Interest is leviable despite the availability of credit in cash/credit ledgers if no payment was made in GST

The Hon’ble Madras High Court in M/s India Yamaha Motor Private Limited, v. the  Commissioner of CGST & Central Excise  [WP.No.19044 of 2019 and WMP.No.18404 of 2019 dated August 29, 2022 ] has held that in a case where Goods and Services Tax (“GST”) Liability has not been remitted, interest under Section 50 of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) is leviable even if the taxpayer has adequate credit balance in his cash ledger or credit ledger.

Facts:

M/s India Yamaha Motor Private Limited (“the Petitioner”) herein filed a monthly return in Form GSTR 3B for the month of July 2017 but noticed that there was an inadvertent error whereby the data pertaining to its plant at Faridabad was included instead of data pertaining to the Chennai plant. This swap resulted in a short disclosure of liability for the period July to October 2017 leading to the levy of interest. Thereafter, the Petitioner had filed a grievance petition before the Revenue department (“the Respondent”) seeking modification of the return for the month of July 2017 that had not been immediately disposed of/addressed by the Respondent.

Thus, the Petitioner had admittedly not filed monthly returns from the month August to October 2017, on the premise that the proper ascertainment of tax liability for the aforesaid months would be dependent upon the adjudication of its grievance petition.

Meanwhile, the order (“the Impugned Order”) has been passed by the Respondent whereby the Petitioner was directed to pay interest of Rs. 5 crores for belated remittance of GST.

Being aggrieved by the Impugned Order, this petition has been filed.

Argument by the Petitioner:

The Petitioner contended that they had sufficient input tax credit (“ITC”) balance in both the electronic cash ledger as well as the electronic credit register during the period. Thus, there had been no loss caused to the revenue and hence no justification to levy interest since the interest is only compensatory in nature.

Issue:

Whether the interest leviable despite the availability of credit balance in cash/credit ledgers, if no payment of GST was made for the impugned period?

Held:

The Hon’ble Madras High Court in WP.No.19044 of 2019 and WMP.No.18404 of 2019, held as under:

• The Court discarded the Petitioner’s argument that it had sufficient balance lying in the electronic cash ledger as well as the in the electronic credit register and that there had been no loss to the Respondent, apprising that credit cannot, prior to availment be taken to construe the payment.
• The Court envisaged that there were many numbers of situations where ITC may be found to have been availed erroneously or on a mistaken interpretation of the law, thus, it would be risky, to state as a general proposition that the mere availability of balance in electronic credit should be assumed to be utilization that would protect the Petitioner from interest levy.
• Further, the Court disapproves the Petitioner’s reliance on the decision of Hon’ble Apex Court in UOI vs Bharti Airtel Limited & Ors [Civil Appeal No. 6520 of 2021 dated October 28, 2021], which case pertained to the timelines for filing of GSTR-3B and revision thereof and not the issue of the instant case.
• The Court declined to insulate the Petitioner from levy of interest as per Section 50 of the CGST Act for belated remittance of GST for the period from July 2017 to October 2017, held that unless the Petitioner actually files a return and debits the respective registers, the Respondent cannot be expected to assume that available credits will be set-off against tax liability.
• Therefore, the demand of interest as per the impugned order stands confirmed. 

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