Levy of interest on the delayed payment of GST can only be on the tax paid by way of cash: Madras HC
Amidst lot of controversy over the issue, here is one Judgment by Madras HC.
Levy of interest on the delayed payment of GST can only be on the tax paid by way of cash has been upheld by the Hon’ble Madras High Court in the case of Refex Industries Limited v. The Assistant Commissioner of CGST & Central Excise (Writ Petition Nos.23360 and 23361 of 2019). The Court has held as under:
“12. The specific question for resolution before me is as to whether in a case such as the present, where credit is due to an assessee, payment by way of adjustment can still be termed ‘belated’ or ‘delayed’. The use of the word ‘delayed’ connotes a situation of deprival, where the State has been deprived of the funds representing tax component till such time the Return is filed accompanied by the remittance of tax. The availability of ITC runs counter to this, as it connotes the enrichment of the State, to this extent. Thus, Section 50 which is specifically intended to apply to a state of deprival cannot apply in a situation where the State is possessed of sufficient funds to the credit of the assessee. In my considered view, the proper application of Section 50 is one where interest is levied on a belated cash payment but not on ITC available all the while with the Department to the credit of the assessee. The latter being available with the Department is, in my view, neither belated nor delayed.”
Hon’ble Court further held that the proviso inserted u/s 50(1) of the CGST Act, 2017 (although not yet notified) seeking imposition of interest only on the cash portion will come to the aid of the assessee as it merely seeks to correct an anomaly in the provision as it existed prior to such insertion.
Hon’ble Court also referred to the adverse ruling on the issue by Hon’ble Telengana High Court in the case of Megha Engineering and Infrastructures Ltd. V. The Commissioner of Central Tax and others (2019-TIOL 893) and diverged from it on the basis that the proviso inserted u/s 50(1) was only at the stage of press release when the order was passed. It may also be noted that the review petition against the said adverse ruling has also been admitted by the Hon’ble Telengana High Court.
In short, Hon’ble Madras High Court has laid down the correct law by upholding the levy of interest only on the net portion of tax paid by cash.
Let us hope that the intensity of the department as per their latest tweets of forcing the recoveries should abate.
Copy of the ruling is attached herewith for for reference & downloading.