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2024 (7) TMI 239 - HC - GSTDemand for short payment of interest under Section 50 of the under Central Goods and Services Tax Act, 2017 - period after deposit of tax by the petitioners in the electronic cash ledger - whether the petitioner is liable to pay interest on the amount of tax from the date of deposit made in electronic cash ledger till the date of filing of the return? - HELD THAT - Section 50 of CGST Act provides for interest on delayed payment of tax. Proviso to Section 50(1) refers to interest on tax payable in respect of supplies made during a tax period and declaring the return for the said period furnished after the due date in accordance with the provisions of Section 39 shall be payable on the portion of the tax which is paid by debit in electric cash ledger. It appears that the respondents have literally interpreted the words interest shall be payable on that portion of the tax which is paid by debit in the electronic cash ledger . The debit in electronic cash ledger is on the date of filing of the return and therefore, interest is calculated till date of filing of return ignoring the fact that the assessee might have deposited the amount in electronic cash ledger prior to the date of filing of return and return may be filed belatedly for various reasons. Debiting of electronic cash ledger is only adjustment of the amount of deposit made in the electronic cash ledger. Therefore, on plain reading of the provisions of Section 50(1) which applies for calculating levy of interest on delayed payment of tax cannot be literally interpreted to the effect that interest is payable on the amount which is already deposited and utilised for the payment and thereafter adjusted for payment of tax is contrary to the fundamental principle for charging interest which is compensatory in nature. The interest can be levied only from the due date of payment of tax till the deposit of such tax in the electronic cash ledger on demand of interest even for subsequent period from the date of deposit in electronic cash ledger till date of filing of return is therefore not tenable. The Hon ble Supreme Court in case of COMMISSIONER OF INCOME TAX II VERSUS M/S MODIPON LTD., PAHARPUR COOLING TOWERS LTD. 2017 (11) TMI 1429 - SUPREME COURT has held that the amount deposited in personal ledger account PLA under the excise provisions of the Central Excise Act is nothing but payment of tax and therefore, it was held to be an admissible deduction under Section 43B of the Income Tax Act, 1961. Thus, when the assessee petitioner deposited the amount which is credited into electronic cash ledger after actual deposit in the Government Treasury, there is no loss to the Government Revenue merely because such deposit gets adjusted against the actual liability at the later date at the time of filing of return. The Hon ble Madras High Court in case of M/S. EICHER MOTORS LIMITED, REPRESENTED BY ITS GROUP MANAGER, FINANCE, MR. R. HARI PRASAD VERSUS THE SUPERINTENDENT OF GST AND CENTRAL EXCISE, RANGE II, TIRUVOTTIYUR DIVISION, THE ASSISTANT COMMISSIONER OF CENTRAL TAX CENTRAL EXCISE, CHENNAI 2024 (1) TMI 1111 - MADRAS HIGH COURT has taken into consideration the entire scheme of the GST Act and thereafter arrived at a conclusion that no interest is leviable under Section 50 of the Act if sufficient balance is available in the electronic cash ledger. As per the Scheme of the Government, it is only for the purpose of accounting that the debit in electronic cash ledger will be made at the time of filing of the return otherwise the amounts get credited to the account of the Government immediately upon the deposit - Therefore, once the amount deposited by the petitioner is credited to the account of the Government, the tax liability of such registered person stands discharged on the said date subject to setting off by debit in electronic cash ledger for accounting purpose at the time of filing of return to set off liability against such deposit of the amount which was credited to the account of the Government and therefore, the petitioner cannot be made liable to pay the interest from the date of deposit in the account of the electronic cash ledger till the date of filing of the return. Petition allowed.
Issues Involved:
1. Whether the petitioner is liable to pay interest on the amount of tax from the date of deposit in the electronic cash ledger till the date of filing the return. 2. Interpretation of Section 50 of the CGST Act regarding interest on delayed payment of tax. 3. Application of Rule 88B of the Central Goods and Services Tax Rules, 2017. 4. Validity of the demand for interest by the respondent authorities. Issue-wise Detailed Analysis: 1. Liability to Pay Interest from Date of Deposit in Electronic Cash Ledger to Date of Filing Return: The petitioners challenged the demand for interest under Section 50 of the CGST Act for the period after the deposit of tax in the electronic cash ledger until the date of filing the return. The petitioners argued that once the tax amount is deposited in the electronic cash ledger, it should be considered as payment of tax, and no interest should be levied beyond this point. They contended that the electronic cash ledger is akin to an advance tax deposit, which is adjusted against the tax liability at the time of filing the return. 2. Interpretation of Section 50 of the CGST Act: The petitioners argued that Section 50 of the CGST Act provides for interest on delayed payment of tax only if the taxable person fails to pay the tax. They emphasized that if there is a sufficient balance in the electronic cash ledger, there is no failure to pay the tax, and hence, interest under Section 50 is not attracted. They cited various provisions of the CGST Act, including Sections 49(1), 49(3), and 49(6), to support their argument that the amount in the electronic cash ledger is considered as payment of tax. The petitioners also relied on the Supreme Court judgment in Commissioner of Income Tax-II v. Modipon Ltd., which held that deposit in the Personal Ledger Account (PLA) under the Excise regime is equivalent to payment of tax. 3. Application of Rule 88B of the Central Goods and Services Tax Rules, 2017: The petitioners contended that Rule 88B, introduced with retrospective effect from 01.07.2017, should not be interpreted to demand interest for the period after the deposit of tax in the electronic cash ledger. They argued that Rule 88B was introduced in the context of amendments to Section 50(3) of the CGST Act and should not be applied to expand the scope of the main provision. The petitioners further argued that the rule cannot override the statutory provisions of the CGST Act and should be read down to conform to the Act. 4. Validity of the Demand for Interest by the Respondent Authorities: The respondents argued that the electronic cash ledger is merely an account reflecting cash deposits and cannot be considered as payment of tax until the amount is debited for a specific liability. They relied on Section 49(1) and Rule 87 of the CGST Act, which state that the amount in the electronic cash ledger can be used for payment of tax only by debiting the ledger. The respondents also referred to various judgments, including Shree Automotive (P) Ltd. v. Joint Commissioner of State Tax, and Sincon Infrastructure Private Limited v. Union of India, to support their argument that interest is payable until the date of filing the return. Court's Analysis and Conclusion: The court analyzed the provisions of the CGST Act and the Rules, along with relevant judgments. It held that the amount deposited in the electronic cash ledger should be considered as payment of tax, and interest cannot be levied for the period after the deposit until the filing of the return. The court emphasized that the purpose of Section 50 is to levy interest as compensatory in nature and not as a penalty. It concluded that the demand for interest for the period after the deposit in the electronic cash ledger is not tenable and contrary to the provisions of the CGST Act. The court quashed the impugned notices demanding interest and allowed the petitions, ruling that the petitioners are not liable to pay interest from the date of deposit in the electronic cash ledger until the date of filing the return.
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