Case Law Details
Jayashree Enterprises Vs Assistant Commissioner (ST) (Madras High Court)
The Madras High Court considered a writ petition challenging an order dated 12.02.2025, primarily with regard to the imposition of interest under the GST enactments.
The petitioner contended that the demand arose from a discrepancy between the Input Tax Credit (ITC) reflected in GSTR-3B and the auto-populated GSTR-2A. According to the petitioner, such a discrepancy could not be characterised as wrongful availment and utilisation of ITC. The petitioner relied on Circular F.No.CBEC-20/01/08/2019-GST dated 18.09.2020 and the proviso to Section 50(1) of the applicable GST enactments, submitting that interest was payable only on the portion of tax discharged by debiting the electronic cash ledger and not the electronic credit ledger. It was further contended that, in the present case, the tax liability had been discharged through the electronic credit ledger. Reliance was also placed on the decision of the High Court in M/s. Maansarovar Motors Private Limited v. Assistant Commissioner, Poonamallee Division and others.
The respondents relied on Section 50(3) of the applicable GST enactments read with Rule 88B(3). It was contended that Parliament had specifically provided for cases involving wrongful availment and utilisation of ITC, and that Rule 88B(3) prescribes levy of interest from the date of wrongful utilisation until reversal of the credit.
The Court examined Section 50 and observed that Section 50(1) deals generally with delayed payment of tax and prescribes a ceiling of 18% interest, whereas Section 50(3) specifically governs cases involving wrongful availment and utilisation of ITC and prescribes a higher ceiling of 24%, indicating that Section 50(1) does not apply to such cases.
The petitioner argued that the expression “wrongful availment and utilisation” should be confined to situations such as fraudulent availment of ITC without genuine supply of inputs or impermissible ITC under Section 17(5). The Court noted that while the GST statutes define ITC in Section 2(63), they do not define the expression “wrongful availment and utilisation.” The assessing officer had concluded, on account of the discrepancy between GSTR-3B and GSTR-2A, that the petitioner had availed ITC to which it was not entitled.
The Court held that, in the absence of any statutory definition restricting the expression to fraudulent or bad-faith cases, any availment and utilisation of ITC by a person not eligible or entitled to such credit would constitute wrongful availment and utilisation. The Court further observed that bad-faith availment and utilisation are dealt with separately under Section 74 by prescribing a higher penalty. Consequently, it held that the specific provision contained in Section 50(3) was attracted.
The Court also considered Rule 88B(3), which prescribes the manner of calculating interest where ITC has been wrongly availed and utilised, including the period from the date of utilisation until reversal of the credit or payment of tax, and provides explanations regarding the point at which wrongly availed ITC is deemed to have been utilised.
The Court referred to the findings in the impugned order, wherein the assessing officer had accepted the petitioner’s reply to the extent that the tax due had been adjusted against available ITC in the electronic credit ledger. However, the assessing officer found that the CGST credit had already been utilised towards other tax liabilities before it was used to set off the tax due in question. Accordingly, interest was levied on the CGST portion under Section 50, and penalty was also imposed since the tax was paid beyond 30 days from the date of intimation in DRC-01.
The High Court observed that the assessing officer had specifically applied Section 50(3) while computing the interest liability. It held that, in cases of wrongful availment and utilisation of ITC, utilisation necessarily occurs through the electronic credit ledger and not the electronic cash ledger. Therefore, reliance on Section 50(3) was held to be appropriate.
Finding no infirmity in the impugned order warranting interference under Article 226 of the Constitution of India, the High Court dismissed the writ petition without costs and closed the connected miscellaneous petition.
Cases Discussed:
M/s. Maansarovar Motors Private Limited v. Assistant Commissioner, Poonamallee Division and two others (Madras HIgh Court), W.P. No.28437 of 2020 and connected cases, order dated 29.09.2020
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An order dated 12.02.2025 is assailed primarily insofar as imposition of interest is concerned.
2. Learned counsel for the petitioner contends that there was a discrepancy between the Input Tax Credit (ITC) reflected in the GSTR — 3B return in comparison to the GSTR — 2A auto-populated return. According to learned counsel, any liability imposed on account of such discrepancy cannot be characterised as wrongful availment and utilisation of ITC. Consequently, he contends that the petitioner is entitled to the benefit of circular bearing F.No.CBEC-20/01/08/2019-GST, dated 18.09.2020. Relying on the proviso to sub-section (1) of Section 50 of applicable GST enactments, learned counsel submits that interest is payable only on the portion of the tax paid by debiting the electronic cash ledger and not by debiting the electronic credit ledger. In the case at hand, he contends that the tax liability was discharged by debiting the electronic credit ledger of the petitioner. He also relies on the judgment of this Court in M/s. Maansarovar Motors Private Limited v. the Assistant Commissioner, Poonamallee Division and two others, order dated 29.09.2020 in W.P.No.28437 of 2020 and related cases.
3. In response to these contentions, Ms. Amirta Poonkodi Dinakaran relies on sub-section (3) of Section 50 of applicable GST enactments read with Rule 88B(3). She contends that the Parliament has specifically provided for cases where ITC was wrongly availed and utilised. In such cases, she submits that sub-rule (3) of Rule 88B provides for interest to be levied from the date of wrongful utilisation till the date of reversal.
4. Central to the adjudication of the issue canvassed by the petitioner is the interpretation of Section 50. Section 50 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 thereunder, 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:
[PROVIDED that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 [or section 74A] in respect of the said period, shall be payable on that portion of the tax that is paid by debiting the electronic cash ledger.]
(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) Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent, as may be notified by the Government, on the recommendations of the Council, and the interest shall be calculated, in such manner as may be prescribed.] “
Sub-section (1) of Section 50 deals generically with belated payment of tax. It prescribes the ceiling of 18% as interest on belated payment. Sub-section (3) deals specifically with wrongful availment and utilisation of ITC. A higher ceiling of 24% is fixed in respect of interest liability in respect thereof, thereby indicating that sub-section (1) is not applicable.
5. Learned counsel for the petitioner contended that liability arising out of the discrepancy in ITC available as per the GSTR — 3B return and GSTR — 2A should not be construed as wrongful availment and utilisation of ITC. He contends that the expression “wrongful availment and utilisation” should be confined to cases such as availment of ITC without genuine supply of inputs or cases relating to impermissible ITC under Section 17(5) of applicable GST statutes.
6. The GST statutes define ITC as the credit of input tax in Section 2(63) of applicable GST enactments. Wrongful availment and utilisation is not defined in the statutes. As a result of the discrepancy between the above mentioned returns, a conclusion has been reached by the assessing officer that the petitioner had availed of ITC to which the petitioner is not entitled. In the absence of any statutory definition curtailing the scope of the expression “wrongful availment and utilisation of ITC” to fraudulent or bad faith availment or utilisation, any availment and utilisation thereof while not eligible or entitled thereto would qualify as wrongful availment and utilisation. This conclusion is fortified by the fact that bad faith availment and utilisation is dealt with separately under Section 74 inter alia by prescribing a higher penalty. As a corollary, the specific provision in sub-section (3) of Section 50 is attracted.
7. This provision is required to be read with Rule 88B(3). Said sub-rule reads as under:
“(3) In case, where interest is payable on the amount of input tax credit wrongly availed and utilised in accordance with sub-section (3) of section 50, the interest shall be calculated on the amount of input tax credit wrongly availed and utilised, for the period starting from the date of utilisation of such wrongly availed input tax credit till the date of reversal of such credit or payment of tax in respect of such amount, at such rate as may be notified under said subsection (3) of section 50.
Explanation : For the purposes of this sub-rule,-
(1) input tax credit wrongly availed shall be construed to have been utilised, when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, and the extent of such utilisation of input tax credit shall be the amount by which the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed.
(2) the date of utilisation of such input tax credit shall be taken to be,-
(a) the date, on which the return is due to be furnished under section 39 or the actual date of filing of the said return, whichever is earlier, if the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, on account of payment of tax through the said return; or
(b) the date of debit in the electronic credit ledger when the balance in the electronic credit ledger falls below the amount of input tax credit wrongly availed, in all other cases.”
8. In the impugned order, the assessing officer has considered this aspect and recorded as under:
“The taxpayer’s reply is verified and found correct. The tax due is set off against the available ITC in the credit ledger. However the CGST credit had already been utilised by the taxpayer against the other tax dues before the actual date on which the credit has been utilised to set off the above said tax due. Hence the CGST portion of the tax due attracts interest in accordance with section 50 of TNGST Act, 2017. Also tax due has been paid only beyond 30 days from the date of intimation of the defect in DRC 01. Hence penalty is also levied for SGST and CGST.”
Adverting specifically to sub-section (3) of Section 50, the assessing officer has computed the interest liability in terms thereof. In a case relating to wrongful availment and utilisation of ITC, it follows that such utilisation is by debiting the electronic credit ledger and not the electronic cash ledger. Hence, the reliance on sub-section (3) of Section 50 is entirely in order. I find no infirmity in the decision warranting interference under Article 226 of the Constitution of India. Therefore, this writ petition is dismissed without any order as to costs. Consequently, connected miscellaneous petition is closed.
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