Introduction: The article delves into the crucial legal question: Can the proviso to Section 50(1) of the CGST Act surpass the scope of the main provision? Examining the notable case of M/s. Eicher Motors Limited vs. The Superintendent of GST, this analysis scrutinizes the intricacies of Sections 50(1) and 39(7) of the CGST Act.
Whether the proviso to Section 50(1) can go beyond the scope of the provisions of Section 50(1) of the CGST Act, 2017?
The said issue has been examined by the Hon’ble Madras High Court in the matter of M/s. Eicher Motors Limited vs. The Superintendent of GST and Central Excise & The Assistant Commissioner of Central Ax & Central Excise, Chennai (W.P. No. 16866 & 22013 of 2023 and W.M.P. No. 32200 of 2023, Judgment reserved on 22.12.2023 and pronounced on 23.01.2024).
The provisions of Section 50(1) of the Central Goods and Service Tax Act, 2017 (CGST Act, 2017) which reads as follows:
“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”
A reading of the above provision makes it clear that every person, who is liable to pay the tax in accordance with the provisions of the Act and Rules made thereunder, but fails to pay the tax within a prescribed period, which remains unpaid, shall pay on his own interest at such rate not exceeding 18% per annum.
The aforesaid Section deals with the interest, which has to be paid, if the tax is not paid within the prescribed period. If such being the case, what would be the prescribed period? To answer this, we have to analyse the provisions of Section 39(7) of the CGST Act, 2017. The provisions of Section 39(7) of the CGST Act, 2017 stated that the tax shall be paid to the Government not later than the last date, on which he required to furnish the monthly returns in terms of Section 39(7) of the Act, otherwise, the tax has to be paid along with interest in terms of the provisions of Section 50(1) of the CGST Act, 2017. Thus, the prescribed date mentioned in Section 50(1) of the Act refers to the last date for payment of GST in terms of the provisions of Section 39(7) of the Act.
Now, proviso to Section 50(1) of the CGST Act, 2017 which reads as follows:
“50. Interest on delayed payment of tax.—
(1)……………….
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 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.”
The above proviso deals with 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 Section 39 of the Act, shall be payable on that portion of tax, which is paid by debiting the electronic cash ledger.
The said provision has been interpreted by the respondents in aforesaid case i.e. M/s. Eicher Motors Limited (supra) by stating that once if the debit entry is made in the electronic cash ledger, that will be the date of actual payment of tax, whereas, Section 50(1) of the Act states that cash should have been paid to the Government within the prescribed period, which is 20th day of every month in terms of Section 39(7) of the Act. The said prescribed period is the only time limit provided under Section 50(1) of the Act. However, the said proviso was also interpreted otherwise as discussed above vide the judgement rendered in RSB Transmission (India) Ltd. vs. Union of India case by the Hon’ble Division Bench of the Jharkand High Court, which is not permissible since the same is beyond the scope of the provision of Section 50(1) of the Act.
Normally, a proviso does not travel beyond the provision, to which it is a proviso. It carves out an exception and to the main provision, to which it has been enacted as a proviso to no other. The normal function of a proviso is to except the something out of the enactment or to quantify something enacted therein, which but for the proviso would be within the purview of the enactment.
With regard to the above aspect, it would apposite to extract the law laid down by the Hon’ble Apex Court with regard to the usage of the proviso as rendered in Romesh Kumar Sharma case, which reads as follows:
“The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. As was stated in Mullins v. Treasurer of Survey [1880 (5) QBD 170, (referred to in Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha (AIR 1961 SC 1596) and Calcutta Tramways Co. Ltd. v. Corporation of Calcutta (AIR 1965 SC 1728); when one finds a proviso to a section 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 proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment and its effect is confined to that case. It is a qualification of the preceding enactment which is expressed in terms too general to be quite accurate. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule. “If the language of the enacting part of the statute does not contain the provisions which are said to occur in it you cannot derive these provisions by implication from a proviso.” Said Lord Watson in West Derby Union v. Metropolitan Life Assurance Co. (1897 AC 647) (HL). Normally, a proviso does not travel beyond the provision to which it is a proviso. It carves out an exception to the main provision to which it has been enacted as a proviso and to no other. (See A.N. Sehgal and Ors. v. Raje Ram Sheoram and Ors. (AIR 1991 SC 1406), Tribhovandas Haribhai Tamboli v. Gujarat Revenue Tribunal and Ors. (AIR 1991 SC 1538) and Kerala State Housing Board and Ors. v. Ramapriya Hotels (P)Ltd. and Ors. (1994 (5) SCC 672).
“This word (proviso) hath divers operations. Sometime it worketh a qualification or limitation; sometime a condition; and sometime a covenant” (Coke upon Littleton 18th Edition, 146) “If in a deed an earlier clause is followed by a later clause which destroys altogether the obligation created by the earlier clause, the later clause is to be rejected as repugnant, and the earlier clause prevails….But if the later clause does not destroy but only qualifies the earlier, then the two are to be read together and effect is to be given to the intention of the parties as disclosed by the deed as a whole” (per Lord Wrenbury in Forbes v. Git [1922] 1 A.C. 256).
A statutory proviso “is something engrafted on a preceding enactment” (R. v. Taunton, St James, 9 B. & C. 836).
“The ordinary and proper function of a proviso coming after a general enactment is to limit that general enactment in certain instances” (per Lor Esher in Re Barker, 25 Q.B.D. 285).
A proviso to a section cannot be used to import into the enacting part something which is not there, but where the enacting part is susceptible to several possible meanings it may be controlled by the proviso (See Jennings v. Kelly [1940] A.C. 206).”
In view of the above, it is clear that at any cost, the proviso cannot be beyond the scope of the provision of Section. In the present case, the proviso to Section 50(1) of the Act was interpreted in such way to give a meaning so as to the proviso will override the provision. In the provision of Section 50(1) of the CGST Act, 2017 it has been stated that every person is liable to pay tax within the prescribed period. This Court has already given its findings for the words “prescribed period” holding that the date prescribed under Section 39(7) of the Act would be the last date for the payment of tax. Hence, when a specific date is prescribed in the provisions, the proviso cannot alter the said date, since it is contrary to that provision. In the present case, the Hon’ble Division Bench of the Jharkand High Court had interpreted the said proviso in such a way that the proviso will override the provision and whereby altered the date for payment of tax to the Government, which is not permissible and thus, the same is contrary to the provisions of Section 50(1) of the CGST Act, 2017.
Conclusion: In conclusion, the interpretation of the proviso to Section 50(1) sparks a significant legal debate. The article posits that the proviso, as per legal norms, cannot override or alter the prescribed period for tax payment. The divergent interpretations in the Eicher Motors case and the Jharkand High Court’s ruling underscore the need for clarity in legal interpretations to ensure adherence to the statutory framework.
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