DEPOSIT IN ELECTRONIC CASH LEDGER PRIOR TO DUE DATE OF FILING OF GSTR-3B RETURN DOES NOT DISCHARGE TAX LIABILITY

[Mr. M. GOVINDARAJAN]

In M/S. RSB TRANSMISSIONS INDIA LIMITED VERSUS UNION OF INDIA THROUGH THE SECRETARY, MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, NEW DELHI THE COMMISSIONER OF CENTRAL GOODS AND SERVICES TAX & CENTRAL EXCISE, JAMSHEDPUR THE SUPERINTENDENT OF CENTRAL GOODS AND SERVICES TAX & CENTRAL EXCISE, ADITYAPUR – V RANGE, JAMSHEDPUR GOODS AND SERVICES TAX NETWORK THROUGH ITS CHAIRMAN, NEW DELHI - 2022 (11) TMI 483 - JHARKHAND HIGH COURT , the petitioner is a company registered under Companies Act, 2013.  The petitioner filed the returns for the month July 2017 with a delay of 5 days; likewise for the month October 2017 the return was filed 25 days belatedly; for November 2017 - one day delay and for March 2018 - one day delay.  The Department levied a sum of Rs.13,23,783/- towards interest due to delay in filing GSTR - 3B returns for the above said period under section 50 of the Act, vide their letter dated 22.07.2021. 

According to the petitioner, only an amount of Rs.2,32,77,535/- was paid belatedly in cash against which interest amount of Rs.1,53,260/- was leviable under Section 50 of the CGST Act 2017 and had been duly deposited by Form GST DRC-03 dated 06.08.2022.  The petitioner contended that interest could be leviable only on that part of the tax debited from the Electronic Cash Ledger after the due date of filing of GSTR-3B returns.  The Department issued letter dated 13.08.2021 requesting him to pay remaining interest of Rs. 11,70,523/- out of total interest of Rs. 13,23,783/-.

The petitioner filed the present petition before the High Court.  The petitioner contended the following before the High Court-

• The petitioner had made a deposit of Rs.29,83, 86,479/- out of the total net tax liability after adjustment of ITC of Rs. 32,16,64,014/- available with him much prior to the due date, the interest can only be levied on the balance amount of Rs. 2,32,77,535/- which was deposited belatedly and not on the entire sum.
• The interest amount of Rs.1,53,260/- was only leviable under Section 50 of the CGST Act 2017 and had been duly deposited by Form GST DRC-03 dated 06th August 2022.
• According to section 39(7) of the Act the due date of making payment of tax is not later than the last date on which he is required to furnish GSTR 3B return.
• The payment of tax can be made prior to the due date of filing of such return.
• When an amount is deposited towards tax in the Government bank account and is reflected as credited in the Electronic Cash Ledger, upon filing of GSTR 3B return, such amount is merely shown as being debited from the Electronic Cash Ledger and there is no real movement or transfer of money from the petitioner’s end as the amount is already in the Government exchequer.
• Since the period prescribed for payment of tax is the last date for filing of GSTR 3B return under Section 39(7), interest can only be levied on that part of tax which has been deposited later than the due / last date for filing of GSTR 3B return.
•  Since the Electronic Cash Ledger is debited only at the time of filing of GSTR 3B return, levy of interest on the entire amount of tax paid through cash upon belated filing of GSTR 3B return cannot be sustained because amounts towards tax already lies with the Government exchequer much prior to the filing of GSTR 3B return.
• The debit entry is only a fictional entry which does not postulate any further movement of money.
• The interest could be leviable only on that part of the tax debited from the Electronic Cash Ledger after the due date of filing of GSTR 3B returns.
• Interest under Section 50 (1) of the CGST Act 2017 can only be levied when the Government is deprived of the tax beyond the due date for payment of tax.
• No interest could be levied on tax, which was deposited by the petitioner prior to the due date of payment of tax, that is prior to the due date of filing of GSTR 3B returns for the month in question
• The provisions of Section 50 (1) of the CGST Act 2017 should be interpreted in a manner that if interest is leviable on that portion of tax already deposited prior to the due date of filing of GSTR 3B return for the month in question, the same would render Section 50 (1) as confiscatory, arbitrary, unreasonable and violative of Article 14 and 19 (1) (g) of the Constitution of India. 

The petitioner has also sought quashing of the letter dated 09.12.2021by which his representation to refund the amount of Rs. 11,70,523/- collected as interest under Section 50 of the CGST Act 2017 on that portion of tax, which stood earlier deposited in the Government Exchequer prior to the due date of filing of GSTR 3B returns for the month in question has been rejected. 

The petitioner has also sought consequential relief of refund of the amount of Rs. 11,70,523/- collected as interest under Section 50 of the act of 2017

The Department contended the following before the High Court-

• Neither were any technical glitches in filing GSTR 3B return for the concerned periods in GSTIN Portal, nor had it intimated to the jurisdictional officer and GSTIN help desk in timely manner.
• The deposits made by challans mentioned in petitioners reply is reflected in their Electronic Cash Ledger and stays in that cash ledger till GSTR 3B return is filed.
• Only then the cash ledger is debited and that amount is deposited in Government account as tax. 
• The Electronic Cash Ledger is an account of the taxpayer maintained by the GSTIN system reflecting the cash deposits in recognized banks and payments of taxes and other dues made by the taxpayer. It contains a summary of all the deposits and payments made by a taxpayer.
• The petitioner had made a deposit of Rs.29,83, 86,479/- out of the total net tax liability after adjustment of input tax credit of Rs. 32,16,64,014/- available with him much prior to the due date, the interest can only be levied on the balance amount of Rs. 2,32,77,535/- which was deposited belatedly and not on the entire sum.
• Section 39 (7) of the CGST Act stipulates that the due date of making payment of tax is not later than the last date on which he is required to furnish GSTR 3B return.
• Merely depositing an amount in Electronic Cash Ledger does not make it a tax deposit / payment to a Government account. 

The High Court considered the arguments put forth by the parties to the present writ petition.  The High Court analyzed the provisions of Section 39 (Furnishing of returns); Section 47 (levy of late fee); Section 49 (Payment of tax, interest, penalty and other amounts); Section 50 (interest on delayed payment of tax; Section 87 (Electronic cash ledger) of the Act.

The High Court observed that every registered person who is required to furnish a return shall pay to the Government the tax due as per such return not later than the last date on which he is required to furnish such return. Every such registered person is required to file his return in terms of Section 39(7) in Form GSTR 3B by 20^th  day of the succeeding month and on failure to file such return by the due date, a late fee shall be paid in terms of Section 47 of the Act.  Section 49(1) provides that every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the Electronic Cash Ledger of such person to be maintained in such manner as may be prescribed.  According to section 49(1) any deposit made in the modes prescribed under Section 49(1) are mere deposits towards tax, interest, penalty, fee or any other amount by such person which can be credited to the Electronic Cash Ledger.

The High Court further observed that Rule 87 (6) provides that such payment is to be made in the mandatory form along with Challan on the common portal and submitted in the Bank from where the payment is to be made and on successful credit of the amount to the concerned Government account maintained in the authorized Bank, a Challan identification number is generated by the collecting Bank and is indicated in the Challan. On receipt of such Challan identification number from the collecting Bank, the said amount shall be credited to the Electronic Cash Ledger of the person on whose behalf the deposit has been made and the common portal shall make available a receipt to this effect.   A combined reading of Section 49(1) of CGST Act, 2017 and Rule 87 (6) and (7) of CGST Rules, 2017 both go to show that such deposit does not mean that the amount is appropriated towards the Government exchequer.  The date of credit to the amount of Government in the authorized Bank shall be deemed to be the date of deposit in the Electronic Cash Ledger. The deposit in the Electronic Cash Ledger, therefore, does not amount to payment of the tax liability. 

Under the scheme of the Act, no person can make payment of tax prior to filing of GSTR 3B return, though such deposits may be made or are lying in his Electronic Cash Ledger. Tax liability gets discharged only upon filing of GSTR 3B return, the last date of which is 20^th  of the succeeding month on which the tax is due and even though GSTR 3B return can be filed prior to the last date and such tax liability can be discharged on its filing, but mere deposit of amount in the Electronic Cash Ledger on any date prior to filing of GSTR 3B return, does not amount to payment of tax due to its State exchequer.   Only on filing of GSTR 3B return, the debit of the tax dues is made from Electronic Cash Ledger and any amount lying in deposit in the Electronic Cash Ledger prior to that date does not amount to discharge of tax liability. Discharge of tax liability is simultaneous with the filing of GSTR 3B return under the scheme of GST regime and the provisions of GST Act intended to ensure seamless flow of movement of goods and services and payment of tax by the registered persons in the form prescribed through a digital mode maintained by GSTIN.

The High Court held that the contention of the petitioner of having discharged the tax liability by mere deposit in the Electronic Cash Ledger prior to the due date of filing of GSTR 3B return would be against the scheme of GST Act and would make the working of GST regime unworkable.    Any deposit in the Electronic Cash Ledger prior to the due date of filing of GSTR 3B return does not amount to discharge of tax liability on the part of the registered person. Since the petitioner filed its return after some delay for the period July, 2017, October, 2017, November, 2017 and March, 2018 i.e. GSTR 3B return were filed after 20th day of the succeeding month for which the tax was due, the Revenue has rightly computed the interest on such delayed payment and requested the petitioner to pay the differential amount of Rs. 13,23,782.99. Since the petitioner has duly discharged his liability towards interest by making payment of total amount and filing Form DRC-03, no case of refund of such amount arises.