Hon’ble High Court of Madras in the matter of Commissioner of CGST v. M/s. Daejung Moparts Pvt. Ltd. [W.A.Nos. 2127 and 2151 of 2019] dated 23.07.2019 dismissed the Letter Patent Appeal filed by the department and upheld the order of single bench, whereby assessee was directed to pay interest consequent to delay in filing of Return, only on net tax liability (after deduction of Input Tax Component).
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
The Revenue has filed these two intra court appeals aggrieved by the orders dated 13.6.2019 passed by the learned Single Judge of this court directing the Assessing Authority who is the present appellant before us to decide the objections of the Assessee dated 10.5.2019 and 29.3.2019 filed in pursuance of the Notice demanding interest issued under Section 50 of the CGST Act by the present Appellant on 2.5.2019 and 14.3.2019 to the Respondent/Assessee.
2. The interest demand on the alleged delay in filing returns under CGST Act was computed to the tune of 41,74,620/- and Rs. 1,70,71,048.31 respectively whereas the Assessee in his objections has raised certain issues about the Output GST liability for each month and that the Input Tax Credit available to the Assessee as per Electronic Credit Ledger which has to be adjusted and only on the net Tax payable by cash, the interest liability under Section 50 of the Act on the delay in filing the Returns has to be re-calculated to the extent of Rs.9,15,121/- and therefore, against the Garnishee proceedings initiated by the Assessing Authority directing the Respondent-Bank on the basis of impugned notice dated 2.5.2019 and the Bank was not even arrayed as Respondent in the present Writ Petition, was bad in law.
3. The learned Single Judge passed the following direction in the order impugned before us:-
“5. Following the order made in W.P.No.15624 of 2019, this writ petition is disposed of with the following directions:
a) Writ petitioner has produced a computer generated statement for his bank account i.e, Account No. 076102000001034, Customer ID 656931 with Indian Overseas Bank, Maraimalainagar (0761), 34, Nandanar Street, Maraimalainagar, Chengalpattu, Tamil Nadu – 603 209, E-mail Id: firstname.lastname@example.org, IFSC Code: IOBA0000761 to show that the balance available in the writ petitioner’s account as of 12.06.2019 is Rs.33,77,394/- (Rupees Thirty Three Lakhs Seventy Seven Thousand Three Hundred and Ninety Four only).
b) As the bank has not been arrayed as respondent, Registry shall communicate this order to the aforesaid bank at the aforesaid address and from and out of the aforesaid balance of little over 33,00,000/-, the said bank shall pay out an admitted sum of Rs. 9,15,121/- (Rupees Nine Lakhs Fifteen Thousand One Hundred and Twenty One only) to the Assistant Commissioner of GST and Central Excise, Maraimalainagar Division (first respondent herein) forthwith.
c) In all other aspects, communication dated 21.05.2019 bearing reference C.No. IV/16/30/2019-Tech-III from the first respondent to the aforesaid bank will stand set aside. This would mean that the writ petitioner can operate aforesaid bank account with the exception of aforementioned admitted sum of Rs.9,15,121/-, which shall be paid by the Bank to the first respondent.
d) On payment of aforesaid amount on or before 20.06.2019, the impugned communication dated 21.05.2019 bearing reference C.No.IV/16/30/2019-Tech-III from the second respondent to the Indian Overseas Bank will stand set aside.
e) On payment of aforesaid amount of Rs. 9,15,121/- on or before 06.2019 by the writ petitioner’s banker, as mentioned supra, impugned communication from the second respondent to Indian Overseas Bank inter-alia under Section 79 of CGST Act will stand set aside and the second respondent shall consider all the points raised in writ petitioner’s reply dated 10.05.2019, more particularly the annexed working sheet, pass an order in a manner known to law and communicate the same to the writ petitioner under due acknowledgement within one week therefrom.
f) If the decision taken by the second respondent is in favour of the writ petitioner, it is the end of the matter. If that be not so, as mentioned supra, writ petitioner shall avail alternate remedy of preferring a statutory appeal to the appellate Authority under Section 107 of CGST Act.
This writ is disposed of with the above directions. No costs. Consequently, the connected miscellaneous petitions are closed.“
4. Even though only a direction has been given by the learned Single Judge to consider the objections of the Assessee dated 10.5.2019 and 29.3.2019 and passorders in accordance with law, once the admitted interest liability is paid by the Bank, the Assessing Authority, without deciding the objections of the Assessee and re-computing the interest liability, has unnecessarily filed the present intra-court The Assessing Authority was bound to decide the aforesaid objections of the Assessee, to determine the correct liability of interest to be paid by the Assessee and without doing so, the garnishee proceedings could not have been initiated.
5. Therefore,the learned Single Judge has rightly set aside the garnishee direction to the Bank, while directing the Bank to deposit the admitted liability for interest under Section 50 of the Act to the extent of Rs. 9,15,121/- (in W.A.No.2127/2019) and Rs. 22,39,413/- (in W.A.No.2151/2019) which the Assessee undertook to pay.
6. I do not find any merit in the present Writ Appeals filed by Revenue and the same are liable to be dismissed. Accordingly, they are dismissed. The connected Miscellaneous Petitions are also dismissed.
W.A.Nos.2127 and 2151 of 2019
Revenue is in appeals against the order of the learned Single Judge dated 13.6.2019.
2. Section 50 of the CGST Acthas been drawn to our attention by the learned counsel for the Appellant which reads is as follows:-
“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 there under, 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.
(2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed from the day succeeding the day on which such tax was due to be paid.
(3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent, as may be notified by the Government on the recommendations of the Council.“
3. The learned counsel for the Appellant submits that every person, who is liable to pay tax, but, fails to pay the tax or any part thereof, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest and not on his assessment. This, automatically imposes a liability upon the Assessee to pay interest. On the very admission of the Assessee that they had filed the Returns belatedly as they could not make under Section 50(1) arises even without any Assessment as the Assessee is required to pay such interest on his own.
4. Section 50 speaks about the liability to pay interest on one contingency viz., to pay tax or any part thereof within the prescribed period, whereas in the present case, it is admitted by the Assessee in his reply dated 10.5.2019 that he has not paid tax, despite which the learned Single Judge has given the directions in the order impugned before us. When once admission is made that Returns have not been filed in time, the interest for the delay in filing the Returns automatically arises and there cannot be any explanation for the same. In this regard, with due respect to the view expressed by my learned Brother, I differ from the view taken. My view is fortified by the Division Bench Judgement of the High Court of Telangana in W.P.No.44517 of 2018 dated 18.4.2019 (Megha Engineering & Infrastructures Ltd. v. The Commissioner of Central Tax and others) wherein under very similar facts, it had been held as follows:-
“39. Admittedly, the petitioner filed returns belatedly, for whatever reasons. As a consequence, the payment of the tax liability, partly in cash and partly in the form of claim for ITC was made beyond the period prescribed. Therefore, the liability to pay interest under Section 50(1) arose automatically. The petitioner cannot, therefore, escape from this liability.“
5. I therefore,hold that the appellant has raised an arguable point which requires deeper consideration of the scope of Section 50 of the Central Goods and Services Tax Act, 2017 and consequently, I am of the view that the summary dismissal of the Writ Appeal at the admission stage itself by my learned Brother and the view taken by the learned Single Judge require to be revisited.
6. The matter is, therefore, referred to the Hon’ble the Chief Justice under Clause 36 of the Letters Patent, on the issue as to whether under Section 50 of the CGST Act, the interest on delayed filing of the Returns arises automatically or on assessment and after considering the explanation offered by the Assessee and whether at all that explanation has to be considered by the Assessing Officer and then pass further orders.