2022 (3) TMI 1584 - HC - GST

Entitlement for interest on delayed payment of tax - levy of interest on the gross tax liability and not on the net cash - HELD THAT - In view of the proviso to Section 50 of the CGST Act, the grievance of the petitioner as to levy of interest on the gross tax liability without reducing the input tax credit has been adhered to, which is not disputed by the learned Government Pleader, Commercial Tax. However, the details of interest to be paid by the petitioner, in terms of amended proviso to Section 50 of the CGST Act, has to be worked out by the concerned authorities. The Writ Petitions are allowed with a direction to the 1st respondent to calculate the interest to be paid after issuing notice to the petitioner and all concerned in terms of amended proviso to Section 50 of the CGST Act.

Summary

Issues:
Levy of interest on gross tax liability under Section 50 of the Central Goods and Services Tax Act, 2017.

Analysis:
The Writ Petitions sought a Writ of Mandamus for various reliefs related to the retrospective application of the proviso to Section 50 of the CGST Act, 2017, and the legality of interest levy on gross tax liability without reducing input tax credit. The issue primarily revolved around the interpretation and application of Section 50 of the CGST Act concerning 'Interest on delayed payment of tax.'

The petitioners contended that the proviso to Section 50 inserted by the Finance Act, 2021, should apply retrospectively from 01.07.2017, and the demand notice issued by the respondent for interest under the pre-amended Section 50 should be set aside. Additionally, they argued that the summary levy and demand of interest without an adjudication determining the principal amount payable was illegal. Furthermore, they challenged the legality of levying interest on gross tax liability without reducing input tax credit, deeming it confiscatory and contrary to the fundamentals of interest levy.

The Court examined the provisions of Section 50 of the CGST Act, particularly the retrospective substitution of the proviso through the Finance Act, 2021. The substituted proviso clarified that interest on tax payable for supplies made during a tax period and declared in the return furnished after the due date shall be payable on the portion of tax paid by debiting the electronic cash ledger. The Court acknowledged that the grievance of the petitioner regarding interest on gross tax liability had been addressed by the amended proviso, which was not contested by the Government Pleader for Commercial Tax.

Consequently, the Court allowed the Writ Petitions and directed the respondent to calculate the interest to be paid by the petitioner in accordance with the amended proviso to Section 50 of the CGST Act. The Court emphasized the need for the concerned authorities to determine the specific details of interest to be paid, ensuring compliance with the amended provisions. No costs were awarded in the judgment, and any pending miscellaneous applications were ordered to be closed, concluding the legal proceedings on the matter.