The interest liability u/s 50, is attracted on the Tax remained unpaid beyond the due date. Since the word “remained” has been used after the word “tax”, it goes to conclude that the legislature’s intention is to recover interest on the net tax liability. The term ‘Tax remained unpaid’, can not be interpreted to mean “tax chargeable under this Act” (i.e., gross tax liability on output supply), ignoring the basic cannons of interpretation of Taxing Statute that “every taxing statue including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly[1]. It is settled proposition of law that taxing statutes are to be interpreted literally[2] and nothing could be added to what is stated in the statute itself[3]. The court only interprets the law within the four corners of the Act and cannot legislate it under the disguise of interpretation. In case a provision of law is misused and subjected to the abuse of process of law, it is for the legislature to amend, modify or repeal it.[4] Section 50, CGST Act, 2017, no where prescribes levy of interest on the total amount of output tax without deducting the available credit of input tax.
Moreover, section 16(2)(d) stipulates “furnishing of return u/s 39 for entitlement of ITC”. This clause nowhere mentions “timely submission of returns and further starts with “notwithstanding clause”, meaning thereby that it supersedes all the sub-sections of section 16.
As such, in our view, if a registered person has furnished returns belatedly, he is entitled to ITC.
Moreover, in a recent judgment, the Hon’ble High court of Gujarat has held that GSTR-3B is not a return but ‘only a temporary stop gap arrangement till due date of filing the return in Form GSTR-3 is notified by the Govt.’[5].
The legislature has recently added a “proviso” in section 50, CGST Act, 2017 by the Act No.23 of 2019, which has received assent of the President of India on 1.8.2019, by which section 50 has been amended so as to provide for, charging interest only on the net tax liability.
However the cases, where tax is paid subsequent to initiation of any proceedings u/s 73 or 74 of the Act, have been kept ‘out of purview of this amendment’.
This amendment has overlooked the express provisions of the Act. And inserting such a proviso, would be against the Ratio decidendi of Hon’ble Supreme Court as mentioned above as well as the Constitution of India. Moreover, this amendment is silent over the interpretation on the charging of interest since 1.7.2017 till the proposed date of implementation.
In our view, the exception in the proviso, is against the express provisions of S.50, CGST Act, 2017, which uses the words, “Tax remained unpaid beyond the due date”.
Incidentally, the following facts are also to be taken into account;
Interest is ordinarily claimed from an assessee who has withheld payment of any tax payable by him and it is always calculated at the prescribed rate on the basis of the actual amount of tax withheld[6]. The term “tax payable” is the amount of tax leviable under the Act less the amount of input tax credit.
In view of the above, we are of the view that Interest is payable on the net tax liability (output tax―input tax), which can be termed as “Tax remained unpaid”, as per section 50 of CGST Act, 2017
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[1]. (2018) 30 J.K.Jain’s GST & VR 105 Commissioner of Customs v. Dilip Kumar and Company SC
[2]. (20117) 28 J.K.Jain’s GST & VR 162 State of Karnataka v. M.K. Agro Tech Pvt. Ltd. SC
[3]. (2011) 16 J.K.Jain’s Vat Reporter 120 Eureka Forbes Limited v. State of Bihar and Ors. SC
[4]. (2006) 6 Vat Reporter 25 Vemareddy Kumaraswamy Reddy v. State of A.P. SC
[5]. (2019) 32 J.K.Jain’s GST & VR 1 AAP and Co. v. Union of India & Ors. (Guj)
[6]. (1981) 48 STC 466 Associated Cement Co. Ltd. v. Commercial Tax Officer SC
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