In Shree Nanak Ferro Alloys (P.) Ltd. v. Union of India, it is held by High Court of Jharkhand that interest is not payable by the petitioner where petitioner had inadvertently paid tax under head CGST, instead of IGST, and as such it was not a case of short payment.
Facts of the Case:- The petitioner is a company registered under the provisions of the CGST Act 2017 and filed its GSTR-1 for month of September, 2017 showing his total IGST liability for that month at Rs. 74.51 lakhs. The CGST liability to be Rs. 2.68 Lakhs and SGST liability for Rs. 2.68 Lakh.
Subsequently, the petitioner submitted its GSTR- 3B, in which the Integrated Tax liability was shown to be Rs. 32.52 Lakhs as against the actual liability of Rs. 74.51 Lakhs and Central Tax liability was shown to be Rs. 44.67/Lakhs – as against the actual liability of Rs. 2.68 Lakhs.
In other words, in the liability shown under the IGST there was a deficient liability amounting to Rs. 41.98 Lakhs whereas in the CGST the excess was shown to the tune of Rs. 41.98 Lakhs, and the tax was also paid accordingly.
This remained unnoticed for a period of about one year, and subsequently by letter dated 01.11.2018, the petitioner Company was informed that in course of audit by CERA, it was observed after the scrutiny of GSTR-1 and GSTR-3B filed by the petitioner, that the petitioner had short paid Integrated tax to the tune of Rs. 41.98 Lakhs and accordingly, the petitioner was asked to make the payment along with the interest.
Provision under CGST Act 2017/ IGST Act :- As per section 77(1) of the CGST Act, A registered person who has paid the Central tax, on a transaction considered by him to be an intra-State supply, but which is subsequently held to be inter-State supply shall be entitled to the refund of the tax amount so paid.
In the similar manner, it is provided under section 19(2) of the IGST Act, that the registered person, who has paid Central tax, on a transaction considered by him to be a intra-State supply, but which is subsequently held to be an inter-State supply, shall not be liable to pay interest on the amount of the Integrated tax payable.
Submission by the Petitioner :- It is submitted by learned counsel for the petitioner that actually there was no short payment of tax by the petitioner, rather, the payment of tax was made under the wrong head in CGST, in which there was no liability of that amount. The tax was paid well within time and the mistake had occurred due to the fact that it was the early phase of the implementation of the GST regime.
The Company had actually paid the amount of the IGST of Rs. 41.98 Lakhs but inadvertently it was paid under the head of CGST, instead of IGST, and as such it was not a case of short payment, rather, it was the case of payment of IGST under a different head.
it was only a bona fide mistake on part of the petitioner, inasmuch as, in their return GSTR-3B, the petitioner Company had inadvertently classified the transaction to be the intra-State supply, whereas it was actually an inter-State supply. while filing GSTR-1, the Company was aware about the nature of the outwards supply at the time of supply itself, regarding its nature being inter-State. However, while filing GSTR-3B, the stand which was correctly taken in GSTR-1 had now been changed.
It is also shown that for making the deposit of the tax under the CGST head, the amount of Rs. 43.61 Lakhs was deposited by the petitioner in its electronic cash ledger, in cash, and thereafter from the same electronic cash ledger the tax was paid under the CGST head.
It is submitted by learned counsel for the petitioner that had there been any otherwise intention of the petitioner Company, the petitioner would not have deposited the cash in its electronic cash ledger for making the payment of IGST, as the same amount could have been utilised by the petitioner in the electronic cash ledger to be used for IGST head as well.
The petitioner further submitted that under section 77(1) of the CGST Act, the petitioner was fully entitled to get the refund of the CGST paid by him wrongly, and at the same time was not liable to pay any interest, under the provision of section 19(2) of the IGST Act.
The Petitioner is also ready to make payment of tax under IGST head if so directed, within a week, and to claim the refund of the tax paid by him under the CGST head, or claim the adjustment thereof against their future liabilities, but learned counsel submits that in no case interest is payable by the petitioner Company.
Submission by the Respondent :-
It is submitted by the learned counsel that filing of the form GSTR-1 clearly indicated that the petitioner was fully aware of the nature of the supply that it was inter-State supply made by the petitioner, and accordingly, the GSTR-3B was filed by the petitioner intentionally showing their liability under the IGST to be only Rs. 32.52 Lakhs and also wrongly showing CGST liability to be Rs. 44.67 Lakhs /- for the reasons best known to the petitioner.
Learned counsel for the CGST has further submitted that there is no provision for transfer / adjustment / utilization of paid tax from one head to the other head and accordingly, the submission of the petitioner could not be acceded to.
Learned counsel has also drawn attention towards Article 269-A of the Constitution of India, to show that though it is the Central Government which realises the tax under the IGST head, but it also includes the proportion of the tax of the State to which it may be applicable, and accordingly, it is submitted by learned counsel that by the extra payment of CGST, though the tax was paid in the coffer of the Central Government, but the concerned State was denied of its proportion in the tax deposited by the petitioner, and accordingly, the liability of the interest shall be made out.
Learned counsel for the CGST has also drawn attention towards section 49(3) of the CGST Act, to show that the amount available in the ‘electronic cash ledger’ may be used for making any payment towards tax or other dues under the provisions of this Act, i.e., only under the CGST head, and there is no such provision as is available for ‘electronic credit ledger’ under section 49(4) and (5), for using that ledger for payment of the tax either in the IGST head or CGST head or even in the State head. It is submitted by learned counsel that since in the present case, the payment was made through ‘electronic cash ledger‘ and not through ‘electronic credit ledger’, there cannot be any adjustment of the tax paid by the petitioner, from CGST to IGST head.
Learned counsel for the CGST further submits that section 77 of the CGST Act, or section 19 of the IGST Act, shall not be applicable in the case of the petitioner, due to the wordings of these provisions, which show the bona fides of the registered person who pays the tax, and the cases where the tax is paid under the wrong head deliberately, as in the case of the petitioner Company, which filed the GSTR-1 correctly, and GSTR-3B changing the stand deliberately, these provisions shall not apply.
Jharkhand High Court’s Decision
It is held by the Jharkhand High Court that admittedly, the petitioner Company had discharged their tax liability under the IGST head, but inadvertently or otherwise, the petitioner deposited the amount under the CGST head. It is not the case that the petitioner Company has concealed the transaction or has committed any fraud in discharging its tax liability. It is a plain case in which the tax has been paid by the petitioner to the Central Government, but not under the IGST head, rather under the CGST head
The contention of learned counsel for the CGST is that there was some ulterior motive behind the deposit of tax under the CGST head. Had there been otherwise intention on the part of the petitioner, the same cash could have been deposited by the petitioner in the electronic cash ledger used to deposit the tax under the IGST head, possibly no benefit was going to be derived by the petitioner Company. In that view of the matter, we are not in a position to doubt the bona fides of the petitioner Company, that due to the initial stage of the CGST regime, there might be some confusion, and the cash was wrongly deposited in the wrong electronic cash ledger.
The contention of the learned counsel for the CGST that these provisions are for the persons acting bona fide, may also be accepted, but there is nothing on the record of this case to show that the petitioner Company had not acted bonafidely, particularly in view of the fact that the transaction relates to the early stages in which the GST regime had been implemented, and there might be some confusion prevailing at that initial stage. In that view of the matter, we do not find any plausible reason whatsoever, to deny the petitioner Company the benefit of the provisions of section 77 (1) of the CGST Act, read with section 19(2) of the IGST Act.
In view of the above , It is held the petitioner can deposit the amount of tax within a week and shall either claim the refund of the amount wrongly deposited under the CGST head, or the same may be adjusted against their future liabilities under the CGST head.
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