2022 (10) TMI 41 - HC - GST

Maintainability of petition - appealable order or not - Levy of interest under Section 50 along with penalty under Section 122(2) of the Central Goods and Service Tax Act, 2017 - restriction on ITC - HELD THAT - A perusal of Section 50 of CGST Act, 2017 shows that there was an amendment to Section 50 of the CGST Act, which came into effect from 01.06.2021. A reading of Section 50 of CGST Act coupled with the amendment would show that every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen percent, as recommended by the Government. Whether the authorities were right in directing the petitioner for payment of interest on the disputed tax and the penalty thereof? - HELD THAT - Since an appeal provision is available, and taking into consideration the findings given by the Assessing Authority, more so, when the finding by the Assessing Authority is to the effect that the assesse is under an obligation to restrict input tax credit to the extent of exempt supplies every month and reverse the same in their GSTR-3B returns, but failed to do so and utilized such ineligible credit to discharge output tax liability, withholding the payment of tax by the due date, coupled with the finding given with regard to payment of interest, it is in the fitness, it would be just and proper, the petitioner avails the remedy of appeal where all the issues can be agitated. The writ petition is disposed of.

Summary

Issues:
1. Challenge to interest and penalty order under CGST Act for tax period 2017-18 to 2019-20.
2. Interpretation of Section 50 of CGST Act regarding payment of interest on tax liability.
3. Availability of alternative remedy under Section 107 of CGST Act for appeal.

Analysis:
1. The petitioner challenged the interest and penalty order passed by the first respondent under the CGST Act for the tax period 2017-18 to 2019-20. The petitioner contended that as the Input Tax Credit claim was not utilized and was lying in the Electronic Ledger, there was no 'net cash liability,' leading to the closure of proceedings. However, a subsequent Show Cause notice demanded interest and penalty for non-payment of interest under Section 50 of the GST Act, which the petitioner objected to, resulting in the present writ petition.

2. The petitioner argued that interest under Section 50 of the CGST Act is chargeable only on 'net tax liability' after adjusting Input Tax Credit. The High Court analyzed Section 50 and its amendment effective from 01.06.2021, which mandates interest payment on unpaid tax at a prescribed rate. The Court noted that interest is levied on cash payments made for tax returns and that interest is payable even if assessed tax is paid from available credit, as per the proviso to Section 50.

3. The Government Pleader contended that the petitioner should have pursued the alternative remedy of appeal under Section 107 of the CGST Act instead of filing a writ petition. The High Court referred to legal precedents emphasizing the importance of exhausting statutory remedies before seeking judicial intervention. The Court highlighted the Supreme Court's stance on allowing belated appeals in certain circumstances and stressed the significance of following the appeal process for a comprehensive adjudication of issues.

4. The Court acknowledged that the petitioner had paid a portion of the assessed tax before the Show Cause notice and the remaining amount after receiving the notice. The issue centered on whether interest was payable on the amounts paid at different stages. The Court emphasized the availability of the appeal provision for addressing all concerns raised by the Assessing Authority, including the restriction of input tax credit and the payment of interest. Ultimately, the Court disposed of the writ petition, advising the petitioner to avail the appeal remedy for a thorough examination of the case.

5. In conclusion, the High Court emphasized the importance of exhausting statutory appeal remedies before seeking judicial intervention in tax matters. The Court highlighted the need for comprehensive adjudication through the appeal process, especially when issues involve the interpretation of tax laws and payment obligations. The judgment reiterated the significance of following legal procedures to address tax disputes effectively and efficiently.