Introduction: The Madras High Court’s recent judgment in the case of M/s. Eicher Motors Limited has shed light on crucial aspects of GST payments, interest, and the use of Electronic Cash Ledger. This article delves into the court’s findings and analyzes the implications for taxpayers.
The question whether the taxpayer/registered person shall be liable to pay interest of the GST amount, which was routinely deposited in the Electronic Cash Ledger within due time, has been examined in details by the Hon’ble Madras High Court in the matter of M/s. Eicher Motors Limited vs. The Superintendent of GST and Central Excise & The Assistant Commissioner of Central Ax & Central Excise, Chennai (W.P. No. 16866 & 22013 of 2023 and W.M.P. No. 32200 of 2023, Judgment reserved on 22.12.2023 and pronounced on 23.01.2024).
The Hon’ble Court ruled that when the tax amount has been credited to the Government within prescribed time limit i.e. before due date, the question of payment of interest would not arise.
Whether before filing of the FORM GSTR-3B, the tax should have been paid?
Yes- The legal position, in this regard, has been examined by the Hon’ble Madras High Court in the matter of M/s. Eicher Motors Limited (supra).
The provisions of Section 39(1) of the CGST Act, 2017 which reads as follows:
“39. Furnishing of returns.— (1) Every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10 or section 51 or section 52 shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars, in such form and manner, and within such time, as may be prescribed, on or before the twentieth day of the month succeeding such calendar month or part thereof.”
A reading of the above provision, it is reveal that every Registered person has to file the returns for every calendar month or part thereof electronically to furnish the following details:
a) inward and outward supply of the goods or services or both;
b) input credit available;
c) tax payable;
d) tax paid;
e) such other particulars;
In view of the above, it is clear that in the monthly returns i.e., Form GSTR-3 or GSTR-3B, it is mandatory to provide the details about the tax paid, which means that prior to filing Form GSTR-3B, the tax should have been paid by the registered person as provided in Section 39(1) of the CGST Act, 2017.
What is the last date for payment of tax, by a registered person, to the Government?
The said question has been examined by the Hon’ble Madras High Court in the matter of M/s. Eicher Motors Limited (supra).
The provisions of Section 39(7) of the CGST Act, 2017 which reads as follows:
“39. (7) Every registered person, who is required to furnish a return under sub-section (1) or sub-section (2) or sub-section (3) or sub-section (5), shall pay to the Government the tax due as per such return not later than the last date on which he is required to furnish such return.”
By reading the above provisions, every registered person, who is required to furnish the returns under Sub- Section (1) of Section 39 of the CGST Act, 2017, shall pay the tax dues to the Government as per such return not later than the last date, on which he is required to furnish such return.
Thus, it is clear that not later than the last date of filing of Form GSTR-3B, i.e., on or before 20th of every month, the tax should have been paid to the Government. The last date for payment of tax to Government would be the date not later than the last date on which he is required to furnish the monthly return. Thus, for payment of tax to Government filing the monthly returns is not the matter but the last date for furnishing the monthly return is important. Thus, whether the monthly return is filed in time or not but the GST has to be remitted not later than the last date for filing the monthly returns.
Whether the tax liability shall be deemed to be discharged when tax amount is transferred to Electronic Cash Ledger? (Answer -Yes)
or
Whether the instance of payment of tax to Government would occur only upon the filing of GSTR-3B return and thereafter by debiting the electronic credit ledger or electronic cash ledger? (Answer -No)
or
Whether the liability to pay GST will be discharged only after filing the GSTR-3B? (Answer -No)
The above questions have been examined by the Hon’ble Madras High Court in the matter of M/s. Eicher Motors Limited (supra). Whenever, the GST has been paid by using FORM GST PMT-06, the tax liability will be discharged to that extent. In case of payment of tax liability by using the FORM GST-PMT-06, it will be first credit to the account of the Government and thereafter only, it will be deemed to be credited to the Electronic Cash Ledger.
The provisions of Section 49(11) of the CGST Act, 2017 which reads as follows:
“49. Payment of tax, interest, penalty and other amounts.— (11) Where any amount has been transferred to the electronic cash ledger under this Act, the same shall be deemed to be deposited in the said ledger as provided in subsection (1).
Explanation: For the purpose of this Section,-
(a) the date of credit to the account of the Government in the authorised bank shall be deemed to be the date of deposit in the electronic cash ledger;
(b) the expression,-
(i) “tax dues” means the tax payable under this Act and does not include interest, fee and penalty and
(ii) “other dues” means interest, penalty, fee or any other amount payable under this Act or the Rules made thereunder;”
A reading of the above explanation makes it clear that the date of credit to the account of Government in an authorised bank shall be deemed to be the date of deposit in the Electronic Cash Ledger. Therefore, once the Form GST PMT-06 is generated and if any amount is paid through the said form in the authorised bank, the same will be credited to the account of the Government and thereafter only, it will be deemed to be credited to the Electronic Cash Ledger. When the GST is paid by using Form GST PMT-06, it will be credited in the following manner:
1) First the GST amount will be credited to the account of the Government;
2) Secondly, the date, on which it is credited to the Government, is deemed to be the date of deposit in the Electronic Cash Ledger.
Thus, it is clear that in terms of Section 39(1) of the CGST Act, 2017, while filing the monthly returns in Form GSTR-3 or GSTR-3B, the registered person/assessee has to state the amount of tax paid, which means before the filing of returns, the tax should have been paid. Further, Section 39(7) of the CGST Act, 2017 states that the tax should have been paid to the Government before the last date for filing the GSTR-3B returns, which means the instance of payment of tax would occur not later than the last date of filing of GSTR-3B returns. Thus it is immaterial whether GSTR-3B is filed within due date or not for remittance of tax to the account of Government.
In view of the above, it is not correct to state that the instance of payment of tax to Government would occur only upon the filing of GSTR-3B return and thereafter by debiting the electronic credit ledger or electronic cash ledger. The assessees have been maintaining said ledgers, only for the purpose of accounting, while, the entire tax to be paid to the Government directly by using the Form GST PMT-06 not later than the last date for filing the Form GSTR-3B.
The GST, which has been collected by a registered person by virtue of sale or otherwise, is the amount of the Government and thus, the same cannot be retained by any registered person/assessee forever at least up to the date of filing of GSTR-3B returns but immediately. As soon as the collection is made, the said amount shall be deposited in the account of Government by generating Form GST PMT-06, since the said amount is belonging to the Government. Thus, once it is deposited, it should be made available to the Government for their use and the Government cannot wait or postpone the utilisation of the said amount until the date of filing of the GSTR-3 or GSTR-3B by the registered person. At any cost, the exchequers cannot be deprived of its right to utilise the amount deposited into the Government account under the pretext of non-filing of GSTR-3B monthly returns.
Before the introduction of Electronic Cash Ledger and Electronic Credit Ledger, a registered person used to maintain a physical ledger and the same has been now converted into the Electronic form of cash/credit Ledgers. Ultimately, the assessees/registered person, who have been maintaining these ledgers would quantify their tax liability for the relevant month and to ensure as to whether the said tax liability has been paid to the Government or not and to determine the eligibility for refund, if any, etc. Only for the said limited purposes, the Electronic Cash Ledger and Electronic Credit Ledger have been maintained and it is not that the tax liability would be discharged only on the date when the GSTR-3B has been filed. But it is ultimate proof/account for discharge of tax liability. The said discharge of tax liability will happen on different date, which is prior to the filing of GSTR-3B monthly return, in terms of provisions of Section 39(1) and 39(7) of the CGST Act, 2017, whenever the GST payment is remitted to the account of Government by the registered person.
Whenever, the GST has been paid by using Form GST PMT- 06, the tax liability will be discharged to that extent. Thus, the filing of GSTR-3B would ensure the complete discharge of GST liability by the registered person through the accounting entries in the respective ledgers. Hence, it does not mean that only when the GSTR-3B is filed, the Government can utilise the GST collection made by the registered person i.e., it is not that until the filing of monthly returns, the registered person can retain the said amount in the Electronic Cash Ledger or Electronic Credit Ledger forever. From the moment it is deposited by generating GST PMT-06, it is the money of the exchequers, since the money was collected only under the name of the exchequer in the form of GST.
Further, a combined reading of aforementioned provisions of Section 39(1), 39(7) and Explanation (a) to Section 49(11) of the CGST Act, 2017 along with Forms viz., Form GST PMT-06, Form GSTR-3 and Form GSTR-3B makes it clear that the payment of tax will always be made not later than the last date for filing the GSTR-3 or GSTR-3B monthly returns, i.e., on or before 20th of every month. Therefore, to say the GST can be paid (or tax liability shall be discharged) only after filing the GSTR-3B, is against the provisions of Sections 39(1), 39(7) and Explanation (9) to Section 49(11) of the CGST Act, 2017.
Further, Section 49(1) of the CGST Act, 2017 deals with the amount to be credited to the Electronic Cash Ledger i.e., every deposit made towards the tax, interest, penalty, fee or any other amount shall be credited to the Electronic Cash Ledger of such person to be maintained in such manner as may be prescribed.
The provisions of Section 49(1) of the CGST Act, 2017 which reads as follows:
“49. Payment of tax, interest, penalty and other amounts.— (1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed.
(2) ……………….
(3) The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of this Act or the rules made thereunder in such manner and subject to such conditions and within such time as may be prescribed.
(4)…………….
(5)……………
(6) The balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest, penalty, fee or any other amount payable under this Act or the rules made thereunder may be refunded in accordance with the provisions of section 54.”
Section 49(3) of the CGST Act, 2017 states that the amount available in the Electronic Cash Ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount etc., which means upon payment of tax by a registered person under the IGST, CGST, SGST, if any excess amount is available under any particular head, the said person can utilise said amount against other heads of tax liabilities, if there is any due. The amount available under one head can be utilized against the other head in terms of the provisions of Section 49(3) of the Act.
Further, as discussed above, the explanation (a) to Section 49(11) of the Act clearly states that any tax amount, which is to be paid by generating GST PMT-06, will be directly credited to the account of the Government and thereafter, for the purpose of accounting, it would deemed to be credited to the Electronic Cash Ledger, which is only for the limited purpose of the quantification of the liability towards GST and to verify as to whether the entire liability has been paid/ deposited/ discharged by the registered person in accordance with the provisions of the Act and Rules made thereunder. It is not that the discharge has been made only when the debit entries are made since whenever the amount is deposited or credited to the Government, that will be the actual date of discharge of tax liability to the extent of deposit and the ECL is only a ledger which will ultimately ensure the discharge of tax liabilities are made in time as per the due date.
Section 49(6) of the Act states that the balance amount in electronic cash ledger or electronic credit ledger after the payment of tax/interest/penalty/fee or any other amount, payable under the Act and Rules made thereunder, will be refunded in accordance with Section 54 of the Act.
Further, Section 54(12) of the Act deals with the payment of interest at the rate of 6% for the delay in refund of GST. If there is any delay in refund of GST in terms of Section 54(12) of the Act, the Government has to refund the same along with interest. However, respondent in the aforesaid case had contended that no tax amount will be passed on to the Government until the filing of Form GSTR-3B. In such case, merely for taking the refund from ECL, without even passing on the said amount to the Government, why should the Government has to pay the interest for delay in refund at the rate of 6%? Therefore, the submission of the respondent, that no tax amount will be passed on to the Government until filing of GSTR-3B, would be contrary to Section 54(12) read with 39(7) of the Act.
The respondent’s further contention was that as long as the amount is available to the credit of Electronic Cash Ledger, the tax amount would be retained until the suitable debit entries are made by filing GSTR3B. If it is so, then why should Section 54(12) of the Ac dealt with the refund with interest for getting back the excess amount of tax paid by a registered person. Therefore, as discussed above, Electronic
Cash Ledger is maintained only for the accounting purpose and ultimately to determine the final tax liability and to verify the payment of said tax liability within the time prescribed under the Act and Rules made thereunder as discussed herein above.
Whether the proviso to Section 50(1) can override Section 50(1) of the CGST Act, 2017 or can go beyond the scope of the provisions of Section 50(1) of the CGST Act, 2017?
The said issue has been examined by the Hon’ble Madras High Court in the matter of M/s. Eicher Motors Limited (supra).
The provisions of Section 50(1) of the Act, which reads as follows:
“50. Interest on delayed payment of tax.— (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council”
A reading of the above provision makes it clear that every person, who is liable to pay the tax in accordance with the provisions of the Act and Rules made thereunder, but fails to pay the tax within a prescribed period, which remains unpaid, shall pay on his own interest at such rate not exceeding 18% per annum.
The aforesaid Section deals with the interest, which has to be paid, if the tax is not paid within the prescribed period. If such being the case, what would be the prescribed period? To answer this, the provisions of Section 39(7) of the CGST Act, 2017 have been already analyzed above. So, the tax shall be paid to the Government not later than the last date, on which he required to furnish the monthly returns in terms of Section 39(7) of the Act, otherwise, the tax has to be paid along with interest in terms of the provisions of Section 50(1) of the CGST Act, 2017. Thus, the prescribed date mentioned in Section 50(1) of the Act refers to the last date for payment of GST in terms of the provisions of Section 39(7) of the Act.
Now, proviso to Section 50(1) of the CGST Act, 2017 which reads as follows:
“50. Interest on delayed payment of tax.—
(1)……………….
Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the
electronic cash ledger.”
The above proviso deals with the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with Section 39 of the Act, shall be payable on that portion of tax, which is paid by debiting the electronic cash ledger.
The said provision has been interpreted by the respondents in aforesaid case i.e. M/s. Eicher Motors Limited (supra) by stating that once if the debit entry is made in the electronic cash ledger, that will be the date of actual payment of tax, whereas, Section 50(1) of the Act states that cash should have been paid to the Government within the prescribed period, which is 20th day of every month in terms of Section 39(7) of the Act. The said prescribed period is the only time limit provided under Section 50(1) of the Act. However, the said proviso was also interpreted otherwise as discussed above vide the judgement rendered in RSB Transmission (India) Ltd. vs. Union of India case by the Hon’ble Division Bench of the Jharkhand High Court, which is not permissible since the same is beyond the scope of the provision of Section 50(1) of the Act.
Normally, a proviso does not travel beyond the provision, to which it is a proviso. It carves out an exception and to the main provision, to which it has been enacted as a proviso to no other. The normal function of a proviso is to except the something out of the enactment or to quantify something enacted therein, which but for the proviso would be within the purview of the enactment.
With regard to the above aspect, it would apposite to extract the law laid down by the Hon’ble Apex Court with regard to the usage of the proviso as rendered in Romesh Kumar Sharma case, which reads as follows:
“The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. As was stated in Mullins v. Treasurer of Survey [1880 (5) QBD 170, (referred to in Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha (AIR 1961 SC 1596) and Calcutta Tramways Co. Ltd. v. Corporation of Calcutta (AIR 1965 SC 1728); when one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject matter of the proviso. The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment and its effect is confined to that case. It is a qualification of the preceding enactment which is expressed in terms too general to be quite accurate. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule. “If the language of the enacting part of the statute does not contain the provisions which are said to occur in it you cannot derive these provisions by implication from a proviso.” Said Lord Watson in West Derby Union v. Metropolitan Life Assurance Co. (1897 AC 647) (HL). Normally, a proviso does not travel beyond the provision to which it is a proviso. It carves out an exception to the main provision to which it has been enacted as a proviso and to no other. (See A.N. Sehgal and Ors. v. Raje Ram Sheoram and Ors. (AIR 1991 SC 1406), Tribhovandas Haribhai Tamboli v. Gujarat Revenue Tribunal and Ors. (AIR 1991 SC 1538) and Kerala State Housing Board and Ors. v. Ramapriya Hotels (P)Ltd. and Ors. (1994 (5) SCC 672).
“This word (proviso) hath divers operations. Sometime it worketh a qualification or limitation; sometime a condition; and sometime a covenant” (Coke upon Littleton 18th Edition, 146) “If in a deed an earlier clause is followed by a later clause which
destroys altogether the obligation created by the earlier clause, the later clause is to be rejected as repugnant, and the earlier clause prevails….But if the later clause does not destroy but only qualifies the earlier, then the two are to be read together and effect is to be given to the intention of the parties as disclosed by the deed as a whole” (per Lord Wrenbury in Forbes v. Git [1922] 1 A.C. 256).
A statutory proviso “is something engrafted on a preceding enactment” (R. v. Taunton, St James, 9 B. & C. 836).
“The ordinary and proper function of a proviso coming after a general enactment is to limit that general enactment in certain instances” (per Lor Esher in Re Barker, 25 Q.B.D. 285).
A proviso to a section cannot be used to import into the enacting part something which is not there, but where the enacting part is susceptible to several possible meanings it may be controlled by the proviso (See Jennings v. Kelly [1940] A.C. 206).”
In view of the above, it is clear that at any cost, the proviso cannot be beyond the scope of the provision of Section. In the present case, the proviso to Section 50(1) of the Act was interpreted in such way to give a meaning so as to the proviso will override the provision. In the provision of Section 50(1) of the CGST Act, 2017 it has been stated that every person is liable to pay tax within the prescribed period. This Court has already given its findings for the words “prescribed period” holding that the date prescribed under Section 39(7) of the Act would be the last date for the payment of tax. Hence, when a specific date is prescribed in the provisions, the proviso cannot alter the said date, since it is contrary to that provision. In the present case, the Hon’ble Division Bench of the Jharkhand High Court had interpreted the said proviso in such a way that the proviso will override the provision and whereby altered the date for payment of tax to the Government, which is not permissible and thus, the same is contrary to the provisions of Section 50(1) of the CGST Act, 2017.
Conclusion: In conclusion, the Madras High Court’s interpretation of GST payment timelines and the use of Electronic Cash Ledger in the Eicher Motors case provides clarity for taxpayers. The ruling emphasizes the importance of timely tax remittance, with the Electronic Cash Ledger serving as an essential tool for accounting purposes. Understanding these nuances is crucial for businesses to navigate GST compliance effectively.
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