A.M Distributors Vs Assistant Commissioner (Kerala High Court)
Summary: The petitioner, A.M Distributors, a taxpayer under the CGST/KGST Act, challenged Exts.P2 and P2A notices issued by the first respondent demanding interest under Section 50 of the CGST Act for belated filing of returns during 2017-2018 and 2018-2019.
The petitioner contended that the interest demand was unsustainable because sufficient amounts were available in its electronic credit ledger during the relevant period. Relying on the proviso to Section 50 of the CGST Act, the petitioner argued that, for belatedly furnished returns, interest is payable only on the portion of tax discharged by debit to the electronic cash ledger and that no interest is contemplated on the portion discharged from the electronic credit ledger. The petitioner also relied upon the observations of the Rajasthan High Court in Swift Motors v. Central Goods and Service Tax Department, Civil Writ Petition No.2415 of 2020.
The Kerala High Court found merit in the petitioner’s submission. It examined Section 50(1), which generally provides for interest where a taxpayer fails to pay tax within the prescribed period, together with the proviso specifically dealing with interest in cases of belated filing of returns. According to the Court, the proviso confines the accrual of interest, in the circumstances covered by it, to the portion of tax paid by debiting the electronic cash ledger and does not contemplate interest on payments made by debiting the electronic credit ledger.
