M/S. Kesoram Industries LTD vs. The Assistant Commissioner Of Central GST And Central Excise

Facts

The petitioners, M/s. Ir4egha Engineering and Infrastructures Ltd. and others, filed writ petitions challenging the demand of interest on the Input Tax Credit (ITC) portion of tax paid for various periods between July 2017 and May 2018. The petitioners argued that the demand was arbitrary, illegal, and without authority of law, violating the CGST Act, 2017, and constitutional provisions. The revenue authorities, represented by the Commissioner of Central Tax and others, sought to recover this interest. In one instance, an order dated 28.11.2018 issued by the Assistant Commissioner of Central Tax reiterated the demand for interest on ITC. The petitioners sought to set aside this demand and prevent coercive recovery actions. Interim orders were passed directing the respondents not to initiate coercive action for recovery.

Held

The High Court allowed the writ petitions, finding the demand for interest on the Input Tax Credit (ITC) portion of tax paid to be unsustainable. The Court reasoned that the demand was arbitrary, illegal, and without authority of law, violating the provisions of the CGST Act, 2017, and the Constitution of India. The Court's decision implies that the revenue authorities acted beyond their legal powers in demanding interest on ITC under the circumstances presented. The operative direction was to set aside the impugned demand notices and orders, thereby granting relief to the petitioners. The Court did not expressly leave any issue undecided. The ratio decidendi is that interest on ITC, as demanded in this case, is not permissible under the relevant provisions of the CGST Act, and such demands are liable to be quashed.

Key Issues

1. Whether the demand for interest on the Input Tax Credit (ITC) portion of tax paid for the period July 2017 to May 2018 is legally sustainable under the provisions of the Central Goods and Services Tax (CGST) Act, 2017? 2. Whether the action of the revenue authorities in demanding and seeking to recover interest on ITC, as reflected in the communication dated 28.11.2018 and subsequent enforcement actions, is arbitrary, illegal, and violative of the principles of natural justice and constitutional provisions? Petitioner's arguments: The petitioners contended that the demand for interest on ITC was illegal, arbitrary, and without authority of law, contravening the CGST Act, 2017, and Articles 14 and 265 of the Constitution of India. They argued that the demand was contrary to the principles of natural justice. They relied on various legal provisions and potentially prior judicial pronouncements (though specific precedents were not detailed in the provided text). Revenue's arguments: The judgment does not explicitly record the arguments made by the revenue respondents. However, their actions in issuing demand notices and seeking recovery indicate their stance that the interest demand was valid.