Case Law Details
Maansarovar Motors Private Ltd. Vs Assistant Commissioner (Madras High Court)
Conclusion: Every person who is liable to pay tax in terms of the Act shall remit the tax either in cash or by way of adjustment of credit available in the Input Tax Credit (ITC) register. Where delay is made in remitting the tax, no interest under section 50 of CGST Act, 2017 would be chargeable in case payment of tax was made through input tax credit.
Held: Section 50 stated that every person who is liable to pay tax in terms of the Act shall remit the tax either in cash or by way of adjustment of credit available in the Input Tax Credit (ITC) register. In cases of delay in such remittance, interest is liable to be paid for the period of delay. While the levy of interest on remittances of tax in cash is not in question, the authorities had proceeded to levy interest on remittances of tax by adjustment of available ITC and this was the subject matter of challenge. Assessee contended that (i) the credit was available even prior to the arising of the output tax liability and hence the question of delay did not arise(ii) no opportunity was granted prior to raising of the impugned demand and consequential proceedings (iii) interest was a measure of compensation and since ITC was already available in the electronic ledger, there was no question of the same being due to the revenue (iv) the proviso to Section 50 which stated that interest should be levied only on that part of that paid in cash had been inserted to set right an anomaly and was therefore retrospective in operation. Reliance was placed on (i)Eicher Motors Ltd. Vs. Union of India [(1999) Union of India [(1996) 88 ELT 12] (iii) Refix Industry Vs. Assistant Commissioner of CGST order dated 06.01.2020 in W.P.No.23360 & 23361 of 2019. Revenue argued that Section 16(2) entitles a person to take credit of input tax and Section 41(1) provides for a credit entry in the electronic credit ledger, which is provisional in nature. Since Section 41 provides that the entitlement to credit is only with the filing of return on self-assessment basis, this entitlement cannot be availed of till such time a return is filed by an assessee. After a return is filed and the credit is availed by entry in the register, the assessee can proceed to utilize the same against output tax liability. In fact, the question of payment of interest arose only in the satisfaction of the tax computed under that return, belatedly and either by cash or by reversal of ITC. It was held that notwithstanding that the proviso had been stated to be effective only from 01.09.2020 by Notification No.63 of 2020 dated 25.08.2020, the resolution of the GST Council dated 22.12.2018 introducing the proposal for amendment of Section 50 to allow payment of interest on net cash liability, taking into account admissible credit that amount payable through electronic cash ledger (ii) the GST Council meeting dated 21.06.2019 wherein the recommendation was made to amend Section 50 vide Section 100 of Finance (No.2) Act, 2019 to provide for charging interest on net cash liability (iii) the Council in its meeting on 14.03.2020 recommending charging of interest on net cash tax liability with effect from 01.07.2017 and accordingly, retrospective amendment of the Act from the aforesaid date (iv) the press release of the Council post the 39th meeting also dated 14.03.2020 allaying apprehensions of the tax payers that the amendment of Section 50 would be prospective, setting out clearly as a trade facilitation measure, the assurance that the insertion of the proviso would be retrospective, applicable with effect from 01.07.2017 (v) the fact that close on the heels of Notification No.63 of 2020 dated 25.08.2020 stipulating the effective date as 01.09.2020, the CBIC issued a press release assuaging apprehensions by stating that the prospective notification was only on account of technical limitations. The Board had extended a waiver of recovery for the past period in line with the decisions of the Council and Notification dated 18.09.2020, that cemented the long line of assurances of the GST Council and the Board in letter and spirit. A direction was issued to the appropriate authority to compute the interest liability for belated remittances of cash and refund the balance of the amount collected from assessee within a period of four weeks from date of uploading of this order. AO were at liberty to raise fresh demands relating to interest on delayed remittances of tax by cash, in accordance with law.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
This batch of writ petitions revolves around the interpretation of Section 50 of the Central Goods and Services Tax Act, 2017 (in short ‘Act’), particularly the effective date of application of the proviso inserted
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