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TMI Blog2019 (4) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 50 (1) is self-imposed and also automatic, without any determination by any one. Hence, the stand taken by the department that the liability is compensatory in nature, appears to be correct. Sub-section (2) of Section 49 that a credit entry is made in the electronic credit ledger of a registered person, only when the ITC, as self-assessed, is found in the return of a registered person. After a credit entry is made in the electronic credit ledger, the same becomes available for making payment. This is clear from Sub-section (3) of Section 49. If after payment, a balance is still available in the electronic credit ledger, the same is liable to be refunded in accordance with Section 54. Until a return is filed as self-assessed, no entitlement to credit and no actual entry of credit in the electronic credit ledger takes place. As a consequence, no payment can be made from out of such a credit entry. It is true that the tax paid on the inputs charged on any supply of goods and/services, is always available. Admittedly, the petitioner filed returns belatedly, for whatever reasons. As a consequence, the payment of the tax liability, partly in cash and partly in the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilizing the ITC, the return cannot be filed unless the remaining 5% is also paid. 6. It appears that there was a delay on the part of the petitioner in filing the returns in GSTR - 3B Forms, for the period from October, 2017 to May, 2018. This was due to the shortage of ITC, available to off-set the entire tax liability. According to the petitioner, the delay in filing the returns was also not huge. The returns for the months of October and November, 2017 and February and May, 2018 were filed with a delay of only one day. The return for December, 2017 was filed with a delay of three days. The return for January, 2018 was filed with a delay of seventeen days, the return for April, 2018 was filed with a delay of nineteen days and the return for March, 2018 was filed with a delay of twenty nine days. 7. According to the petitioner, the total tax liability of the petitioner for the period from July, 2017 to May, 2018 was ₹ 1014,02,89,385/- and the ITC available to the credit of the petitioner during this period was ₹ 968,58,86,133/-. 8. Thus, there was a short fall to the extent of 45,44,03,252/-, which the petitioner was obli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for filing of returns and payment of tax; (ii) the eligibility and conditions for taking input tax credit and (iii) the wording of Section 50. FILING OF RETURNS : 15. Under Section 40 of the CGST Act, 2017, the procedure for filing of the first return, corresponding to the period between the date on which the dealer became liable to registration, till the date on which registration is granted, is prescribed. 16. Under Section 39, a detailed procedure is stipulated for the filing of the monthly returns. In brief, the Scheme of Section 39 is as follows: i) Every registered person should furnish for every Calendar Month or part thereof, a return, electronically, of inward and outward supplies of goods or services, ITC availed, tax payable, tax paid etc., on or before the 20th day of the succeeding calendar month; ii) The Commissioner is empowered to extend, by notification, for reasons to be recorded in writing, the time limit for furnishing the returns, for such Class of registered persons; iii) Every registered person, who is required to furnish a return, should pay to the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 49 stipulates that the input tax credit as self-assessed in the return of a registered person should be credited to his electronic credit ledger in accordance with Section 41. The amount available in the electronic credit ledger may be used by virtue of Sub-section (4) of Section 49, for making any payment towards output tax under the Act. 22. Thus, the broad scheme of Section 39 which deals with the filing of returns, Section 41 which deals with the claim of ITC and its provisional acceptance, Section 16 which deals with the conditions and eligibility for taking ITC and Section 49 which deals with payment of tax, make it clear that the moment all the four conditions stipulated in Sub-section (2) of Section 16 are complied with, a person becomes entitle to take credit of ITC. Once a person takes credit of ITC, the amount gets credited on a provisional basis to his electronic credit ledger under Section 41 (1). 23. In other words, Section 16 (2) makes a registered person entitled to take credit of input tax. Section 41 (1) provides for a credit entry to be made on a provisional basis in the electronic credit ledger. But, the time at which this cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determining the liability to pay interest. Wording of section 50 28. Having thus seen the scheme of Sections 39, 41, 16 and 49, let us now take a look at Section 50 about which present dispute revolves, which reads as under: 50. Interest on delayed payment of tax- ( 1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made there under, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council. ( 2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid. ( 3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 52 shall, for every calendar month or part thereof, furnish, in such form, manner as may be prescribed, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars as may be prescribed on or before the twentieth day of the month succeeding such calendar month or part thereof. ( 2) x x x x ( 3) x x x x ( 4) x x x x ( 5) x x x x ( 6) x x x x ( 7) Every registered person, who is required to furnish a return under sub-section (1) or sub-section (2) or subsection (3) or sub-section (5), 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. ( 8) x x x x ( 9) x x x x ( 10) x x x x 33. Therefore, the period prescribed for payment of tax in respect of every month is on or before the 20th day of the succeeding calendar month. 34. The mode of payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, may be utilised towards payment of integrated tax; ( e) the central tax shall not be utilised towards payment of State tax or Union territory tax; and ( f) the State tax or Union territory tax shall not be utilised towards payment of central tax. ( 6) The balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest, penalty, fee or any other amount payable under this Act or the rules made thereunder may be refunded in accordance with the provisions of section 54. ( 7) All liabilities of a taxable person under this Act shall be recorded and maintained in an electronic liability register in such manner as may be prescribed. ( 8) Every taxable person shall discharge his tax and other dues under this Act or the rules made thereunder in the following order, namely: ( a) self-assessed tax, and other dues related to returns of previous tax periods; ( b) self-assessed tax, and other dues related to the return of the current tax period; ( c) any other amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But, it is available in the air or cloud. Just as information is available in the server and it gets displayed on the screens of our computers only after connectivity is established, the tax already paid on the inputs, is available in the cloud. Such tax becomes an in-put tax credit only when a claim is made in the returns filed as self-assessed. It is only after a claim is made in the return that the same gets credited in the electronic credit ledger. It is only after a credit is entered in the electronic credit ledger that payment could be made, even though the payment is only by way of paper entries. 38. If we take a common example of banking transactions, this can be illustrated much better. An amount available in the account of a person, though available with the bank itself, is not taken to be the money available for the benefit of the bank. Money available with the bank is different from money available for the bank till the bank is allowed to appropriate it to itself . Similarly, the tax already paid on the in-puts of supplies of goods or services, available somewhere in the air, should be tapped and brought in the form of a credit entry into the electron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the net tax liability of the taxpayer, after taking into account the admissible input tax credit, i.e., interest would be leviable only on the amount payable through the electronic cash ledger. The above recommendations of the Council will be made effective only after the necessary amendments in the GST Acts are carried out. 42. But, unfortunately, the recommendations of the GST Council are still on paper. Therefore, we cannot interpret Section 50 in the light of the proposed amendment. 43. The learned counsel for the petitioner relied upon two decisions of the Gujarat High Court, one in State of Gujarat v. Dashmesh Hydraulic Machinery, dated 19.01.2015 , and another in State of Gujarat v. Nishi Communication, dated 29.01.2015 . 44. But, both the above decisions arose out of Gujarat Value Added Tax Act. The VAT regime and the GST regime differ from each other substantially. Therefore, these decisions do not go to the rescue of the petitioner. 45. In view of the above, the claim made by the respondents for interest on the ITC portion of the tax cannot be found fault with. Hence, the Writ Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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