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2020 (10) TMI 1173 - HC - GSTInterest on late payment of GST - Calculation of Interest - whether the interest could be demanded only on the net liability and not on gross liability? - HELD THAT - Amendment to section 50 of the Central Goods and Service Tax Act, 2017 was introduced by Finance (No.2) Act, 2019 for charging interest on the net cash tax liability. The said amendment was made effective prospectively from 01.09.2020 vide the Central Government notification No.63/2020-Central Tax dated 25.08.2020. GST Council in its 39th meeting recommended that interest should be charged on the net cash tax liability with effect from 01.07.2017. Recommendation was made for making the amendment to section 50 retrospectively with effect from 01.07.2017. It is stated that retrospective amendment in the GST laws would be carried out in the due course through suitable legislation. After issuance of the notification dated 25.08.2020, views were expressed by tax payers that the said notification is contrary to the recommendation of GST Council to charge interest on the net cash tax liability with effect from 01.07.2017. The central issue raised in the writ petition i.e., whether interest under section 50 of the Central Goods and Service Tax Act, 2017 is to be levied on the gross tax liability or on the next tax liability has been answered by the Board in the administrative instructions dated 18.09.2020 by categorically stating that the interest would be on the net cash tax liability for the period prior to the amendment i.e., from 01.07.2017 to 31.08.2020. Respondents to intimate the petitioner about the quantum of interest payable on account of delayed payment of GST for the period under consideration in terms of the administrative instructions dated 18.09.2020 and the same shall be paid by the petitioner, if not already paid - Petition allowed.
Issues Involved:
1. Levy of interest on delayed payment of GST. 2. Validity and constitutionality of Section 50, 39(7), 75(12), and 164(3) of the CGST/MGST Act, 2017. 3. Legality of recovery (garnishee) notices issued by the respondents. 4. Retrospective application of the amendment to Section 50 of the CGST Act. Detailed Analysis: 1. Levy of Interest on Delayed Payment of GST: The petitioner, a manufacturing company, faced interest charges on delayed GST payments computed on gross liability. The petitioner contended that interest should be levied on net liability, not gross. The respondents issued garnishee notices to recover the interest amount, which the petitioner argued was done without due process. 2. Validity and Constitutionality of CGST/MGST Act Provisions: The petitioner challenged several provisions of the CGST/MGST Act, 2017, claiming they were unconstitutional under Articles 14, 19, and 265 of the Constitution. Specifically, the petitioner sought declarations that: - Section 50 is unenforceable due to lack of prescribed machinery provisions. - Sections 39(7) and 75(12) violate Articles 14 and 19. - Section 164(3) is unreasonable and discriminatory. - Rule 61(5) of the CGST Rules and related notifications are beyond statutory provisions and violate Articles 14 and 19. 3. Legality of Recovery (Garnishee) Notices: The petitioner argued that the garnishee notices issued by the respondents were unreasonable, arbitrary, and issued without following due process, thus violating Articles 14, 19, and 300A of the Constitution. The court noted that these notices were issued despite the petitioner remitting interest based on net liability. 4. Retrospective Application of the Amendment to Section 50: Section 50 of the CGST Act was amended by the Finance (No.2) Act, 2019, to levy interest on net cash tax liability, effective from 01.09.2020. However, the GST Council recommended that this should apply retrospectively from 01.07.2017. The Central Board of Indirect Taxes and Customs (CBIC) issued administrative instructions on 18.09.2020 to recover interest on net cash liability retrospectively, pending formal legislative amendment. Judgment Analysis: The court acknowledged the administrative instructions dated 18.09.2020, which addressed the petitioner's grievances by clarifying that interest on delayed GST payments should be levied on net cash liability from 01.07.2017 to 31.08.2020. The court noted that both parties agreed that these instructions resolved the primary issue. The court quashed the garnishee notices issued on 16.07.2020 and directed the respondents to inform the petitioner of the interest amount payable based on the administrative instructions. The petitioner was required to pay any outstanding interest as per these instructions. Conclusion: The writ petition was allowed, and the recovery notices were quashed. The court concluded that no live issue remained for adjudication, as the administrative instructions had resolved the central issue. The order was digitally signed, and no costs were imposed.
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