Assessee should approach GST Commissioner to seek relief for interest payment in instalments

The Best Recharge Vs Deputy Commissioner (ST) (Madras High Court)

Assessee should approach Commissioner under Section 80 of CGST Act to seek relief for payment of interest in instalments

The Hon’ble Madras High Court in Best Recharge v. Deputy Commissioner (ST) GST [W.P. (MD) NO. 9041 of 2024 and W.M.P (MD) NO. 8258 of 2024 dated April 15, 2024] directed the assessee to approach the Commissioner under Section 80 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) for seeking relief for payment of interest in monthly instalments pertaining to disputed tax already paid on account of excess wrongful availment of Input Tax Credit (“ITC”).

Facts:

M/s. Best Recharge (“the Petitioner”) had availed excess ITC than available in GSTR-2A; hence, the adjudicating authority initiated the proceedings to recover the tax along with interest on the excess credit availed by the Petitioner.

The Petitioner, prior to the adjudication order, deposited the excess claimed ITC. However, the adjudicating authority in the Order in Original dated September 02, 2022 levied the interest @ 24% on the excess ITC availed.

Aggrieved by the levy of interest, the Petitioner filed an appeal before the first appellate authority under Section 107 of the CGST Act.

The Appellate Authority vide Appeal No. AP/GST/T/13/2023, dated March 07, 2024 rejected the contention of the Petitioner of reducing the interest rate from 24% to 18% and making payment of interest in instalments.

The appellate authority rejected the appeal on the ground that the same is not under the jurisdiction of section 107 of the CGST Act.

Aggrieved by the order of the first appellate authority, the Petitioner filed a writ petition before the Madras High Court praying to quash the order passed by the first appellate authority and consequently direct the waiver of all further payments demanded.

The Petitioner contended that it had paid the excess claimed tax prior to the issuance of an order by the adjudicating authority. Thus, there should not be any further demand of interest.

Issue:

Whether the Appellate Authority u/s 107 of the CGST Act has the jurisdiction to reduce the rate of interest on tax liability arising due to the reversal of wrongfully availed ITC before passing the adjudication order under GST?

Held:

The Hon’ble Madras High Court in W.P. (MD) NO. 9041 of 2024 and W.M.P (MD) NO. 8258 of 2024, held as under:

• Observed that, the order passed by the first appellate authority does not require any interference as the order does not suffer from any of the vices which requires it to be reviewed under Article 226 of the Constitution of India.
• Stated that, since the Petitioner has paid the disputed tax, the only relief the Petitioner can seek is for payment of interest in instalment for which the Petitioner has to approach the Commissioner under Section 80 of the CGST Act.
• Dismissed the Writ Petition.

Our Comments:

As per the amendment made vide Section 116 of the Finance Act, 2022, the Central Government has reduced the rate of interest from 24% to 18% on the ITC wrongly availed and utilised ITC with a retrospective date of July 01, 2017.

Therefore, the interest that would have been levied by the adjudicating authority should be 18% and not 24%.

Conclusion: Best Recharge’s appeal denial highlights the complexities of tax disputes under the CGST Act. While the court upheld the appellate authority’s decision, it provided clarity on the appropriate course of action for seeking interest relief. Assessees should approach the Commissioner under Section 80 of the CGST Act to explore options for paying interest in instalments, ensuring compliance with statutory provisions and procedural requirements.

As the case concludes, it sets a precedent for similar disputes, guiding taxpayers and legal practitioners in navigating the intricacies of GST laws and procedures. Understanding the nuances of jurisdiction and available remedies is crucial for effectively addressing tax-related challenges and securing favorable outcomes.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

Writ Petition is filed for issuance of a Writ of Certiorarified mandamus for a direction to call for the records on the file of the 1st respondent and quash the appeal No.AP/GST/T/13/2023 dated 07.03.2024 passed by the 1^st respondent consequently direct the 2^nd respondent to waiver the all further payments demand by the 2^nd respondent within stipulated period.

2. The petitioner has filed this Writ Petition against the impugned order dated 07.03.2024 in Appeal No. AP/GST/T/13/2023. By the aforesaid order, the 1^st respondent has dismissed the appeal of the petitioner against the order dated 02.09.2022 passed by the 3^rd respondent in his proceedings bearing Ref.No.GSTIN:33FVJPS4934J1Z1/2019-20. By the aforesaid order, the 3^rd respondent has called upon the petitioner to pay interest for a sum of Rs.7,53,258/-as detailed below:

The specific case of the petitioner is that the petitioner had surrendered the registration which is also accepted by the respondent by their order dated 20.12.2022 in their proceedings bearing reference in Form GST REG-19 under Rule 22(3) of the GST Rule,2017. It is submitted that the amount was paid prior to the order dated 02.09.2022 bearing Ref.No.GSTIN:33FVJPS4934J1Z1/2019-20 of the 3^rd respondent in good faith and bonafide belief that the respondent would not demand tax or further interest. It is submitted that the appeal filed by the petitioner before the 1^st respondent has been wrongly rejected and since the Appellate Tribunal has not been constituted has filed this Writ Petition to review the order passed by the 1^st respondent Deputy Commissioner(ST) GST (Appellate Authority)/1^st respondent herein.

3. Opposing the prayer, learned counsel for the respondents would submit that there is no estoppel and in any event petitioner is duty bound to pay interest on the admitted tax liability. It is therefore submitted that there is no scope for reducing the tax liability or the interest thereon. It is submitted that question of reducing the interest or giving the petitioner a liberty to pay interest in installment cannot be granted by the 1st respondent in his Appellate jurisdiction U/s. 107 of the TNGST Act, 2017. Learned counsel for the respondents would submit that if at all it is open for the petitioner to approach the Commissioner U/s. 80 of the TNGST Act, 2017.

4. I have considered the arguments advanced by the learned counsel for the petitioner and the respondent. The operative portion of the impugned order reads as under:

“ 4.ORDER

Tvl. Best Recharge (herein after referred os Appellant) 88B, West Car Street Vikramasingapuram, Tirunelveli 627 425. The tax payer has availed excess ITC than available in GSTR2A hence the Adjudicating authority has levied tax and interest. The appellant has agreed and reversed the tax but has filled. peal for the levy of interest.

The appellant has mentioned that the Business is not good and requested to pay the interest @ 18% and Rs.5000/- in monthly installment.

The interest for wrong claim of ITC is levied u/s 50(3) of the act for which interest is levied @18% the relevant section is read below:

3) Where the input tax credit has been wrongly availed and utilised, the registered per 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 otanne as may be prescribed.

Hence the reduction of interest rate cannot be considered. Further the appellant has requested to pay the interest in instalment in each month. The section 80 of the act specifies that the commissioner only has the power to determine the payment of tax in instalment. The relevant section is read below:

Payment of tax and other amount in instalments.

80. On an application filed by a taxable person, the Commissioner may, for reasons to be recorded in writing, extend the time for payment or allow payment of any amount due under this Act, other than the amount due as per the liability self-assessed in any return, by such person in monthly instalments not exceeding twenty four, subject to payment of interest under section 50 and subject to such conditions and limitations as may be prescribed:

Provided that where there is default in payment of any one instalment on its due date, the whole outstanding balance payable on such date shall become due and payable forthwith and shall, without any further notice being served on the person, be liable for recovery.

Hence the appeal filed by the appellant cannot be considered and the order passed by the adjudicating authority is valid.”

5. In my view the order does not call for any interference. The order does not suffer from any of the vices which would render the impugned order amenable/susceptible to a review under Art.226 of the Constitution of India. The order is also well reasoned and also does not suffer from any short coming. Therefore, the Writ Petition is liable to be dismissed. However, considering the fact that the petitioner has paid the disputed tax on 27.07.2022, the only relief the petitioner can seek is for payment of interest in installment. As per Sec.80 of the TNGST Act,2017, the petitioner has to approach the Commissioner. Considering the same, this Writ petition is dismissed with liberty to the petitioner to approach the Commissioner within a period of 30 days from the date of receipt of this order.

6. Pending disposal of such application further recovery proceedings shall be kept in abeyance. It is made clear that in case if the petitioner fails to file such an application within 30 days from the date of receipt of a copy of this order, the respondents are at liberty to proceed against the petitioner in accordance with law. No costs. Consequently, connected Writ Miscellaneous Petition is closed.

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