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TMI Blog2024 (7) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... er . The debit in electronic cash ledger is on the date of filing of the return and therefore, interest is calculated till date of filing of return ignoring the fact that the assessee might have deposited the amount in electronic cash ledger prior to the date of filing of return and return may be filed belatedly for various reasons. Debiting of electronic cash ledger is only adjustment of the amount of deposit made in the electronic cash ledger. Therefore, on plain reading of the provisions of Section 50(1) which applies for calculating levy of interest on delayed payment of tax cannot be literally interpreted to the effect that interest is payable on the amount which is already deposited and utilised for the payment and thereafter adjusted for payment of tax is contrary to the fundamental principle for charging interest which is compensatory in nature. The interest can be levied only from the due date of payment of tax till the deposit of such tax in the electronic cash ledger on demand of interest even for subsequent period from the date of deposit in electronic cash ledger till date of filing of return is therefore not tenable. The Hon ble Supreme Court in case of COMMISSIONER O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners and learned advocate Mr.Utkarsh Sharma and learned advocate Ms.Hetvi Sancheti for the respondents. 2. Rule, returnable forthwith. Learned advocate Mr.Utkarsh Sharma and learned advocate Ms.Hetvi Sancheti waives service of notice of rule for and on behalf of the respondents. 3. Having regard to the controversy in narrow compass and with the consent of the learned advocates for the respective parties, these matters are taken up for hearing. 4. As the facts arising in both the petitions are similar, the same were heard analogously and are being disposed of by this common order. 5. In these petitions, the petitioners have challenged the order raising demand for short payment of interest under Section 50 of the under Central Goods and Services Tax Act, 2017 (for short the CGST ) for the period after deposit of tax by the petitioners in the electronic cash ledger. 6. For sake of convenience, Special Civil Application No.17657 of 2022 is treated as a lead matter. 6.1. The petitioner-Company converted limited liability partnership into the limited Company in the year 2017-18 and claimed transfer of unutilised input tax credit balance in the accounts of the petitioner No.1-Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Rule 88B of the Central Goods and Service Tax Rules, 2017 (for short the Rules ) as per notification No.14/2022-Central Tax dated 05.07.2022 with retrospective effect from 01.07.2017. 6.8. Being aggrieved, the petitioner has challenged the notice dated 10.08.2022 demanding the interest on delayed payments of taxes of Rs.26,86,507/- under IGST, CGST and SGST Act from the date of deposit of the tax in the electronic tax ledger up to the date of filing of the return relying upon the provisions of Section 50 of the CGST Act and Rule 88A and 88B of the Rules. In case of the petitioner of Special Civil Application No.8871 of 2022 also similar issue has arisen by the Superintendent of CGST demanding the interest under Section 50 of the CGST Act from date of deposit of the amount towards tax in electronic cash ledger of the petitioner till the date of filing of return. 7. Learned advocate Mr.Uchit Sheth for the petitioners submitted as under : 7.1. Section 50 of the GST Acts provides for imposition of interest if the taxable person fails to pay the tax. Where the taxable person has sufficient balance in the electronic cash ledger, there is no failure to pay tax and therefore charge of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that PLA under the Excise regime is equivalent to electronic cash ledger under the GST regime and therefore the decision of Hon. Supreme Court is squarely applicable. 7.5. The Petitioners rely upon the judgement of this Hon. Court in the case of State of Gujarat v/s T.J. Agro Fertilizer Pvt. Ltd. Tax Appeal No. 225 of 2015 decided on 9.4.2015 (Compilation Vol. II - Page 95 - Relevant Paras 4, 4.1 and 5). It was held by this Hon. Court that interest could not be imposed for the period between the date of adhoc payment of tax and date of passing of assessment order as the State had already received the amount of tax. 7.6. It is well settled that imposition of interest is compensatory in nature. Reliance is placed in this regard on the judgment of Hon. Supreme Court in the case of Indodan Industries Ltd. /s State of U.P. Others Civil Appeal No. 2352 of 2007 decided on 20.10.2009 (Compilation Vol.II - Page 99 - Relevant paras 7,8) and Mahalaxmi Sugar Milla Co. V/S C.I.T. Delhi (1930) 3 SCC 475 (Compilation Vol.II - Page 102 - Relevant Para 11). In the present case, since the amount gets credited 10 the electronic cash ledger only after actual deposit of amount into Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court in the case of Dwarka Prasad V/S Dwarka Das Saraf reported in (1976) 1 SCC 128 (Compilation Vol. 1 - Page 38 - Relevant paras 16,17,18) and Commissioner of Income Tax v/s The Indo Mercantile Bank reported in 1959 SCC online SC 5 (Compilation Vol. 1 - Page 52 - Relevant paras 10,11). 7.11. Rule 88B of the Central Goods and Services Tax Rules, 2017, which is again relied upon by the Respondents, was also introduced in the context of amendment to Section 50(3) of the GST Acts. This is apparent from the discussion in the 47th GST Council meeting which was followed by insertion of Rule 88B by Notification No. 14/2022 dated 5.7.2022. In any case rule cannot go beyond the provisions of the GST Acts and if it does so, then the same needs to be struck down/read down to bring it in conformity with the statutory provision. 7.12. If at all the submission of the Respondents is accepted that there cannot be any tax payment before the same is adjusted against liability at the time of filing of returns, then as such the liability can be said to have arisen only at the time of filing of returns and therefore the question of delayed payment of tax cannot arise. Reliance is placed in this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by taxpayer making any payments, the tax payer is required to choose the amount to be added to each of the minor head within major head and the amount so deposited shall remain credited to be utilised for payment of tax liability, interest, penalty, fees and other charges for the respective major heads and minor heads. 8.3. Reliance was placed on the circular issued by the Central Board of Indirect Taxes and Customs vide F.No.CBEC-20/01/08/2019-GST dated 18.09.2020 on recovery of interest on net cash liability with effect from 01.07.2017 wherein, it is clarified that for the period 01.07.2017 to 31.08.2020, field formations in your jurisdiction may be instructed to recover interest only on the net cash liability i.e. that portion of the tax that has been paid by debit in the electronic cash ledger or is payable through cash ledger. 8.4. Relying upon the above clarification, it was submitted that amount lying in the electronic cash ledger cannot be assigned to any liability unless a tax payer makes a debit entry from a cash ledger for a specific liability. 8.5. Learned advocate for the respondent, referred to and relied upon the provisions of Section 49(1) of the CGST Act which pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 50 read with Rule 86 and whenever, there is delay in debit in the electronic cash ledger in respect of the tax payment, the tax payer shall be liable for the interest in terms of Section 50 in respect of delayed payment of tax. In support of his submissions, reliance was placed on the following decisions : (1) Shree Automotive (P) Ltd. Another versus Joint Commissioner of State Tax, Government of West Bengal Others (W.P.A. 16781 of 22019 with CAN 1 of 2020 CAN 2 of 2020 CAN 5406 of 2020) decided on 07.09.2021; (2) Pratibha Processors Versus Union of India reported in AIR 1997 SC 138; (3) Maithan Steel and Powers Ltd. versus Commissioner of Central Excise-2016 (344) ELT 792 (Sett.Com). 8.9. Referring to the above provisions, it was further submitted that mere credit in electronic cash ledger and considering the date of credit of cash ledger as a date of payment of tax in respect of net cash liability cannot be considered in view of the provisions of Section 50 of the Act which clearly stipulates that the interest is payable till the date of debit of electronic cash ledger for payment of tax, interest, penalty, etc. Reliance was also placed in the newly inserted rule 88B of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challans by a registered person into the government exchequer, prior to the filing of GSTR- 3B returns, could be treated as discharge of the tax liability and whether there could be interest levied, deeming such delayed filing of returns to be a circumstance which attracts Section 50 of the GST Act. Therein, the period was between July 2017 to 2019 and the amount of tax had already been deposited in the Electronic Cash Ledger, even prior to the filing of the return. We have to immediately notice that the facts indicate a circumstance clearly covered under the proviso to Section 50(1). The learned Division Bench found that the Electronic Cash Ledger is an account of tax ledger (sic) maintained with the department reflecting online deposits; made from accounts maintained by the assessee Patna High Court CWJC No.11621 of 2023 dt. 19-04-2024 with banks, from which payments can be made as tax. The mere deposit of an amount in an Electronic Cash Ledger does not make it a tax deposit or payment to a government account. After extracting the various provisions especially Section 49 it was found that Explanation to subsection (11) deems the date of deposit in the Electronic Cash Ledger to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to a current account maintained by a legal entity with a Bank; where no interest is accrued with only the restriction that the debits made, Patna High Court CWJC No.11621 of 2023 dt. 19-04-2024 have to be as against payment of tax, interest, penalty or any other dues under the GST Act. Section 49(1) read with the provisions of Section 39 as spoken of by us hereinabove, would indicate that the payment of tax occurs only on the furnishing of returns, which payment is by way of a debit made from the cash ledger. 21. On the interpretation placed by us on the various provisions under the Act, which also is the proper understanding of the very scheme of the enactment, we are persuaded to reject the claim of the petitioner that the proviso of Section 50(1) mandates a levy of interest only when there is a delayed furnishing of return and debit made and payment effected from the Electronic Cash Ledger. As we found Section 50(1) specifically mulcts liability of Patna High Court CWJC No.11621 of 2023 dt. 19- 04-2024 interest on any delayed furnishing of return, since it is the furnishing of the return which results in payment of tax, interest, penalty or other amounts due under the Act as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied therein. (7) Every registered person who is required to furnish a return under subsection (1), other than the person referred to in the proviso thereto, or sub-section (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: 4[Provided that every registered person furnishing return under the proviso to sub-section (1) shall pay to the Government, in such form and manner, and within such time, as may be prescribed, (a) an amount equal to the tax due taking into account inward and outward supplies of goods or services or both, input tax credit availed, tax payable and such other particulars during a month; or (b) in lieu of the amount referred to in clause (a), an amount determined in such manner and subject to such conditions and restrictions as may be prescribed.] Provided further that every registered person furnishing return under subsection (2) shall pay to the Government, the tax due taking into account turnover in the State or Union territory, inward supplies of goods or services or both, tax payable, and such other particulars during a quarter, in such form and manner, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other amount payable as determined by a proper officer in pursuance of any proceedings under the Act or as ascertained by the said person; (c) the amount of tax and interest payable as a result of mismatch under section 42 or section 43 or section 50; or (d) any amount of interest that may accrue from time to time. (3) Subject to the provisions of section 49, every liability by a registered person as per his return shall be made by debiting the electronic credit ledger maintained as per rule 86 or the electronic cash ledger maintained as per rule 87 and the electronic liability register shall be credited accordingly. (4) The amount deducted under section 51, or the amount collected under section 52, or the amount payable on reverse charge basis, or the amount payable under section 10, any amount payable towards interest, penalty, feeor any other amount under the Act shall be paid by debiting the electronic cash ledger maintained as per rule 87 and the electronic liability register shall be credited accordingly. (5) Any amount of demand debited in the electronic liability register shall stand reduced to the extent of relief given by the appellate authority or Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that he shall not file an appeal. [86A. Conditions of use of amount available in electronic credit ledger.- (1) The Commissioner or an officer authorised by him in this behalf, not below the rank of an Assistant Commissioner, having reasons to believe that credit of input tax available in the electronic credit ledger has been fraudulently availed or is ineligible in as much asa) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36- i. issued by a registered person who has been found non-existent or not to be conducting any business from any place for which registration has been obtained; or ii. without receipt of goods or services or both; or b) the credit of input tax has been availed on the strength of tax invoices or debit notes or any other document prescribed under rule 36 in respect of any supply, the tax charged in respect of which has not been paid to the Government; or c) the registered person availing the credit of input tax has been found nonexistent or not to be conducting any business from any place for which registration has been obtained; or d) the registered person availing any credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Government Department; or (ii) a Public Sector Undertaking; or (iii) a local authority; or (iv) a statutory body: Provided further that the Commissioner or an officer authorised by him in this behalf may remove the said restriction after such verifications and such safeguards as he may deem fit. Rule 88B: Manner of calculating interest on delayed payment of tax (1) In case, where the supplies made during a tax period are declared by the registered person in the return for the said period and the said return is furnished after the due date in accordance with provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, the interest on tax payable in respect of such supplies shall be calculated on the portion of tax which is paid by debiting the electronic cash ledger, for the period of delay in filing the said return beyond the due date, at such rate as may be notified under subsection (1) of section 50. (2) In all other cases, where interest is payable in accordance with subsection (1) of section 50, the interest shall be calculated on the amount oftax which remains unpaid, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) 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. Section 49 of the CGST Act provides for payment of tax, interest, penalty and other amounts. Sub-section (1) of Section 49 stipulates that every deposit made toward tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards etc. shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed whereas, Sub-section (3) provides that amount available in electronic cash ledger may be used for making any payment towards tax, interest, penalty, etc. under the provisions of the CGST Act or the rules made there under in such manner and subject to such condition and within such time as may be prescribed. Sub-section (6) of Section 49 provides the balance in electronic cash ledger or electronic credit ledger after payment of tax, interest, etc., may be refunded in accordance with the provisions of Section 54. Sub-section (8) of Section 49 provides for discharging the tax liability by self assessed tax. Explanation to Section 49 reads as under : Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash ledger. Therefore, on plain reading of the provisions of Section 50(1) which applies for calculating levy of interest on delayed payment of tax cannot be literally interpreted to the effect that interest is payable on the amount which is already deposited and utilised for the payment and thereafter adjusted for payment of tax is contrary to the fundamental principle for charging interest which is compensatory in nature. If the mechanical and literal interpretation is done by the respondent is accepted, the same would convert the interest into the nature of penalty. It appears that for the purpose of introduction of the proviso to Section 50(1), is with regard to remove the controversy which earlier existed as to whether interest is leviable on gross tax liability without considering admissible input tax credit or whether it was only applicable on net tax liability paid by the taxable person. The GST Counsel in his 31st meeting decided to incorporate proviso to Section 50 of the Act so as to clarify that interest was leviable only on net tax liability and accordingly, the proviso was introduced prospectively by Finance Act, 2019 and notified vide notification No.63/2020 dated 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory or handicraft or carpentry unit a few tools, some small contrivances or connection of materials housed in a building, will superficially look like a mere 'accommodation' but actually be a humming factory or business with a goodwill as business, with a prosperous reputation and a name among the business community and customers. Its value is qua business, although it has a habitation or building to accommodate it. The personality of the thing let out is a going concern or enterprise, not a lifeless edifice. The legislature, quite conceivably, thought that a marginal, yet substantial, class of buildings with minimal equipments may still be good businesses and did not require protection as in the case of ordinary building tenancies. So, to dispel confusion from this region and to exclude what seemingly might be leases only of buildings but in truth might be leases of business, the legislature introduced the exclusionary proviso. 17. While rulings and text books bearing on statutory construction have assigned many functions for provisos, we have to be selective, having regard to the text and context of a statute. Nothing is gained by extensive references to luminous clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each other. This Court in Anglo-French Textiles Co. Ltd. v. Commissioner of Incometax, Madras (1) again emphasised that distinction in the following words:- Next, a, set off under section 24(1) can only be claimed when the loss arises under one head and the profits against which it is sought to be set off arises under a different head. When the two arise under the same head, of course the loss can be deducted but that is done under section 10 and not under section 24(1) (Per Bose, J.) Indeed it is not disputed that when profit and loss arose under the same head in any place which was not an Indian State recourse had to be had to the provisions of ss. 7 to 12B and not to any other section. But it was contended on behalf of the Revenue that the first proviso to s. 24(1) of the Indian Act not only affected the generality of the main enactment but also introduced an addendum that where the profits of the business arose in what was British India in the case of the Indian Act or what was Travancore State in the case of the Travancore Act and the losses under the head business were sustained in an Indian State or in the latter case in any other Indian State or British India, these losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been within the section. It has to operate in the same field and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly says unless the words of the proviso are such that that is its necessary effect. (Vide also Corporation of The City of Toronto v. Attorney-General for Canada) (1). 18. The Hon ble Supreme Court in case of Commissioner of Income Tax versus Modipon Limited has held that the amount deposited in personal ledger account PLA under the excise provisions of the Central Excise Act is nothing but payment of tax and therefore, it was held to be an admissible deduction under Section 43B of the Income Tax Act, 1961 as under : 9. Deposit of Central Excise Duty in the PLA is a statutory requirement. The Central Excise Rules, 1944, specify a distinct procedure for payment of excise duty leviable on manufactured goods. It is a procedure designed to bring in orderly conduct in the matter of levy and collection of excise duty when both manufacture and clearances are a continuous process. Debits against the advance deposit in the PLA have to be made of amounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id prior to the assessment order and the State/Department received the said amount of tax, there cannot be any interest levied during the aforesaid period. It cannot be disputed that levy of interest would be on delayed payment of tax due and payable. It is not the case that on finalization of the assessment, any amount more than the amount paid on ad-hoc basis, was assessed and/or required to be paid by the assessee. 20. The Hon ble Apex Court in case of Indodan Industries Limited versus State of U.P. Others has held as under : 7. One more aspect needs to be highlighted. In the present case, we are concerned with the levy of interest for delayed payment. Under sub-Section (2B) to Section 9, such interest for delayed payment is given the status of tax due . The said interest is compensatory in nature in the sense that when the assessee pays tax after it becomes due, the presumption is that the Department has lost the revenue during the interregnum period (the date when the tax became due and the date on which the tax is paid). The assessee enjoys that amount during the said period. It is in this sense that the interest is compensatory in nature and in order to recover the lost reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(6) provides that the officer or authority empowered to collect the cess may forward to the Collector a certificate under his signature specifying the amount of arrears including interest due from any person, and on receipt of such certificate the Collector is required to proceed to recover the amount specified from such person as if it were an arrear of land revenue. The words used in s.3(6) are specifying the amount of arrears including interest , that is to say that the interest is part of the arrear of cess. In the case of a penalty imposed under s.3(5), a separate provision for recovery has been made under s.3(7). Although the manner of recovery of a penalty provided by s.3(7) is the same as the manner for recovery provided by s.3(6) of the arrears of cess, the Legislature dealt with it as something distinct from the recovery of the arrears of cess including interest. In truth, the interest provided for under s.3(3) is in the nature of compensation paid to the Government for delay in the payment of cess. It is not by way of penalty. The provision for penalty as a civil liability has been made under s.3(5) and for penalty as a criminal offence under s.4. The Delhi High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy been credited to the Government within the prescribed time limit, i.e., before due date, the question of payment of interest would not arise. Under these circumstances, this Court passes the following orders: 1) The credit to the account of Government would always occur not later than the last date for filing the monthly returns in terms of the provisions of Section 39(7) of the Act. 2) Once the amount is paid by generating GST PMT-06, the said amount will be initially credited to the account of the Government immediately upon deposit, at which point, the tax liability of a registered person will be discharged to the extent of the deposit made to the Government. Thereafter, for the purpose of accounting only, it will be deemed to be credited to the ECL as stated in the Explanation (a) to Section 49(11) of the Act. 3) As long as the GST, which was collected by a registered person, is credited to the account of the Government not later than the last date for filing the monthly returns, to that extent, the tax liability of such registered person will be discharged from the date when the amount was credited to the account of the Government. If there is any default in payment of GST, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit made to the Government. As per the Scheme of the Government, it is only for the purpose of accounting that the debit in electronic cash ledger will be made at the time of filing of the return otherwise the amounts get credited to the account of the Government immediately upon the deposit. Therefore, once the amount deposited by the petitioner is credited to the account of the Government, the tax liability of such registered person stands discharged on the said date subject to setting off by debit in electronic cash ledger for accounting purpose at the time of filing of return to set off liability against such deposit of the amount which was credited to the account of the Government and therefore, the petitioner cannot be made liable to pay the interest from the date of deposit in the account of the electronic cash ledger till the date of filing of the return. 25. In view of the above foregoing reasons, the impugned communication through email dated 26.04.2022 and the letter dated 27.12.2021 in Special Civil Application No.8871 of 2022 as well as impugned notice dated 10.08.2022 in Special Civil Application No.17657 of 2022 are hereby quashed and set aside. In the result, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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