Lot Mobiles PVT LTD vs. Union Of INDIA And 3 Others

Held

The Court allowed the writ petitions, following its own Division Bench decision in W.P. No. 44517 of 2018 & batch dated 22.12.2021. The core of the decision hinges on the interpretation of Section 50 of the CGST Act, 2017. Specifically, the Court acknowledged the amendment to Section 50 of the CGST Act by the Finance Act, 2021, which was given retrospective effect from 01.07.2017. This amendment clarified that interest on tax payable in respect of supplies declared in the return furnished after the due date (except in specific circumstances) shall be levied on that portion of the tax which is paid by debiting the electronic cash ledger. The Court directed the respondents to quantify the interest payable by the petitioners as per this amended provision after issuing notice and hearing the petitioners. The ratio decidendi is that interest on delayed payment of GST is to be calculated on the net cash amount paid, not the gross returned income, as per the amended Section 50 of the CGST Act.

Facts

The petitioners, including M/s Pavan Motors Pvt Ltd., M/s Vallabhaneni Constructions Pvt. Ltd., LOT Mobiles Pvt Ltd., and BIG C Mobiles Pvt Ltd., filed writ petitions before the Telangana High Court. Their primary grievance concerned the demand for interest on the gross returned income, rather than the net cash amount, under the Central Goods and Services Tax (CGST) Act, 2017. The revenue authorities had initiated recovery proceedings, including attachment of bank accounts, based on these interest demands. The petitioners challenged these demands as illegal, arbitrary, and violative of constitutional provisions and the CGST Act. The tax periods involved were not explicitly stated for all petitions but the context suggests the period following the implementation of GST.

Key Issues

1. Whether the levy of interest under Section 50 of the CGST Act, 2017, on the gross returned income, as opposed to the net cash amount paid, is legally sustainable? (Question of law, turning on Section 50 of the CGST Act, 2017). Petitioner's arguments: The petitioners contended that the interest should be levied only on the portion of tax paid from the electronic cash ledger, not the entire gross returned income. They argued that the recovery proceedings initiated by the revenue authorities were illegal, arbitrary, and violative of Articles 14, 19(1)(g), 20, and 21 of the Constitution of India. They relied on the interpretation of Section 50 of the CGST Act. Revenue's arguments: The respondents, represented by the Union of India and its authorities, did not dispute the submission that the issue was no longer res integra in light of a previous Division Bench judgment. They implicitly accepted the petitioners' contention regarding the interpretation of Section 50.