2019 (6) TMI 1383 - HC - GST

Interest for delayed payment of tax - failure to pay cash component of GST due to reason that, one of their customers delaying payment on a regular basis. - section 50 CGST Act - HELD THAT - Writ petitioner undertakes to pay the admitted liability of ₹ 229,014,673/- (as admitted in petitioner's aforementioned letter dated 29.03.2019 to the Department within one week from today i.e., on or before 20.06.2019) - On payment of aforesaid amount on or before 20.06.2019, the impugned communication dated 23.05.2019 bearing reference C.No.IV/16/30/2019-Tech-III from the second respondent to the third respondent bank will stand set aside. The second respondent shall consider all the points raised in writ petitioner's reply dated 29.03.2019, more particularly the annexed working sheet, pass an order in a manner known to law and communicate the same to the writ petitioner under due acknowledgement within one week therefrom. Petition disposed off.

Summary

Issues:
1. Liability of the writ petitioner to pay interest for Input Tax Credit (ITC).
2. Reduction in the demanded amount by the tax department and the basis for the reduction.
3. Applicability of a previous court order in a similar case to the current situation.
4. Statutory remedies available to the writ petitioner.

Analysis:

Issue 1:
The writ petitioner, engaged in manufacturing automotive parts, claimed entitlement to utilize ITC towards tax liability. The tax department demanded interest on delayed tax payment, including ITC. The petitioner contended that ITC credit was utilized against GST payable, and interest was calculated on the remaining cash component. The central question was whether the petitioner is liable to pay interest for ITC.

Issue 2:
The tax department reduced the demanded amount without providing a clear reason for the reduction. The communication to the bank specified the reduced amount but did not address the issue of interest on ITC. The court noted discrepancies in the communication and the lack of explanation for the reduced sum, raising concerns about the basis for the reduction and the liability for interest on ITC.

Issue 3:
The Revenue counsel cited a court order from a different jurisdiction, arguing that interest imposition under Section 50 of the CGST Act is automatic. However, the court found discrepancies in the communication and the lack of clarity on the liability for interest on ITC, leaving the question of applying the previous court order unresolved.

Issue 4:
The court directed the petitioner to pay the admitted liability within a specified timeframe. If the payment was made, the impugned communication would be set aside, and the tax department would review the petitioner's contentions and communicate the decision. The petitioner was advised to avail statutory remedies under Section 107 of the CGST Act if dissatisfied with the department's decision, ensuring due process and legal recourse.

In conclusion, the judgment addressed the issues of interest on ITC, reduction in the demanded amount, applicability of previous court orders, and statutory remedies available to the petitioner, ensuring procedural fairness and legal compliance in resolving the tax dispute.