India Yamaha Motor Private Limited Vs Assistant Commissioner (Madras High Court)
The Hon’ble Madras High Court in M/s India Yamaha Motor Private Limited, v. the Commissioner of CGST & Central Excise [WP.No.19044 of 2019 and WMP. No. 18404 of 2019 dated August 29, 2022 ] has held that in a case where Goods and Services Tax (“GST”) Liability has not been remitted, interest under Section 50 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) is leviable even if the taxpayer has adequate credit balance in his cash ledger or credit ledger.
Facts:
M/s India Yamaha Motor Private Limited (“the Petitioner”) herein filed a monthly return in Form GSTR 3B for the month of July 2017 but noticed that there was an inadvertent error whereby the data pertaining to its plant at Faridabad was included instead of data pertaining to the Chennai plant. This swap resulted in a short disclosure of liability for the period July to October 2017 leading to the levy of interest. Thereafter, the Petitioner had filed a grievance petition before the Revenue department (“the Respondent”) seeking modification of the return for the month of July 2017 that had not been immediately disposed of/addressed by the Respondent.
Thus, the Petitioner had admittedly not filed monthly returns from the month August to October 2017, on the premise that the proper ascertainment of tax liability for the aforesaid months would be dependent upon the adjudication of its grievance petition.
Meanwhile, the order (“the Impugned Order”) has been passed by the Respondent whereby the Petitioner was directed to pay interest of Rs. 5 crores for belated remittance of GST.
Being aggrieved by the Impugned Order, this petition has been filed.
Argument by the Petitioner:
The Petitioner contended that they had sufficient input tax credit (“ITC”) balance in both the electronic cash ledger as well as the electronic credit register during the period. Thus, there had been no loss caused to the revenue and hence no justification to levy interest since the interest is only compensatory in nature.
Issue:
Whether the interest leviable despite the availability of credit balance in cash/credit ledgers, if no payment of GST was made for the impugned period?
Held:
The Hon’ble Madras High Court in WP.No.19044 of 2019 and WMP.No.18404 of 2019, held as under:
The Court discarded the Petitioner’s argument that it had sufficient balance lying in the electronic cash ledger as well as the in the electronic credit register and that there had been no loss to the Respondent, apprising that credit cannot, prior to availment be taken to construe the payment.
The Court envisaged that there were many numbers of situations where ITC may be found to have been availed erroneously or on a mistaken interpretation of the law, thus, it would be risky, to state as a general proposition that the mere availability of balance in electronic credit should be assumed to be utilization that would protect the Petitioner from interest levy.
Further, the Court disapproves the Petitioner’s reliance on the decision of Hon’ble Apex Court in UOI vs Bharti Airtel Limited & Ors [Civil Appeal No. 6520 of 2021 dated October 28, 2021], which case pertained to the timelines for filing of GSTR-3B and revision thereof and not the issue of the instant case.
The Court declined to insulate the Petitioner from levy of interest as per Section 50 of the CGST Act for belated remittance of GST for the period from July 2017 to October 2017, held that unless the Petitioner actually files a return and debits the respective registers, the Respondent cannot be expected to assume that available credits will be set-off against tax liability.
Therefore, the demand of interest as per the impugned order stands confirmed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner is an assessee under the provisions of the Tamil Nadu Goods and Service Tax Act, 2017, (‘TNGST Act’/‘Act’) and has challenged an order dated 10.04.2019 wherein the respondent calls upon it to remit interest of a sum of Rs.5,00,00,000/- (approx.) for belated remittance of Goods and Service Tax (‘GST’) for the period from July, 2017 to October, 2017.
2. When the matter had come up before me on 16.12.2020, I had passed the following order:
“Heard Mr.Prasad, learned counsel for the petitioner and Mr.Santhanaraman, learned Standing Counsel for the respondents.
2. Impugned order dated 10.04.2019 calling upon the petitioner to remit interest for the belated payment of GST has, admittedly, been passed without a pre-intimation notice/show cause notice. However, without having to set aside the impugned order, it would suffice that a direction be issued to R2, who is the jurisdictional Commissioner, to consider representation dated 28.09.2017 wherein the factual matrix of the matter has been set out in detail.
3. It appears that while seeking to file a return for the month of July, 2017, an error was discovered therein, as a result that the return was merely ‘filed’ and not ‘submitted’ and the process was aborted at that stage. According to the petitioner, the output tax liability has been remitted in full into the cash ledger even prior to the ‘filing’ of the return. The petitioner has been making efforts to correct the error and to obtain opening of the GST portal in order that the corrected return could be filed, to no avail. According to the petitioner, the cascading effect of the aforesaid events have led to the subsequent monthly returns being delayed well as, till such time the error in the July return is rectified, the proper determination of output tax liability for the subsequent months cannot be made.
4. The petitioner will appear before R2 on 23.12.2020 at 10.30 a.m. without expecting any further notice in this regard. The Commissioner/R2 will hear the petitioner, either over video conference or physical hearing, consider the representation of the petitioner dated 28.09.2017 along with any other material that may be supplied and pass orders thereupon within a period of four (4) weeks from today.
5. List this on 25.01.2021 for production of orders.”
3. Consequent upon the direction as aforesaid, the petitioner has appeared before the respondent and advanced submissions, pursuant to which, an order has been passed on 18.01.2021 accepting one portion of the submissions made. The petitioner has sought and has been granted permission to raise additional grounds addressing what remained of the grievance under order dated 10.04.2019, as covered under order dated 18.01.2021 and the respondent has also filed an additional counter. Pleadings are thus complete.
4. What follows in the succeeding paragraphs of this order addresses the contents of order dated 18.01.2021 alone, and the prayer in this writ petition thus stands moulded, to this extent. The levy of interest u/s 50 of the Act, arises from the fact that when the petitioner filed a GSTR 3B return for the month of July, 2017, there was an inadvertent error whereby the data pertaining to its plant at Faridabad was included instead of data pertaining to the Chennai plant.
5. This swap resulted in a short disclosure of liability for the period July to October 2017 leading to the levy of interest. The petitioner had filed a grievance petition seeking modification of the return for the month of July 2017 that had not been immediately disposed/addressed by the authorities.
6. Thus, the petitioner has admittedly not filed monthly returns for the months August to October 2017, on the premise that the proper ascertainment of tax liability for the aforesaid months would be dependent upon the adjudication of its grievance petition as above. According to the petitioner, it was for this reason that the petitioner did not file returns for the later periods, as a measure of containing the cascading effect of the error that had transpired in the return for July 2017.
7. The remittance of taxes for the subsequent periods are admittedly belated, and the period of delay and consequent levy of interest, are as tabulated below:
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