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TMI Blog2022 (3) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... lly, W.P (T) No. 1261/2020 was preferred by the petitioner. Vide order dated 04.01.2021, petitioner was allowed liberty to assail the respective demands for the Financial Years 2018-19 and 2019-20 in separate writ petitions as the consequential relief relating to challenge of the demand notices relating to Financial Years 2017-18, 2018-19 and 2019-20 had been combined in W.P(T) No. 1261/2020. Subject matter in W.P (T) No. 177//2021 relates to the tax period for Financial Year 2018-19 and the subject matter in W.P (T) No. 161/2021 is in respect of tax period for the Financial Year 2019-20, while W.P (T) No. 1261/2020 is now confined to the Financial Year 2017-18. 3. In all the three writ petitions, primarily challenge was to the Circular bearing F. No. CBEC-20/16/07/2020-GST dated 10.02.2020 (Annexure-1) issued by the Central Board of Indirect Taxes and Customs ('CBIC' in short) which prescribes that interest payable on delayed payment of taxes can be recovered under the provisions of Section 79 read with Section 75(12) of CGST Act. It was pointed out that the petitioner has been asked to pay the amount of interest applicable over the taxes in full, failing which he would face proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 50(1) of the Act cannot be demanded for delay in filing monthly return in Form GSTR-3B, but for the delay in payment of the taxes. Section 50 deals with the liability to pay interest on "unpaid" tax when a person "fails to pay" tax. It does not speak anything when a person has paid tax in accordance with Section 49. Proviso to Section 50(1) cannot travel beyond or be inconsistent with or make addition to the main provision. It must be limited to the subject matter of enacting clause. Proviso to Section 50(1) merely says that the Input Tax Credit (ITC) is as good as tax paid, hence, no interest is payable thereon. It does not say anything about payment from Electronic Credit Ledger as Section 50(1) deals with cases of unpaid or failure to pay tax only. The word 'debiting' under section 50(1) is used for apportionment of an amount on which interest is payable if not paid in accordance with Section 49. This expression 'debiting' has to be read in the context of the word 'fails to pay' and 'unpaid' in sub-Section (1) and (2) of Section 50. In the instant case, by the impugned summary of the order issued in Form GST DRC-07 and impugned demand notice issued in Form GST DRC-01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50, intention of the legislature can be gathered from the scope of the Act and other provisions of Section 9, 39, 49, 50, 51, 52, 54 and Rule 61. Learned counsel for the petitioner has relied upon the case of Manik Lal Majumdar and others versus Gauranga Chandra Dey and others [(2005) 2 SCC 400]. Learned counsel for the petitioner has also drawn attention to Section 54(12) of the Act which provides that if the amount in Electronic Cash Ledger is not refunded within the specified time by the Government, the registered person would be entitled to interest at the rate not exceeding 6% which shows that money goes into the coffers of the Government. Compensatory interest therefore cannot be demanded. For any delay in filing return, late fee can be levied under section 47 of the Act, but interest on delayed filing of return cannot be levied as it would be contrary to the concept of interest in taxing statute. It is further submitted that as per section 39 (1) of CGST Act / JGST Act read with Rule 61, the tax for a month is to be paid by 20th of the following month along with monthly return in GSTR-3B. If tax is deposited into the Electronic Cash Ledger in accordance with Section 49 befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed under Section 39(1) of the Act read with Rule 61(1) of the Rules. Subsequently, vide Notification No. 17/2017-CT dated 27.07.2017, the Central Government amended sub-Rule (5) of Rule 61, whereby the words 'in lieu of GSTR-3' was omitted, meaning thereby that the return in GSTR-3B is not a return in lieu of return in Form GSTR-3. Similar amendment in Rule 61(5) was made in the JGST Rules, 2017 vide Notification dated 29.06.2017 and 31.07.2017 issued by the State Government under section 164 of JGST Act, 2017. Now, with retrospective effect from 01.07.2017, the Central Government vide Notification dated 09.10.2019, has substituted and prescribed the return in Form GSTR-3B under section 39(1) of the Act read with Rule 61(5) in place of return in Form GSTR-3 under Rule 61(1). A similar retrospective substitution has been made by the State Government in Rule 61(5) of JGST Rules, 2017 with effect from 01.07.2017 by Notification dated 27.12.2019. Therefore, proviso to Section 50 of the Act cannot be read in the context of Section 39(1) of JGST Act, 2017/ Rule 61(5) of JGST Rules, 2017 so as to create interest on tax paid as per return in Form GSTR-3B in place of return in Form G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook, that it is fundamental rule of construction that proviso must be considered in relation to the principal matter to which it stands as a proviso. Since the natural presumption is that but for the proviso, the enacting part of the section would have included the subject matter of the proviso, the enacting part should be generally given such a construction which would make the exceptions carved out by the proviso necessary and a construction which would make the exceptions unnecessary and redundant should be avoided. 5. Based on these submissions, learned counsel for the petitioner has prayed that the impugned notice issued in Form GST DRC-01A dated 28.01.2020 and Summary of the Order issued in Form GST DRC-07 dated 26.02.2020 be quashed. 6. Respondents have filed counter affidavit in the respective writ petitions and taken an objection to the maintainability of the writ petitions on the ground that the Act provides for an alternative remedy of statutory appeal under section 107 of JGST Act which the petitioner has not availed. Respondents have also taken a plea that interest can be recovered on delayed payment of tax under section 50 read with section 75(12) of JGST Act. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest liability has not been given retrospective effect, rather the scope of liability has been limited with retrospective effect. Therefore, argument of learned counsel for the petitioner based on return in Form GSTR-3B / GSTR-3 with reference to Rule 39(1) read with Rule 61(5) is misplaced and not tenable. Petitioner had filed its return for the month of July 2017 on 07.09.2017 in Form GSTR-3B. Similarly, the return for the month of April 2018 has been filed on 19.06.2018 in Form GSTR-B and interest was paid on his own account. Petitioner was aware that he had to pay interest for delayed payment of tax. In answer to the contention relating to absence of rules framed under section 50(2) of JGST Rules, it is submitted that as per Section 50(2), interest is payable from the day succeeding the day on which such tax was due to be paid. Sub-section 50(1) provides the rate of interest for delayed payment of tax. Therefore, the substantive provision of the Act regarding interest is workable even without framing rules. He has placed reliance in the case of Jantia Hill Truck Owner Association versus Shailang Area Coal Dealer and Truck Owner Association and others [(2009) 8 SCC 492] wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeding under section 73 or 74 of the Act after proper show-cause notice and opportunity to reply. In this regard, learned counsel for the petitioner has relied upon the case of Mahadeo Construction Co. (Supra) decided by a Coordinate Bench of this Court, of which one of us (Deepak Roshan, J) was a Member. 8. Following questions emerge for consideration in these writ petitions from the pleadings on record and the submissions of the parties. (i) Whether writ petition is maintainable? (ii) Whether liability of interest under section 50 of JGST Act, 2017 can be raised without initiating any adjudication process under section 73/74 of the Act in the event Assessee raising dispute towards the liability of interest. An incidental question also arises, whether recovery proceeding under section 79 of the Act can be initiated for recovery of interest under section 50 of the Act without conclusion of adjudication proceeding under the Act. For answer to the first question, it is necessary to refer to the relevant provisions of JGST Act, 2017 and the decisions on the point. Section 50 and 73 of JGST Act, 2017 are quoted hereunder: "50. Interest on delayed payment of tax. - (1) Every pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act or the rules made thereunder. (2) The proper officer shall issue the notice under sub-section (1) at least three months prior to the time limit specified in subsection (10) for issuance of order. (3) Where a notice has been issued for any period under subsection (1), the proper officer may serve a statement, containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for such periods other than those covered under sub-section (1), on the person chargeable with tax. (4) The service of such statement shall be deemed to be service of notice on such person under sub-section (1), subject to the condition that the grounds relied upon for such tax periods other than those covered under sub-section (1) are the same as are mentioned in the earlier notice. (5) The person chargeable with tax may, before service of notice under sub-section (1) or, as the case may be, the statement under sub-section (3), pay the amount of tax along with interest payable thereon under section 50 on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein the details of the amount payable. [(1A) The proper officer shall, before service of notice to the person chargeable with tax, interest and penalty, under sub-section (1) of Section 73 or sub-section (1) of Section 74, as the case may be, shall communicate the details of any tax, interest and penalty as ascertained by the said officer, in Part A of FORM GST DRC-01A.] (2) Where, before the service of notice or statement, the person chargeable with tax makes payment of the tax and interest in accordance with the provisions of sub-section (5) of section 73 or, as the case may be, tax, interest and penalty in accordance with the provisions of sub-section (5) of section 74, or where any person makes payment of tax, interest, penalty or any other amount due in accordance with the provisions of the Act [whether on his own ascertainment or, as communicated by the proper officer under sub rule (1A),] he shall inform the proper officer of such payment in FORM GST DRC-03 and the proper officer shall issue an acknowledgement, accepting the payment made by the said person in FORM GST DRC-04. [(2A) Where the person referred to in sub-rule (1A) has made partial payment of the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing which show-cause notice will be issued under section 73(1). It further states that in case the Assessee wishes to file any submission against the above ascertainment, the same should be furnished by 05.02.2020 in Part-B of this Form. According to the petitioner, it furnished a reply on 03.02.2020 which is enclosed as Annexure-B to the counter affidavit in W.P (T) No. 161/2021. It took the plea that for the subject period they have discharged output tax liability from the Electronic Credit Ledger and Electronic Cash Ledger amounting to Rs. 29,71,71,253/- . According to them, Taxing statute being substantive in nature and not procedural, interest on delayed payment cannot be levied. They inter-alia took a number of pleas as to the chargeability of interest including absence of any charging provision under the IGST Act, 2017. They further submitted that the demand of interest is illegal, arbitrary and without authority of law and contrary to the law settled by the Apex Court. They prayed for dropping of the demand of interest. 11. It is not in dispute that no notice under section 73(1) of JGST Act, 2017 was issued thereafter before Summary of the Order was issued on the GST porta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the proposed liability, he may make such submission in Part-B of Form GST DRC-01A. In the present case, the Proper Officer has issued the statement in Form GST DRC-01A upon the petitioner intimating him to pay the amount of tax ascertained along with the amount of applicable interest in full by 05.02.2020, failing which show-cause notice will be issued under section 73(1). Petitioner instead of making the payment, filed a reply before the proper officer which has been enclosed and acknowledged by the Respondent in their counter affidavit also. However, no show-cause notice under section 73(1) was issued thereafter. Instead, the Summary of the Order was issued in Form GST DRC-07 on 26.02.2020 indicating the amount of interest payable by the petitioner in terms of the adjudication order dated 26.02.2020 for the tax period in question. Therefore, it is clear that though the petitioner did not pay the amount of tax and interest intimated to him in Form GST DRC-01A and instead submitted his reply thereto, the Respondent despite the stipulation contained in Form GST DRC-01 failed to issue any show-cause notice upon him under section 73(1) of JGST Act, 2017. When the petitioner had di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when an efficacious alternate remedy is provided by law; (v) When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion; and (vi) In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with." 13. The next question which falls for consideration is, whether liability of interest under section 50 of the Act could be raised without initiating any adjudication proceeding either under section 73 or 74 of JGST Act in the event Assessee raising a dispute towards liability of interest. In this regard, opinion of this Court rendered in the case of Mahadeo Construction (Supra) at para-21 of the judgment is extracted hereunder: "21. It is not a true that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 43 (10) shall have to pay interest on undue or excess claim or such undue or excess reduction, at the rate not exceeding 24 percent. 29. A careful perusal of sub Sections (2) and (3) of Section 50 thus would show that though the liability to pay interest under Section 50 is an automatic liability, still the quantification of such liability, certainly, cannot be by way of an unilateral action, more particularly, when the assesse disputes with regard to the period for which the tax alleged to have not been paid or quantum of tax allegedly remains unpaid. Likewise, whether an undue or excess claim of input tax credit or reduction in output tax liability was made, is also a question of fact which needs to be considered and decided after hearing the objections of the assesse, if any. Therefore, in my considered view, though the liability fastened on the assesse to pay interest is an automatic liability, quantification of such liability certainly needs an arithmetic exercise after considering the objections if any, raised by the assesse. It is to be noted that the term "automatic" does not mean or to be construed as excluding "the arithmetic exercise". In other words, though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the view expressed by Dr. Vineet Kothari, J., as I find that entertaining the writ appeal is not warranted, since the Writ Court has not determined the interest liability of each petitioners against the interest of the Revenue in any manner and on the other hand, it only remitted the matter back to the concerned Officer to determine the quantum of such liability. Thus, the second question with regard to the maintainability of the writ appeals is answered accordingly." 14. It has been held that if an Assessee disputes the liability of interest i.e. either disputes its calculation or even the leviability of interest, then the only option left for the Assessing Officer is to initiate proceeding either under Section 74 or 74 of the Act for adjudication of the liability of interest. In the present case, petitioner has disputed the interest liability by filing reply. Respondent had also indicated that in case petitioner fails to deposit the amount of tax and interest by 05.02.2020, show-cause notice under section 73(1) shall be issued. Respondent have themselves failed to follow the procedure stipulated under the Act as indicated by them in Form GST DRC-01A containing the intimati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed. In the present case admittedly, prior to the issuance of letter dated 6.2.2019, no show-cause notice or an opportunity of being heard was given to the petitioner and no adjudication order was passed." 15. We are thus satisfied that the Respondents have failed to follow the procedure prescribed in law before issuing Summary of the Order in Form GST DRC-07 holding the petitioner liable to pay interest under section 50(1) of the Act due to late filing of GSTR-3B and not depositing the due interest on its own. As such, writ petition succeeds only on the point of failure to follow the principles of natural justice and the procedure prescribed in law. 16. Petitioner has inter-alia taken a legal plea that the interest is not payable on late filing of GSTR-3B since the amount of tax has been deposited in the Electronic Cash Ledger in accordance with Section 49 of the Act. The Revenue has not denied the tax due and as such, interest under section 50(1) which is compensatory in nature cannot be realized from it. Interest can only be charged on the tax unpaid or if the Assessee fails to pay the same by the due date, as per Section 50(1) of the Act. Since there is no delay in payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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