Article compiles Format of Draft Letter / reply against Section 50(1) GST Interest demand in respect of the Delayed payment of the Tax amount on account of Late filing of the GSTR 3B Return.

Dear Sir,

R: M/s. _____________  GSTN :
Your Letter No.———- dated——- in respect of Interest
Due U/s 50(1) received through mail.

1. This has reference to your Letter received in the mail with respect to the Interest Payable by the above referred assessee for the Period _____ to ____ in respect of the Delayed payment of the Tax amount on Late filing of the GSTR 3B Return. The quantification of the Interest payable by the assessee, in the said letter is as under:

Financial Year Interest Payable on Cash Set Off Interest Payable on ITC Set Off Total Interest Payable

2. We would like to bring your notice that Sec. 50(2) provides for the manner of the computation of the Interest and is as under:

50(2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.

We understand the manner of calculating the Interest has not yet been Prescribed. In the event it has been so done and notified, do let us know. Since the letter neither has the details of the manner of the calculation of this Interest nor the working of the Interest amount, it is difficult for us to verify the correctness of the same.

3. In this context, the decision of the Gauhati High Court in Santosh Kumar Harlalka Vs State of Assam & Ors, (1995) 2 GLR 95 becomes may more relevant here. In the above case, Section 27 of the Assam General Sales Tax Act, 1993 provided for deduction of tax at such rates and in such manner as may be prescribed. The rate and manner of deduction of tax were however not prescribed by framing the Rules. In view of the above legal anomaly the Court held as under:

“Therefore, I am of the opinion that as per the “Rules”, no rate and manner have been prescribed to deduct tax at source. In the absence of any prescribed rate and manner, the 3rd respondent has no jurisdiction to issue notice dated 5.8.93 directing the 4th respondent to deduct taxes at source and the respondent no.5 has also no authority and jurisdiction to deduct the tax at source in the manner as it is proposed. Therefore, the letter dated 5.8.93 issued by the 3rd respondent is liable to be set aside as ultra vires.”

Subsequently, in order to overcome the above Judgement, the Government of Assam amended the law prescribing the rate, but nonetheless the manner was still not prescribed. The matter again came up once again before the Gauhati High Court in Gauhati Municipal Corporation Contractor’s Association Vs Gauhati Municipal Corporation, (1996) 2 GLR 172 and the High Court held as under:

“It is a well settled law that where a power is given to do certain thing in a certain way the thing must be done in that way or not at all. In section 27(b) of the Assam General Sales Tax Act the legislature has fairly indicated that tax can be deducted at source not only on the basis of the prescribed rate but also in the manner. While making the said provision, definitely, the legislature had in its mind certain manners. It is also an established principle of law that legislature do not use any expression which is unnecessary and redundant. Taking the plain meaning from Section 27(b) of the Act, it is abundantly clear that some manner, regarding deduction of tax has to be prescribed. As this has not been done, in my opinion, no tax can be deducted at source in the present facts and circumstances of the case. Accordingly, I set aside and quash the action of respondents deducting the sales tax at source from the bills payable to the members of the petitioner-association”

4. It is trite law that when a power is given to do a certain thing in a certain way the thing must be done in that way or not at all. Other methods of performance are necessarily forbidden. The aforesaid law was laid down in Nazir Ahmad vs King Emperor, AIR 1936 PC 253(2) In State of Uttar Pradesh Vs Singhara Singh & Ors, AIR 1964 SC 358. 

The above decision was approved by the Constitution Bench of the Apex Court as well approving such proposition of law.

5. Constitution Bench of the Apex Court again in Commissioner of Income Tax Vs Anjum M.H. Ghaswala, (2002) 1 SCC 633 held as under:

“Then it is to be seen that the Act requires the Board to exercise the power under Section 119 in a particular manner i.e. by way of issuance of orders, instructions and directions. These orders, instructions and directions are meant to be issued to other income tax authorities for proper administration of the Act. The Commission while exercising its quasi-judicial power of arriving at a settlement under Section 245-D cannot have the administrative power of issuing directions to other income tax authorities. It is a normal rule of construction that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the stated itself. ….”

6. In Captain Sube Singh & Ors Vs. Lt. Governor of Delhi, (2004) 6 SCC 440, referring to the decision of the Apex Court CIT vs Anjum (supra), the Apex Court held as under:

“29. In Anjum M.H. Ghaswala {CIT v. Anjum M.H. Ghaswala, (2002) 1 SCC 633} a Constitution Bench of this Court reaffirmed the general rule that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself. The statute in question requires the authority to act in accordance with the rules for variation of the conditions attached to the permit.”

7. However based on the recommendation and the Principle of the calculation available, we would like to submit that there has been a delay in the filing of certain Returns covered by the above financial year and the Interest Payable on the Delayed Payment of the Tax has been computed and paid/being paid as under: 

Return Period Gross Tax Payable Entitled ITC Chapter V and Sec 140 Tax-Payable Due date for Payment of Tax Payable Date of Tax payment Interest Payable U/s 50(1)

 The above amount has been paid as under:

Particulars Amount Rs.
Paid with the Filing of the Return GSTR 3B
Being Paid Now

8. Interest due and payable is of compensatory nature. We would like to bring to your notice that the Supreme Court in Pratidha Processors vs. Union of India- (1996) 11 SCC 101, has held that Interest is compensatory in character and is imposed on the assessee who has withheld payment of any tax as and when it is due and payable; that the levy of interest is levied on the delay in payment of tax due and payable on the due date.  

Since the taxes paid by the Vendors of the assessee to the Government on behalf of the assessee and made available to the assessee as ITC under Chapter V, the taxes due and withheld and paid beyond the due date shall be ‘Cash paid’ taxes due only and accordingly the Interest shall be payable on such component only.

9. The principles of the above Apex Judgment has been stated and brought on the statute by the Notification No. 23/2017 dated 17th August 2017 as amended by Notification No. 24/2017 dated 21st August 2017 issued by the Commissioner, on the recommendations of the Council, and gazetted vide GSR No. 997(E ) dated 8th August 2017.

2(iii) :  where the amount of tax payable under the said Act for the month of July, 2017, as detailed in the return furnished in FORM GSTR-3B, exceeds the amount of tax deposited in cash as per item (i), the registered person shall pay such excess amount in cash in accordance with the provisions of rule 87 of the said Rules on or before 28th August, 2017 along with the applicable interest calculated from the [26th day of August, 2017] till the date of such deposit.


(ii)  tax payable under the said Act” means the difference between the tax payable for the month of July, 2017 as detailed in the return furnished in FORM GSTR-3B and the amount of input tax credit entitled to for the month of July, 2017 under Chapter V and section 140 of the said Act read with the rules made thereunder.

Chapter V deals with the Eligible ITC U/s 16 and Sec. 140 relates to the Transitional Credits under various circumstances.

Since the Interest payable based on the above parameters stands fully discharged there is no further Interest liability, particularly on the ITC component as has been stated in your said letter and there shall be no need for initiation of any recovery

10. The amount in ITC in the Credit ledger could not be adjusted against the Output liability earlier without filing of the GSTR3B return ‘programmed for filing with payment only’ on account of the fact, which has been acknowledged by the GST Council in their 31st meeting held on 22nd December 2018, that though the GST Law provides for the filing of the Return without making the payment of the taxes, the facility has ‘not yet been made available on the common portal and this inflexibility of the system increases the Interest burden which otherwise has to be only on GST Value Addition.

11. We would also like to wish to bring to your notice the circular No.128/27/2019 dated 23.12.2019 which states that every communication including e-mails from the CBIC should have a Document Identification Number (DIN), in the absence of which it would be considered as invalid communication/notice. Thereby since there is no DIN assigned to this E-Mail communication, it can be considered as invalid and not requiring us to respond. This is what we understood in the TV shows where Honourable FM has clarified. Kindly let us know if what we are saying is incorrect. We will stand corrected.

In view of the above we request you to kindly treat the Advisory in the said letter as being complied with and that there is no cause for any Interest to be determined or to be paid on the ITC.

In case you need any other information, we shall be glad to provide you the same.

Thank you

Also Read- Draft Format of Reply / Submission against notice seeking  recovery of interest on the gross tax dues on account of delayed filing of GSTR 3B.

Author Bio

Qualification: CA in Practice
Company: Harish K Lalwani and Associates
Location: Pune, Maharashtra, IN
Member Since: 29 May 2018 | Total Posts: 3

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