Madras High Court Allows Monthly Installments for Tax Dues under GST

Ohm Srinivasa Paper Boards Pvt. Ltd. Vs Assistant Commissioner of Central GST and Central Excise (Madras High Court)

The Hon’ble Madras High Court in the case of M/s Ohm Srinivasa Paper Boards (P.) Ltd. v. Assistant Commissioner of Central GST and Central Excise [Writ Miscellaneous Petition (MD) Nos. 7930 and 7932 of 2022 dated July 03, 2024] directed the Assessee to pay balance amount for the past period in 12 monthly installments from August 01, 2024 to July 01, 2025, considering the accumulated losses and partial payment is already made, where the Assessee failed to discharge the liability as per law under Section 142 of the Central Goods and Services Act, 2017 (“the CGST Act”). Hence, the writ petition was disposed of.

Facts:

M/s Ohm Srinivasa Paper Boards (P.) Ltd. (“the Petitioner”) was the manufacturing company. The Petitioner had challenged the summary of the Order creating a demand under the existing laws under FORM GST DRC-07A, dated August 26, 2021 (“the Impugned Order”), in respect of arrears of tax on self-assessment under the provisions of Central Excise Act, 1944 (“the Central Excise Act”)., for the period between February, 2015 and June, 2017.

The demand itself was based on the self- assessment made by the Petitioner under Rule 6 of the Central Excise Rules, 2002 (“the Central Excise Rules”) read with the Central Excise Act. Initially, the Petitioner attempted to avail the amnesty under the Sabka Vishwas Scheme (Legacy Disputes Resolution), 2019 as announced by the Central Government by the Finance Act 2 of 2019. However, the Petitioner failed to pay the admitted liability before the authorities and thus, was not able to avail the benefits of the scheme.

The sum of Rs.1,46,79,069/- was due and payable by the Petitioner towards tax, interest and penalty.

Therefore, the Petitioner paid the amount of Rs. 25,00,000/- leaving the balance amounting to Rs. 1,21,79,069/- and this amount is demanded by the Petitioner by invoking the powers under Section 142(8) of the CGST Act which has accumulated loss and was unable to discharge the tax liability under the old regime.

Hence, aggrieved by the Impugned Order the Petitioner has filed the writ petition.

Issue:

Whether the Assessee can pay tax liability in installments?

Held:

The Hon’ble Madras High Court in the case of Writ Miscellaneous Petition (MD) Nos. 7930 and 7932 of 2022 held as under:

• Observed that, there is no other dispute barring the amount to be recovered from the Petitioner and by directing the Petitioner to pay the balance amount in 12 equated monthly installments from August 01, 2024 to July 01, 2025.
• Held that, the Petitioner failed to discharge the liability, the Respondent is at liberty to proceed with recovery as per law. Hence, writ petition was disposed of.

Our Comments:

Section 142 of the CGST Act governs the “Miscellaneous transitional provisions”. Further, the Section 142(8) (a) of the CGST Act states that where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or recoverable from the person, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act. However, Section 142(8)(b) of the CGST Act states that here in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes refundable to the taxable person, the same shall be refunded to him in cash under the said law, notwithstanding anything to the contrary contained in the said law other than the provisions of section 11B(2) of the Central Excise Act and the amount rejected, if any, shall not be admissible as input tax credit under the CGST Act.

The Hon’ble Madras High Court in Zest Buildtek Promotors v. Deputy Commissioner of GST and Central Excise [W.P. No. 12349 of 2023 dated February 19, 2024], the Hon’ble High Court quashed the attachment order passed against the Assessee, thereby holding that, the issuance of attachment order under the provisions of the Customs Act for recovery of Service Tax dues is not valid as the same is recoverable under Section 142(8)(a) of the CGST Act read with Section 174 of the CGST Act. Also, the Hon’ble High Court provided an opportunity to file statutory appeal irrespective of limitation period due to the non-availability of the physical order.

An Assessee can pay the tax liability in monthly instalments. The Hon’ble Kerala High Court in Malayalam Motors Pvt. Ltd. v. The Assistant State Tax Officer [WP(C). No. 21490 of 2020(I) dated October 12, 2020] held that, the assessee who has sought an instalment facility to pay the admitted tax, together with interest thereon, shall be permitted to discharge the tax liability, inclusive of any interest and late fee thereon, in equal successive monthly instalments, in view of the financial difficulties faced by it during the COVID pandemic situation.

Similarly, the Hon’ble Kerala High Court in the matter of Pazhayidom Food Ventures (P) Ltd v. Superintendent Commercial Taxes [WP(C). No. 14275 of 2020 dated July 24, 2020], in similar circumstances, had directed the respondent tax authority to accept the belated returns and permitted the petitioner therein to discharge the balance tax liability inclusive of any interest and late fee thereon, in equal monthly instalments commencing from August 25, 2020 and culminating on March 25, 2021.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

In this Writ Petition, the petitioner has challenged the impugned summary of the order creating a demand under the existing laws under Form GST DRC-07A, dated 26.08.2021, in respect of arrears of tax on self-assessment under the provisions of the Central Excise Act, 1944, for the period between February, 2015 and June, 2017.

2. The demand itself is based on the self-assessment made by the petitioner under Rule 6 of the Central Excise Rules, 2002 read with the Central Excise Act, 1944. Earlier, the petitioner appears to have approached the designated authority under the Sabka Vishwas (Legacy Disputes Resolution) Scheme, 2019 as announced by the Central Government by the Finance Act 2 of 2019. However, the petitioner failed to pay the admitted liability before the authorities and thus, could not take the advantage of the amnesty under the scheme. It appears that a sum of Rs.1,46,79,069/- is due and payable by the petitioner towards tax, interest and penalty as detailed below:-

3. The learned Senior Standing Counsel for the respondent submits that the petitioner has paid a sum of Rs.25,00,000/- as against the above said amount on the following dates:-

Thus, a sum of Rs.1,21,79,069/- [Rs.1,46,79,069 – Rs.25,00,000] is due and payable by the petitioner as against the amount that has been demanded from the petitioner by invoking the powers under Section 142(8) of CGST Act, 2017 read with Rule 142(A)(1) of the CGST Rules, 2017.

4. It appears that the petitioner is a Manufacturing Company, which has accumulated loss and was unable to discharge the tax liability under the old regime. The attempt of the petitioner to discharge part of the liability on the above dates stands recorded.

5. Considering the fact that there is no other dispute barring the amount to be recovered from the petitioner, I am inclined to exercise the discretion partly in favour of the petitioner, by directing the petitioner to pay the balance amount in 12 equated monthly installments starting from 01.08.2024 ending with 01.07.2025.

6. In case, the petitioner fails to discharge the liability as ordered above, the respondent is at liberty to proceed against the petitioner in accordance with law by attaching the properties of the petitioner and bringing it to sale and through other modes.

7. This Writ Petition stands disposed of with the above observation. No costs. Consequently, connected Miscellaneous Petitions are closed.

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