the only appellate disposition. 40. By virtue of Section 20 of the IGST Act, the relevant provisions of the CGST Act concerning, inter alia, payment of tax, interest, demands and appeals apply, mutatis mutandis, to integrated tax. The IGST components in the three demands therefore ....
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....respective of the circumstances subsequently obtaining. In Dharampal Satyapal Ltd. v. Deputy Commissioner of Central Excise, Gauhati, (2015) 8 SCC 519, the Hon'ble Supreme Court distinguished the obligation to observe natural justice from the remedial consequence which should follow upon its breach. Likewise, in Escorts Farms Ltd. v. Commissioner, Kumaon Division, (2004) 4 SCC 281, and State of U.P. v. Sudhir Kumar Singh, (2021) 19 SCC 706: 2020 SCC OnLine SC 847, the Hon'ble Supreme Court recognised that a remand need not follow mechanically where no real prejudice survives or where repetition of the exercise would be merely formal. The effect of the admitted non-compliance with Section 75(4) must, therefore, be tested in the particular factual setting of these appeals. 44. The consequence of the aforesaid non-compliance has to be examined in the particular factual setting of these appeals. The Hon'ble Supreme Court in Dharampal Satyapal Ltd. v. Deputy Commissioner of Central Excise, Gauhati, (2015) 8 SCC 519, and State of U.P. v. Sudhir Kumar Singh, (2021) 19 SCC 706: 2020 SCC OnLine SC 847, has recognised that, while observance of natural justice is an important requirement, ....
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....he statutory event by which a particular GST return liability is discharged. That question must be answered from the integrated scheme of Sections 39, 49 and 50 and the Rules. 48. Section 49(1) calls the incoming amount a "deposit" and credits it to an undifferentiated electronic cash ledger under the prescribed heads. Section 49(3) then separately authorises the amount "available" in that ledger to be "used for making any payment". Rule 85(3) identifies debit of the electronic cash or credit ledger as the means of payment of a liability as per the return. The statutory distinction between deposit/availability and payment/discharge cannot be treated as accidental. A CIN proves receipt of funds by Government; it does not, before appropriation through the statutory ledger mechanism, identify the deposit as discharge of a particular self-assessed monthly liability. Section 75(12) does not alter that payment mechanism; it addresses the recovery consequence where self-assessed tax or interest remains unpaid, but does not deem an unappropriated ECL balance to be payment of a particular return liability. 49. This construction is reinforced by the retrospective proviso to Section 50(....
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....arge of the relevant liability by debit. Divergent High Court decisions 53. We have given anxious consideration to the contrary line. In Eicher Motors (supra), the Hon'ble Madras High Court held that where the tax amount had reached the Government through timely ECL credit, interest could not continue merely because the GSTR-3B was filed later. Arya Cotton (supra), a Division Bench judgment of the Hon'ble Gujarat High Court, likewise held that the proviso to Section 50 primarily addresses the net-cash base and that interest cannot continue after the deposit into ECL. 54. These authorities are entitled to substantial persuasive weight. They also demonstrate that the precise point is the subject of a genuine inter-High-Court divergence. No binding decision of the Hon'ble Supreme Court resolving this precise ECL-credit-versus-debit controversy has been brought to our notice. Nor has the Hon'ble High Court of Chhattisgarh decided that precise issue. 55. Abis Export (supra), being a decision of the jurisdictional High Court, is significant. It recognised the retrospective operation of the proviso to Section 50(1) and treated that amended proviso, whose operat....
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.... for an amount continuously lying in ECL. Applying ordinary principles of temporal operation, this deliberate contrast weighs strongly against direct retrospective application. 59. The materials of the 53rd GST Council meeting are also significant as legislative and policy history. Agenda Item 3(x), after examining Sections 39, 49 and 50 and Rule 88B as they then stood, expressly proceeded on the understanding that, under the existing provisions, a deposit in the Electronic Cash Ledger prior to the due date did not amount to discharge of the tax liability and that interest continued on the amount debited from the Electronic Cash Ledger for the period of delay in filing the return. The agenda thereafter noted that levy of interest in such circumstances, although the amount had already been credited to the Government account, did not appear fair, and on that consideration proposed an amendment to Rule 88B(1) excluding the amount continuously lying in the Electronic Cash Ledger from the computation of interest. The Council accepted that recommendation. The tenor and sequence of the agenda therefore indicate that the proviso was proposed as a substantive relief from the position und....
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.... Late fee attaches to the procedural default in furnishing the return; Section 50 interest concerns delay in statutory payment as defined by the Act and Rules. The two provisions operate in distinct fields and one does not displace the other. G. Application of the Above Principles to the Admitted Facts and Quantification of Interest 64. Because the respondent has admitted continuous head-wise sufficiency of the relevant ECL balances from each due date until debit, there is no residual factual dispute requiring a challan-by-challan remand. Nor is there an arithmetical controversy once the governing legal premise is decided. Under the pre-10.07.2024 law as construed above, the cash component remained subject to interest until discharge by debit in the course of filing the belated return, subject to the amounts already admitted/paid by the appellant and all payments or adjustments already made against the respective demands. 65. Accordingly, the disputed demand of Rs. 7,73,641 in APL/171 Rs. 18,63,871 in APL/172 and Rs. 2,29,695 in APL/173 does not call for interference on the ground that sufficient cash had earlier been deposited in ECL. The impugned Orders-in-Appeal are sus....
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.... terminating interest under Section 50. The retrospective proviso to Section 50(1) and Rule 88B(1) reinforce the distinction between deposit in the Electronic Cash Ledger and payment by debit thereof. (iv) The proviso inserted in Rule 88B(1) by Notification No. 12/2024-Central Tax dated 10.07.2024 took effect from that date and contains no provision giving it retrospective or deemed operation. Having regard also to the language and legislative history of the amendment, it is not treated, for the periods involved in these appeals, as merely clarificatory of the pre-existing law. The contrary High Court authorities supporting the appellant have been considered; in the absence of a binding decision of the Hon'ble Supreme Court or the jurisdictional High Court on the precise ECL deposit-versus-debit issue, we respectfully prefer the construction recorded hereinabove. (v) Consequently, the disputed interest demands of Rs.7,73,641 in APL/171, Rs.18,63,871 in APL/172 and Rs.2,29,695 in APL/173 call for no interference. The consequential prayer for refund on the substantive merits of the appeals therefore fails, subject to proper appeal-wise and demand-wise credit and rec....