M/S Satishchandra Oza And Sons vs. Assistant Commissioner

The present Writ Petitions came to be filed seeking issuance of a Writ of Mandamus for the following reliefs: “.....to issue a Writ of Mandamus or any other appropriate writ or order or direction declaring- a) that the proviso to Section 50 of the Central Goods and Services Tax Act, 2017 inserted by Section 100 of Finance (No.2) Act, 2019 applies retrospectively from 01.07.2017 and consequently set aside the demand notice dated 27.02.2019 (mistakenly mentioned as 2019) for the months from April, 2018 to March, 2019 issued by the 1st respondent demanding interest under the pre-amended Section 50 of the CGST Act; b) declare that the summary levy and demand of interest under Section 50 of the CGST Act which is not preceded by an adjudication as per Section 73 of the CGST Act determining the principal amount payable is illegal and contrary to the scheme of the CGST Act, 2017 and principles of natural justice; and c) alternatively, declare that Section 50(1) of the CGST Act, in so far as it seeks to levy interest on the gross tax liability without duly reducing the input tax credit available to the registered person under the CGST Act as being illegal, confiscatory and contrary to the fundamentals of the levy of interest, a colourable exercise to levy penalty in the guise of interest and 2

The issue involved in these two Writ Petitions relates to levy of interest on the gross tax liability and not on the net cash.

In all, to appreciate the same, it would appropriate to refer Section 50 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the ‘CGST Act’) which deals with ‘Interest on delayed payment of tax’ “50. Interest on delayed payment of tax- (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made there under, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen percent., as may be notified by the Government on the recommendations of the Council. (2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid. (3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent, as may be notified by the Government on the recommendations of the Council.”

Subsequently in the Finance Act, 2021, a proviso to sub- section (1) of Section 50 of the CGST Act came to be substituted giving it retrospective with effect from 01.07.2017. After substitution of Finance Act, 2021, the proviso reads as under:-

In view of the proviso to Section 50 of the CGST Act, we feel that the grievance of the petitioner as to levy of interest on the gross tax liability without reducing the input tax credit has been adhered to, which is not disputed by the learned Government Pleader, Commercial Tax. However, the details of interest to be paid by the petitioner, in terms of amended proviso to Section 50 of the CGST Act, has to be worked out by the concerned authorities.

Hence, the Writ Petitions are allowed with a direction to the 1st respondent to calculate the interest to be paid after issuing notice to the petitioner and all concerned in terms of amended proviso to Section 50 of the CGST Act. There shall be no order as to costs. Consequently, miscellaneous applications pending, if any, shall stand closed. _______________________________ JUSTICE C.PRAVEEN KUMAR

2022