M.S. Duroply Industries Limited (Formerly Known As M/S Sarada Plywood Industries LTD.) vs. The Union Of INDIA And 4 Ors

Facts

M.S. Duroply Industries Limited (the petitioner) challenged orders dated 31.03.2022 by the Joint Commissioner (Appeals), 02.06.2020 by the Assistant Commissioner, and a communication dated 06.09.2023. The petitioner had deposited a principal amount of Rs. 33,69,271/- pursuant to an interim order dated 21.12.2023, which stayed interest and penalty subject to this deposit. Subsequently, Section 128A was inserted into the CGST Act, 2017, waiving interest and penalty if the tax amount for the period 01.07.2017 to 31.03.2020 was paid in full. The Court inquired if the petitioner's payment could be adjusted towards returns filed on 31.10.2017 under the CGST Act, 2017, and if the deposited amount could be refunded. The department, in an affidavit, agreed to this adjustment and refund.

Held

The Court held that the issues raised in the writ petition have been addressed by the department's agreement to adjust the petitioner's payment of Rs. 33,69,271/- (made using PLA credit) towards the returns filed on 31.10.2017 under the CGST Act, 2017. The Court further noted that the amount deposited by the petitioner pursuant to the court's order dated 21.12.2023 would be refunded. The reasoning was based on the department's affidavit, which accepted the court's query regarding adjustment and refund, thereby resolving the dispute in light of Section 128A of the CGST Act, 2017. The ratio decidendi is that when a statutory provision like Section 128A is introduced, and the department agrees to adjust past payments and refund amounts deposited under court orders, the dispute can be settled amicably, waiving interest and penalty. The operative direction was to grant liberty to the petitioner to file an application for refund, with the respondents directed to refund the amount within four weeks of such application. The petitioner is entitled to benefits under Section 128A of the CGST Act, 2017.

Key Issues

1. Whether the amount of Rs. 33,69,271/- paid by the petitioner, using credit in its PLA account, could be adjusted towards returns filed on 31.10.2017 under the CGST Act, 2017, considering the principle of revenue neutrality and the subsequent insertion of Section 128A of the CGST Act, 2017, which waives interest and penalty upon full tax payment for the period 01.07.2017 to 31.03.2020? Petitioner's contention: The petitioner argued that given the admitted entitlement to a refund under Section 11B of the Central Excise Act, 1944, and the insertion of Section 128A of the CGST Act, 2017, the deposited amount should be adjusted and refunded to avoid further interest liability for the department. Revenue's contention: The Revenue, through an affidavit, agreed to adjust the amount paid by the petitioner towards the returns filed on 31.10.2017 under the CGST Act, 2017, and refund the amount deposited pursuant to the court's order.