2024 (5) TMI 264 - HC - GST

Interest Liability on Electronic Credit Ledger Payments - Seeking levy of interest only on that part of the tax which is paid in cash - Peremptory recovery sought as against two objections raised on audit relating to interest payable for the assessment years 2017-18 and 2018-19 - interpretation placed on the proviso fully absolving a debit from the Electronic Credit Ledger from the liability of interest - HELD THAT - The audit report as was pointed out by the learned counsel for the petitioner at paragraph no. 1 speaks of non-payment of the amount of interest amounting to Rs. 82, 57, 170/- on delayed payment through DRC-3 in the financial years 2018-19. The taxpayer was found to have offset the GST liabilities only on 12.05.2020 when the last date of furnishing monthly returns was on the succeeding month. The offsetting of GST liabilities occurs only on furnishing of return and the credit to the input tax ledger also occurs only on such furnishing of returns. The order specifically speaks of a personal hearing afforded at the Monitoring Committee Meeting (MCM) and the Committee having rejected the submissions made and required the assessee to make the deposit of the interest amounts into the government account under the proper head of CGST/SGST interest. The objections made under audit and the decisions of the Monitoring Committee does not oblige the Proper Officer to follow it verbatim and the Proper Officer is the person who has to consider the matter and arrive at a decision insofar as the final assessment is concerned as also process and effect recovery - The availability of input tax in the Electronic Credit Ledger would be inconsequential since the tax payment is only on furnishing of returns. The credit available in the Electronic Credit Ledger would be set off against output tax only on the furnishing of returns for the tax period when debit is made from the Credit Ledger. The writ petition is dismissed.

Summary

Issues Involved:
1. Legality of peremptory recovery of interest for delayed tax payments.
2. Interpretation of Section 50(1) and its proviso regarding interest liability.
3. Authority of the Monitoring Committee in issuing binding orders to the Proper Officer.

Summary:

Issue 1: Legality of Peremptory Recovery of Interest for Delayed Tax Payments

The petitioner, an assessee under the Central Goods and Services Tax Act, 2017, challenged the peremptory recovery of interest for the assessment years 2017-18 and 2018-19. The audit report raised nine objections, seven of which were addressed under Section 74 of the Act. The petitioner contended that the Proper Officer should have considered objections against the interest demand as well. The court held that the interest liability is automatic under the Act and depends on the factual situation of tax payment timing and mode.

Issue 2: Interpretation of Section 50(1) and its Proviso Regarding Interest Liability

The court examined several judgments, including those of the High Court of Judicature at Madras and the High Court of Jharkhand, to interpret Section 50(1) and its proviso. It was concluded that interest is payable on delayed tax payments regardless of whether the payment is made from the Electronic Credit Ledger or the Electronic Cash Ledger. The court agreed with the later decision in M/s. India Yamaha Motor Pvt. Ltd., which held that the availability of electronic credit does not absolve the assessee from interest liability. The court emphasized that the payment of tax occurs only upon the furnishing of returns, and any delay in this process attracts interest liability.

Issue 3: Authority of the Monitoring Committee in Issuing Binding Orders to the Proper Officer

The court found that the Monitoring Committee does not have the authority to issue binding orders to the Proper Officer. Section 2(16) and Section 168 of the Act empower the Central Board of Indirect Taxes and Customs to issue instructions or directions, but this does not extend to constituting a body that can issue binding orders. The Proper Officer must independently consider the matter and arrive at a decision regarding final assessment and recovery.

Conclusion:

The court dismissed the writ petition, affirming that interest liability is automatic for delayed tax payments, whether from the Electronic Credit Ledger or the Electronic Cash Ledger. The court also clarified that the Monitoring Committee cannot issue binding orders to the Proper Officer. The petitioner was directed to suffer their respective costs.