Parnika Commercial And Estates Private Limited vs. Union Of INDIA & Ors.

Held

The Court noted the Administrative Instruction dated September 18, 2020, issued by the Central Board of Indirect Taxes and Customs. This instruction clarifies that for the period from July 1, 2017, to August 31, 2020, field formations are to recover interest only on the net cash tax liability, which is the portion of tax paid by debiting the electronic cash ledger or payable through it. For cases where show cause notices were issued demanding payment on gross tax liability, these are to be kept in the Call Book until a retrospective amendment to Section 50 of the CGST Act is carried out. The Court found that in view of this administrative decision, the petitioner's grievance no longer survived. Therefore, the writ petition was disposed of in accordance with the said Administrative Instruction.

Facts

The petitioner, Parnika Commercial and Estates Private Limited, filed a writ petition challenging a notice for rejection of its refund application dated December 5, 2019, and a corrigendum dated December 18, 2019. The petitioner also sought to direct respondent no. 3 to refund an amount wrongly forfeited from its pending refund application. Furthermore, the petitioner sought a declaration that interest under Section 50 of the CGST Act is payable only on the net tax liability and not on available Input Tax Credit (ITC). The Court had issued notice on July 30, 2020. Subsequently, the petitioner placed on record an Administrative Instruction dated September 18, 2020, issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs (GST Policy).

Key Issues

1. Whether the liability to pay interest under Section 50 of the Central Goods and Services Tax Act, 2017, is confined only to the net tax liability and no interest is payable on the available ITC? (Question of law turning on Section 50 of the CGST Act). Petitioner's contention: The petitioner argued that interest under Section 50 of the CGST Act is payable only on the net tax liability and not on the available ITC. Revenue's contention: The judgment does not record any specific argument from the revenue on this issue. However, the subsequent Administrative Instruction addresses the concern raised by the petitioner.