2022 (4) TMI 1241 - HC - GST

Recovery of interest payable on delayed payment of tax - delayed payment of tax by cash for the period between July 2017 to October 2020 - whether the recovery under the proposed notice pursuant to the order passed by this Court on an earlier occasion will come within the purview of Section 50 of CGST Act, 2017 r/w 142(A) of CGST Rules, 2017 as inserted vide notification No.60/2018- Central Taxes, dated 30.10.2018 w.e.f., 30.10.2018? HELD THAT - The petitioner appears to have paid the tax for the month of July, 2017 to December 2019 belatedly. Therefore, the petitioner was earlier called upon to pay interest under section 50 of the respective GST Enactments under Notice on 04.03.2020. Proviso to section 50 (1) on the strength of which the present writ petition has been filed was inserted vide Finance Act (No. 2) Act, 2019. It is not relevant to the facts of the present case - The above proviso to Section 50(1) came into force with effect from 1.9.2020 in terms of Notification No. 63/2020-Central Tax Dated 25.08.2020. The Central Board of Indirect Taxes and Customs has also clarified on 26.8.2020 that no recovery of interest shall be made for the past in the light of the decision taken by the GST Council in its 39th meeting on delayed payment of GST. Since tax was paid by the petitioner belatedly, petitioner is liable to interest during the period default. There was no excuse for not paying the tax in time from its electronic cash register. Nothing precluded the petitioner from discharging the tax liability from its electronic credit - If there is a belated payment of tax declared in the returns filed, interest has to follow. The petitioner has to pay the interest on the belated payment of tax and as has been demanded. Even where there is a failure to file returns or circumstances specified under Sections 73 and 74 of CGST Act, 2017, in interest has to be paid. Petition dismissed.

Summary

Issues Involved:
1. Entitlement to stall recovery of interest on delayed tax payment under Section 50 of CGST Act, 2017.
2. Applicability of the proviso to Section 50(1) of CGST Act, 2017.
3. Legality of the demand for interest on belated tax payment.

Issue-wise Analysis:

1. Entitlement to Stall Recovery of Interest on Delayed Tax Payment Under Section 50 of CGST Act, 2017:
The petitioner sought to quash a demand notice dated 04.03.2020, which required payment of ?6,58,233/- as interest for delayed tax payment under Section 50(1) of the CGST Act, 2017. The High Court had previously directed the respondents to recompute the interest liability and refund any excess amount collected. The GST Council had recommended that interest on delayed GST payment should be charged only on net cash tax liability retrospectively from 01.07.2017. Despite this, the GST authorities issued orders levying interest on tax paid by reversal of ITC, leading to contradictory positions and coercive recovery actions.

2. Applicability of the Proviso to Section 50(1) of CGST Act, 2017:
The proviso to Section 50(1), inserted by the Finance Act (No. 2) Act, 2019, stipulates that interest on tax payable for supplies made during a tax period and declared in the return filed after the due date should be levied only on the portion of tax paid by debiting the electronic cash ledger. This proviso came into effect from 01.09.2020 via Notification No. 63/2020-Central Tax. The CBIC clarified that no recovery of interest for the past period would be made in light of the GST Council's decision. However, the court noted that this proviso was not relevant to the petitioner's case, as the interest liability did not arise from the reversal of ITC but from the belated payment of tax.

3. Legality of the Demand for Interest on Belated Tax Payment:
The court observed that the petitioner had paid tax belatedly for the period from July 2017 to December 2019 and was thus liable to pay interest under Section 50(1) of the CGST Act, 2017. The court emphasized that interest is applicable on belated tax payments declared in returns, irrespective of whether the tax is paid from the electronic cash ledger or credit ledger. The court dismissed the writ petition, concluding that the petitioner had no excuse for not paying the tax on time and was liable for the interest demanded.

Conclusion:
The court dismissed the writ petition, stating that the petitioner was liable to pay interest on the belated payment of tax under Section 50(1) of the CGST Act, 2017. The proviso to Section 50(1) was deemed inapplicable to the petitioner's case, as the interest liability did not arise from the reversal of ITC. The court upheld the demand for interest on the net tax liability due to delayed tax payment.