M/S. Apollo Tyre Center vs. Deputy Commissioner

Held

The Court allowed the writ petitions, noting that the issue was covered by a previous common order of the same High Court dated December 22, 2021, in W.P. No. 44517 of 2018 and batch. The core grievance of the petitioners related to the levy of interest on gross returned income instead of the net cash amount. The Court referred to Section 50 of the CGST Act, which deals with interest on delayed payment of tax. It highlighted the amendment to the proviso of Section 50(1) by the Finance Act, 2021, which was given retrospective effect from July 1, 2017. This amended proviso clarifies that interest is payable on the portion of tax paid by debiting the electronic cash ledger. The Court found that this amendment redressed the petitioners' grievance. Consequently, the Court directed the respondents to issue a notice and hear the petitioners before quantifying the interest payable as per the amended provision of Section 50 of the CGST Act. The petitions were allowed without costs.

Facts

The petitioners, M/s. Sri Laxmi Tyre Company and M/s. Apollo Tyre Center, filed writ petitions challenging the garnishee notices issued by the Deputy Commissioner, Central Tax, Nalgonda GST Division. These notices were for the recovery of alleged tax dues, including interest, from the petitioners' bank accounts (State Bank of India). The petitioners argued that the interest was being levied on the gross returned income, not on the net cash amount paid, and that the garnishee notices were issued without considering the proviso to Section 50(1) of the CGST Act, as amended. The amount in dispute for Sri Laxmi Tyre Company was Rs. 8,04,983, and for Apollo Tyre Center was Rs. 8,92,488. The petitions were filed in 2020.

Key Issues

1. Whether the action of the respondent in issuing a Garnishee Notice for recovery of demand, including interest, without considering the proviso to Section 50(1) of the CGST Act, inserted by the Finance (No. 2) Act, 2019, is illegal and arbitrary? (Question of law) Petitioner's Arguments: - The interest on delayed payment of tax should be levied only on the portion of tax paid by debiting the electronic cash ledger, as per the proviso to Section 50(1) of the CGST Act. - The garnishee notices were issued without properly considering this amended provision, making them illegal and contrary to the provisions of the SGST/CGST Acts and the Constitution of India. Revenue's Arguments: - The judgment does not explicitly record any arguments made by the revenue or State in opposition to the petitioners' contentions regarding the interpretation of Section 50(1) or the validity of the garnishee notices.