Interest & penalty not leviable when there is no fault of Assessee in depositing GST

In a landmark decision, the Hon’ble Allahabad High Court ruled in favor of Bhole Baba Milk Food Industries Limited v. Union of India [Writ Tax No. 1431 of 2023 dated April 16, 2024], stating that interest and penalty for late GST deposit are not applicable when the delay is not the fault of the assessee. This ruling emphasizes the importance of assessing the circumstances surrounding tax payments before levying additional charges.

Hon’ble Allahabad High Court allowed the writ petition and held that the levy of fee and interest would arise only in case where the failure is on part of the assessee to file return and/or payment of tax due within the prescribed period of time.

Facts:

Bhole Baba Milk Food Industries Limited (“the Petitioner”) has filed the writ petition before the Hon’ble High Court for refund of the amount of interest and penalty for non-filing of return which has been debited from the Electronic Credit Ledger.

Issue:

Whether interest and penalty leviable when there is no fault of Assessee in depositing GST?

Held:

The Hon’ble Allahabad High Court in the case of Writ Tax No. 1431 of 2023 held as under:

• Noted that, the Petitioner has initiated the payment of tax within the prescribed time period in the manner prescribed for which the amount is debited from the bank account. However, the Revenue Department (“the Respondent”) states that the amount has been received at later stage.
• Opined that, the levy of fee and interest would arise only in case where the failure is on part of the assessee to file return and/or payment of tax due within the prescribed period of time.
• Held that, the writ petition is disposed of directing the Respondent to adjust the amount of interest and penalty against the tax liability.

Conclusion: The Allahabad High Court’s decision in favor of Bhole Baba Milk Food Industries Limited underscores that interest and penalty for GST delays should only be imposed when the delay is due to the assessee’s fault. This judgment provides significant relief to taxpayers, ensuring that they are not unfairly penalized for delays beyond their control, thus promoting fairer tax practices.

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(Author can be reached at info@a2ztaxcorp.com)