Eicher Motors Limited Vs Superintendent of GST and Central Excise (Madras High Court)
In a recent case, Eicher Motors Limited contested against the Superintendent of GST and Central Excise before the Madras High Court. The crucial issue revolved around the interpretation of Section 50(1) of the GST Act. The court addressed whether interest would be payable if the amount equal to the tax due is available in the electronic cash ledger (ECL).
The Madras High Court, in line with statutory provisions, clarified that interest under Section 50 is not applicable if the GST amount is available in the ECL equal to the tax due.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The writ petition in W.P.No.16866 of 2023 has been filed challenging the Recovery notice dated 16.05.2023 issued by the respondent.
2. The writ petition in W.P.No.22013 of 2023 has been filed challenging the impugned order dated 12.07.2023 passed by the respondent.
3. The brief facts of the case are as follows:
3.1 The petitioner is a renowned manufacturer of mid-sized motorcycles (250-750CC), vide HS Code 8711 led by the iconic brand Royal Enfield, with its manufacturing unit in Tamil Nadu. They have their Global Head Quarters in Chennai and three manufacturing facilities at Oragadam, Vallam and Tiruvottiyur. The petitioner is operating through their dealers and distributors and by means of more than 1000 large stores and 900 studio stores in major cities and also having more than 800 authorized dealers in India alone.
3.2 The petitioner has paid a sum of Rs.15,033 Crores as GST for the period from the year 2017-18 till the year 2023. Out of the said amount, a sum of Rs. 10,871 Crores was paid using the Input Tax Credit and a sum of Rs.4,162 Crores was paid in cash.
3.3 On the date of introduction of GST i.e., 01.07.2017, the petitioner had an accumulated balance of a sum of Rs.33,87,10,445/- as CENVAT credit ready to be transitioned into the GST regime. However, owing to want of system readiness and technical glitches in the GST Common Portal during the initial stages of implementation of GST, the Department had extended the due dates for filing the Form GST TRAN-1 from time to time and accordingly, the petitioner had filed their Form GST TRAN 1 on 16.10.2017 under Sections 140(1) and 140(3) of the Goods and Services Tax Act, 2017 (hereinafter called as “GST Act”).
3.4 Due to unknown reasons, the credit in entirety sought to be transitioned was not made available forthwith as Input Tax Credit (ITC) on furnishing of Form GST TRAN-1 on 16.10.2017. Further, since the entire amount of Rs.33,87,10,445/- did not reflect in the Electronic Credit Ledger, the petitioner could not file the monthly return in Form GSTR-3B for July 2017 within the due date i.e., 28.08.2023. Such non-filing of Form GSTR-3B for July 2017 had a domino effect and the petitioner was unable to file the GSTR-3B for subsequent months from August, 2017 to December, 2017, since Section 39(10) of CGST Act disables an assessee from filing returns for the subsequent period if the returns for the previous tax period are not furnished. Though the petitioner was disabled from filing the returns, the petitioner had ensured that the tax dues are fully paid within the due dates without any delay and accordingly, the petitioner had discharged GST liability for the period from July, 2017 to December, 2017 by depositing the tax amounts in the Electronic Cash Ledger under the appropriate heads as CGST, SGST, IGST into the Government account within the due date for each month.
3.5 The entire amount of accumulated credit was not transitioned and hence, the petitioner was constrained to file revised GST TRAN-1 on 27.12.2017. On such filing, the aforesaid amount of transitioned credit got reflected in the petitioner’s Electronic Credit Ledger, which enables the petitioner to file Form GSTR 3B for the month of July, 2017. Since the return for July, 2017 was filed, the GST portal permitted the petitioner to file the returns for the subsequent months as well. Accordingly, the petitioner filed all the Returns from the month July, 2017 to December, 2017 on 24.01.2018.
3.6 After a lapse of around 6 years, the petitioner was visited with a Recovery notice dated 16.05.2023, demanding the payment of interest of a sum of Rs.23,76,26,657/- for alleged belated payment of GST from July, 2017 to December, 2017. The said recovery proceedings were initiated directly even without the issuance of show cause notice. Even after the filing of a detailed response by the petitioner vide their letter dated 29.05.2023, the recovery proceedings were not withdrawn by the Department and hence, the petitioner challenged the said Recovery notice in W.P.No. 16866 of 2023, in which, vide order dated 07.06.2023, this Court had granted stay of recovery proceedings subject to the payment of 30% of the interest amount demanded in the Letter dated 16.05.2023. Aggrieved by the said interim order dated 07.06.2023, the petitioner had preferred an appeal in W.A.No. 1263 of 2023 before the Hon’ble Division Bench of this Court. In the said writ appeal, an order came to be passed on 20.06.2023, wherein the Hon’ble Division Bench of this Court had directed the 1st respondent to consider the petitioner’s representation dated 29.05.2023 and pass an order within a period of 3 weeks.
3.7 Pursuant to the said order dated 20.06.2023, the Department considered the petitioner’s representation and passed an order dated 12.07.2023 confirming the demand of interest against the petitioner. Aggrieved over the said order dated 12.07.2023, the petitioner had filed W.P.No.22013 of 2023.
3.8 The common issue involved in both these writ petitions is as to whether the petitioner is liable to pay interest of the GST amount, which was routinely deposited into the ECL within the due date. However, the case of the Department is that the deposit of tax in Electronic Cash Ledger would not amount to payment of tax and would tantamount to failure to remit GST in time, for which interest liability would be attracted.
4. Petitioner’s Submission:
4.1 Mr.Vijay Narayan, learned Senior counsel appearing for the petitioner would submit that the tax amount is duly remitted by the petitioner to the Government treasury account maintained with RBI and the said amount is paid to the Government (both Central and State) under the appropriate heads such as CGST, SGST, IGST, etc., through the treasury challans in Form PMT-06. Further, he would submit that a reading of Section 49(1) of GST Act read with RBI FAQ makes it clear that the money is transferred from Assessee’s account to the Government’s account at the time of payment into ECL. At FAQ No.8 of the FAQ dated 14.04.2020 issued by the RBI, it has been stated that “RBI has also facilitated payment of GST by tax payers directly into Government accounts at RBI by using NEFT/RTGS payment options provided in GST Portal”. Further, Explanation (a) to Section 49 of GST Act, also clarifies that the deposit to ECL is nothing but deposit in Government Account maintained with RBI.
4.2 Further, he would contend that any amount paid into ECL cannot be withdrawn by the taxpayer at their sweet will i.e., once the money is deposited into the account of Government maintained with RBI, the same will not be refund unless a suitable order is passed by the Department. Section 49(6) of the GST Act states that any balance in ECL after the payment of GST would be refunded to the Assessee in terms of Section 54 of CGST Act read with Rule 89 of CGST Rules. On the other hand, if the Department wishes to recover any amount from the taxpayer, they can easily recover the same from the ECL vide a mere entry for appropriation of amount against the pending tax demand without any recourse or knowledge or permission of the Assessee. Therefore, he would submit that the amount upon deposit into the ECL belongs to the Government.
4.3 It was also submitted by the learned Senior counsel that debit to ECL is only a journal entry and the same will not take away the fact that the tax already stands paid at the time of remittance into the Government account under Section 49(1) of the GST Act. Further, he would submit that the Personal Ledger Account under Central Excise Regime is akin to the ECL in GST Regime.
4.4 He would also submit that in the 27th GST Council meeting dated 04.05.2018, the delay in filing the GSTR 3B by tax payers due to technical glitches in the filing of Form TRAN 1 was recognised and as a result, the GST Implementation Committee had approved the waiver of Late Fee on such delayed filing.
4.5 Further, he would contend that in the present case, there is no element of withholding of tax as the petitioner had rightly deposited the amount into ECL on time. Therefore, since there is no basis to levy the demand for interest by the Department and Section 5 0(1) of GST Act is not attracted in this case.
4.6 It is also brought to the knowledge of this Court by the learned Senior counsel that a query was raised under the Right to Information Act, 2005 (hereinafter called as “RTI Act”) on how the GST collection figure is arrived at by the Government and the RTI response, which was issued by the Ministry of Finance Department of Revenue, set outs that GST collection figures are prepared on the basis of the amount deposited in the electronic cash ledger.
4.7 Further, it was submitted that a writ petition in W.P.No.20158 of 2023 has been filed by the petitioner challenging the retrospective operation of the proviso to Section 50(1) of the CGST Act and Rule 88B(1) and (2) of the CGST Rules and the same is pending before this Court. However, in the present case, though the proceedings were initiated by the Department on the strength of the above provisions, since there is no failure to pay the tax in time, Section 50 of the GST Act will not be applicable to the present case.
4.8 In support of his contention, the learned Senior counsel had referred to the following judgements passed by the Hon’ble Apex Court:
(i) Munshi Ram and another vs. Balkar Singh and others reported in 2016 SCC OnLine P&H 11166;
(ii) CIT vs. Modipon Ltd reported in 2017 (356) ELT 481 (SC);
4.9 Therefore, he would submit that there was no tax liability even as on the delayed date of filing of returns. Hence, the question of imposing of penalty, interest, etc., would not arise since the same has been waived by the GST Council even for the delayed filing of GSTR returns. Under this circumstances, he requested to set aside the impugned proceedings of the Department.
5. Respondent’s submission:
5.1 Per contra, Mr.A.P.Srinivas, learned Senior Standing Counsel, appearing for the respondents would submit that the petitioner being a registered dealer, they are required to file the monthly returns along with self-assessed admitted tax under Section 39(7) of the GST Act on or before 20th of the succeeding months. However, the same was belatedly filed by the petitioner for the period from July, 2017 to December, 2017. Hence, by virtue of Section 50 of the Act, the petitioner was requested to pay the interest vide Recovery notice dated 16.05.2023. However, the petitioner had declined to remit the demanded interest and challenged the said Recovery notice vide W.P.No.16866 of 2023.
5.2 Further, he would submit that according to the petitioner, since the Department had not granted the “transitional credit”, the petitioner was prevented from filing the monthly GSTR-3B returns in time and hence, the same was filed belatedly till December, 2017.
5.3 He would also explained the steps that has to be performed by the petitioner and submitted that it is the duty of a registered dealer to upload the TRAN-1 Form and there is no role for the respondent to grant any “transitional credit” under Section 140 of the GST Act read with Rule 117 of the GST Rules, unless the Form TRAN-1 was uploaded by the petitioner in the GST Portal. Once the said Form TRAN-1 is uploaded, the same will be carried forward and the transitional credit will be credited to the ECL of the petitioner. Hence, he would submit that the non-availability of “Transitional Input Tax Credit” has no bearing for filing the mandatory monthly returns in GSTR-3B on the 20th day of the succeeding month.
5.4 Further, he would contend that though the time for filing the TRAN-1 was extended by the Government from time to time, there was no extension to file the monthly returns in Form GSTR-3B. Therefore, since the transitional credit can be availed as and when it is credited to the ECL and as and when Form TRAN-1 was filed by the respondent, the reasons assigned by the petitioner for non-filing of monthly returns is not correct.
5.5 He would also submit that there is no reason for the petitioner to retain the GST collected from their customers to the tune of Rs.527.54 Crores and detain the same in the ECL for non-availability of TRAN-1 credit of Rs.33,87,10,445/-. Since the petitioner is only an “authorised agent” to collect the GST on behalf of the Government, they should be responsible to remit the same on or before the 20th of succeeding month, failing which will attract the “compensatory interest” under Section 50 of the GST Act.
5.6 Further, he would submit that the “cash”, which is paid vide challan generated under Rule 8 7(7) of the GST Rules, is only a “deposit” of such amount as specifically clarified in explanation to Section 49 of the GST Act read with Rule 87 of the GST Rules and such “deposit” in the petitioner’s own ECL is not the tax paid to the Government, unless the said amount is debited while filing the monthly GSTR-3B returns. Section 49(3) of the GST Act clearly states that the amount available in ECL may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of this Act or the Rules made thereunder. Therefore, the tax liability is self-assessed by the tax payer by filing GSTR1 returns and the tax amount paid under the heads IGST, CGST, SGST, cess, interest, fees, etc., are to be paid under the respective heads by filing GSTR-3B returns and after the debiting such amount from the ECL only, the tax liability is said to be discharged, otherwise, the said amount reflects as credit balance in ECL, which the petitioner can get back at any time by filing a refund application under Section 54 of GST Act within a stipulated time limit.
5.7 He would also submit that a combined reading of Sections 50, 75(12) and 79 makes it clear that there is no requirement of issuance of any show cause notice for recovery of unpaid interest on self-assessed tax.
5.8 Therefore, he would contend that being aware of the amount of credit available, the petitioner had failed in filing the mandatory GSTR3B returns in time and requested for dismissal of these writ petitions. Further, in support of his contentions, he had referred the following judgements:
(i) Refex Industries vs. Assistant Commissioner of CGST reported in 2020 SCC Online Mad 587;
(ii)Manasarover Motors P Ltd vs Assistant Commissioner reported in 2020 SCC Online Mad 28155;
(iii) Srinivasa Stampings vs. SPT of GST & CE in W. P.No. 7129 of 2021
(iv) P.K. Ores P Ltd vs Commissioner of State Tax reported in MANU/OR/236/2022;
(v) Orissa Stvedores Ltd vs. Union of India reported in MANU/OR/1116/2022;
(vi) RSB Transmission (India) Ltd. vs. Union of India reported in MANU/JH/1260;
(vii) Haji Lal Mohd Biri Works vs. State of Uttar Pradesh reported in (1974) 3 SCC 137;
(viii) The Sales Tax Officer vs. Dwarika Prasad Sheo Karan Dass reported in (1977) 1 SCC 22;
(ix) Khazan Chand vs. State of Jammu and Kashmir reported in (1984) 2 SCC 456;
(x) Prahlad Rai vs. Sales Tax Officer reported in (1991) Supp (2) SCC 612;
(xi) Commissioner of Sales Tax vs. Qureshi Crucible reported in (1993) Supp (3) SCC 495;
6. I have given due consideration to the submissions made by Vijay Narayan, learned Senior counsel appearing for the petitioner and Mr.A.P.Srinivas, learned Senior Standing Counsel appearing for the respondents and also perused the materials available on record.
7. In the present case, on the date of introduction of GST i.e., 07.2017, the petitioner had an accumulated balance of a sum of Rs.33,87,10,445/- as CENVAT credit ready to be transitioned into the GST regime. However, due to the technical glitches and other difficulties faced by the assessees, the petitioner was not able to file the GST TRAN1 in time, however, the Department had extended the due dates for filing the Form GST TRAN-1 from time to time and accordingly, the petitioner had filed their Form GST TRAN 1 on 16.10.2017 under Sections 140(1) and 140(3) of the GST Act.
8. Further, since Form GST TRAN 1 was not filed in time by the petitioner, the credit in entirety sought to be transitioned was not made available as ITC and thus the entire amount of Rs.33,87, 10,445/- did not reflect in the Electronic Credit Ledger, therefore the petitioner could not file the monthly return in Form GSTR-3B for July 2017 within the due date i.e., 28.08.2023. Due to such non-filing of Form GSTR-3B for July 2017, the petitioner was unable to file the GSTR-3B for subsequent months from August, 2017 to December, 2017, since Section 39(10) of GST Act disables an assessee from filing returns for the subsequent period if the returns for the previous tax period are not furnished. Though the petitioner was disabled from filing the returns, the petitioner had discharged GST liability in time without any delay for the period from July, 2017 to December, 2017 by depositing the tax amounts both in the Electronic Credit Ledger and Electronic Cash Ledger under the appropriate heads as CGST, SGST, IGST into the Government account within the due date for each month as provided under the Act.
9. Thereafter, the petitioner was constrained to file revised GST TRAN-1 on 27.12.2017 and on such filing, the aforesaid amount of transitioned credit got reflected in the petitioner’s Electronic Credit Ledger, which enables the petitioner to file Form GSTR 3B for the month of July, 2017. Since the returns for July, 2017 was filed by the petitioner, the GST portal permitted them to file the returns for the subsequent months as well. Accordingly, the petitioner filed all the Returns from the month July, 2017 to December, 2017 on 24.01.2018.
10. The GST Council at its 26th meeting held on 10.03.2018, it had discussed about the reversal of late fee paid by the tax payers on filing the Form GSTR-3B due to delay in filing Form GST-TRAN-1 in Item No.4.10. The said decision taken by the GST Council is extracted hereunder:
“4.10. Agenda Item 9-Reversal of late fee paid by taxpayers on filing of FORM GSTR-3B due to delayed filing of FORM GST TRAN-1
4.10.1. Commissioner (GST Policy Wing), CBIC stated that in the 15 meeting of GIC held on 26 03 2018, it was recommended that the taxpayers, who could not submit FORM GST TRAN-1 due to technical errors, should be allowed to authenticate and file the same by 30.04.2018 and that those taxpayers who were not able to file FORM GSTR-3B due to non-filing of FORM GST IRAN-1, shall be allowed to file the same by 31.05 2018. He informed that the GSTN has sent a proposal to waive late fee on delayed filing of FORM GSTR-3B in such cases. He further stated that to enable such waiver through notification, a class of taxpayers has to be defined for the 17,573 such identified cases, CEO, GSIN replied that the formulation of such definition and the list of 17,573 taxpayers would be prepared by GSTN
4.10.2. Special Secretary, GST Council observed that such waiver/reversal of the late fee may be conditional upon the taxpayers authenticating and filing FORM GST TRAN-1 and associated FORM GSTR-3B by 30.04.2018 and 31.05.2018 respectively.
4.10.3. After discussion, GIC approved the following:
i. Waiver of late fee on such delayed filing of FORM GSTR-3B of taxpayers who could not submit FORM GST TRAN-1 due to technical errors.
ii. Such waiver shall be conditional upon the taxpayers authenticating and filing FORM GST TRAN-1 and associated FORM GSTR-3B by 30.04.2018 and 05.2018 respectively.
iii. GSTN shall prepare a formulation defining 17,573 taxpayers to enable preparing of notification and also send the list of 1 7,573 taxpayers to the GST Policy Wing.”
11. A perusal of the above minutes of GST Council shows that they had waived the late fee for belated filing of Form GSTR-3B and Form GST-TRAN-1 due to the technical glitches.
12. If an Assessee had failed to file the Form GSTR-3B returns for a month on the due date, he cannot be permitted to file the Form GSTR3B returns for the subsequent months in terms of the provisions of Section 39(10) of the GST Act, which reads as follows:
“Section 39- Furnishing of returns.-
(1) to (9)………………….
(10) A registered person shall not be allowed to furnish a returns for a tax period if the return for any of the previous tax periods has not been furnished by him.”
13. A perusal of the above makes it clear that no registered person can furnish a monthly return for tax, if the return for tax of any previous tax periods has not been furnished by them.
14. Though the credit around a sum of Rs.33 crores was available under the CENVAT Regime for transition to the GST Regime, the petitioner was not able to file the Form GST-TRAN-1 due to technical glitches in time.
15. Further, in terms of the provisions of Section 39(10) of the Act, if the entire amount payable as tax has been paid before the last date for filing Form GSTR-3B Form, i.e., on or before 20th of succeeding month, no Assessee can upload the Form GSTR-3B. In the present case, since the Form GST-TRAN-1 was not able to upload, by the petitioner, they were unable to upload the Form GSTR-3B for the month of July, 2017 and thereafter.
16. Even though the petitioner was not able to file the GSTR-3B returns in time, they had duly paid the entire tax amount in time in the manner stated below:
