2021 (1) TMI 970 - HC - GST

Constitutional validity of the proviso to Section 50 of the Central Goods and Services Tax Act, 2017 - interest on delayed payment of tax - HELD THAT - Let Notice be issued to the respondents, returnable on 11.02.2021 . The respondents shall be served directly through email. In the meantime, Mr. Choksi, the learned counsel appearing for the writ applicants shall furnish one set of entire paperbook to Mr. Devang Vyas, the learned Addl. Solicitor General of India, so that by the next returnable date, Mr. Vyas can seek appropriate instructions in the matter.

Summary

Issues involved:
Constitutional validity of the proviso to Section 50 of the Central Goods and Services Tax Act, 2017.

Detailed Analysis:
The judgment addresses the challenge to the constitutional validity of the proviso to Section 50 of the Central Goods and Services Tax Act, 2017. The proviso in question, inserted by the Finance (No.2) Act, 2019, pertains to the interest on delayed payment of tax. The primary contention raised is regarding the interpretation and application of the proviso, specifically in relation to the interest on tax payable for supplies made during a tax period and declared in the return after the due date. The petitioner argues that the proviso creates differential treatment between taxpayers who self-assess tax payment and those who fail to file returns on time, leading to an alleged violation of Article 14 of the Constitution of India.

Furthermore, the petitioner's counsel highlights the decision of the GST Council in its 31st meeting, emphasizing that the Council recommended charging interest only on the net tax liability of the taxpayer, considering the admissible input tax credit. The petitioner asserts that this recommendation by the GST Council should have been implemented without deviation by the Parliament. The petitioner also draws attention to a press release dated 22.12.2018, which underscores the Council's stance on levying interest solely on the net cash liability, indicating a discrepancy between the Council's recommendation and the proviso in question.

The argument put forth by the petitioner aims to establish that the proviso to Section 50(1) of the Act is arbitrary and discriminatory, as it fails to align with the principles laid down by the GST Council. The petitioner contends that the exclusion of certain taxpayers from the benefit of the proviso, coupled with the imposition of interest on GST paid through the electronic credit ledger due to short payment of tax, infringes upon the constitutional guarantee of equality under Article 14 of the Constitution of India.

In light of the arguments presented, the Court issues notice to the respondents, returnable on a specified date, and directs the petitioner's counsel to provide the necessary documentation to the Addl. Solicitor General of India for further consideration and instructions in the matter. The judgment reflects a critical analysis of the legal provisions, constitutional principles, and the recommendations of the GST Council, emphasizing the need for coherence and consistency in the application of tax laws to ensure fairness and adherence to constitutional norms.