2022 (11) TMI 85 - HC - GST

Interest on delayed payment of taxes - appeal rejected on the count that the petitioner has not paid the amount of tax, interest, fine, fee and penalty arising from the impugned order dated 03.08.2018 - violation of Section 107 (6) of the Act, 2017 - HELD THAT - The amendment which has been made effective from 01.07.2017 clearly provides that the interest on tax payable in respect of supplies made during the tax paid and declared in the return for the said period furnished after the due date in accordance with the provisions of Section 39 of the Act, 2017 except where such return is furnished after commencement of any proceedings under Section 73 or 74 of the Act, 2017 shall be levied on that portion of tax i.e. paid by debiting the electronic cash ledger, as such, the amendments are having retrospectively applicability effect, as such, in view of the amendment made by the Central Government, the writ petition is disposed of with a direction to the appellate authority to examine whether in the given facts and circumstances of the case, the petitioner can be extended benefits of amendment made in Section 50 of the Act or not. It is made clear that this Court has only examined the retrospectively applicability of amendment in Section 50 of the Act, 2017 and whether the petitioner can take its advantage or not to over come the rider of Section 107(6) which is a condition precedent for maintaining the Appeal under GST Act 2017, it will be decided by the appellate authority in accordance with law after giving opportunity of hearing to the petitioner. The matter is remitted back to the appellate authority to decide the appeal of the petitioner afresh after examining the effect of the amendment in Section 50 of the Act, 2017 within four months from the date of receipt of copy of order passed by this Court - the instant writ petition is partly allowed.

Summary

Issues Involved:
1. Rejection of the appeal under Section 50(1) of the Central Goods and Services Tax Act, 2017.
2. Demand for interest on unpaid tax liability.
3. Non-availability of a mechanism for rectifying GST returns.
4. Retrospective applicability of the amendment to Section 50 of the CGST Act, 2017.

Issue-Wise
Detailed Analysis:

1. Rejection of the Appeal under Section 50(1) of the CGST Act, 2017:
The petitioner challenged the order dated 11.09.2018, which rejected their appeal under Section 50(1) of the CGST Act, 2017, due to non-payment of tax, interest, fine, fee, and penalty as required under Section 107(6) of the Act. The petitioner argued that the appeal was dismissed without providing a mechanism to rectify the GST returns, which led to the incorrect calculation of tax liability.

2. Demand for Interest on Unpaid Tax Liability:
The petitioner was directed to pay interest amounting to Rs. 72,69,975 for the period from July 2017 to September 2017 due to differences in GSTR 1 and GSTR 3B returns. The petitioner contended that there was no tax liability as they neither availed input credit nor charged GST on pet food, which was later identified as taxable. The petitioner had set off the tax liability in the return for March 2018. The State argued that the petitioner delayed tax payment and concealed the amount received from pet food sales, thus justifying the interest levy under Section 50 of the CGST Act, 2017.

3. Non-availability of a Mechanism for Rectifying GST Returns:
The petitioner highlighted the absence of a mechanism to correct errors in GSTR 3B returns, which led to discrepancies in tax liability reporting. Despite several communications with the authorities, no solution was provided. The petitioner had sufficient input credit to cover the tax liability but was unable to rectify the returns due to the lack of a correction mechanism.

4. Retrospective Applicability of the Amendment to Section 50 of the CGST Act, 2017:
During the pendency of the writ petition, the Government of India amended Section 50 of the CGST Act, 2017, with retrospective effect from July 2017. The amendment stipulated that interest on delayed tax payment would be charged only on the net cash tax liability. The petitioner sought to benefit from this amendment, arguing that it should apply retrospectively to their case. The State opposed this, but the court examined the retrospective applicability of the amendment.

Court's Findings:

Retrospective Applicability of the Amendment:
The court noted that the amendment to Section 50 was intended to be retrospective, as recommended by the GST Council and clarified by the CBIC. The amendment aimed to charge interest only on the net cash tax liability, effective from July 2017. The court referred to the judgment of the Madras High Court in M/s. Maansarovar Motors Private Limited, which supported the retrospective application of the amendment.

Direction to the Appellate Authority:
The court directed the appellate authority to re-examine the petitioner's appeal in light of the retrospective amendment to Section 50. The appellate authority was instructed to determine whether the petitioner could benefit from the amendment and overcome the condition precedent of Section 107(6) for maintaining the appeal. The appellate authority was given four months to decide the appeal afresh, ensuring a fair hearing for the petitioner.

Conclusion:
The writ petition was partly allowed. The impugned order dated 11.09.2018 was set aside, and the matter was remitted back to the appellate authority to re-evaluate the appeal considering the retrospective amendment to Section 50 of the CGST Act, 2017.