M/S. Standard Automobiles vs. The Assistant Commissioner Of Central Tax And Another

Held

The Court held that the grievance of the petitioners has been redressed by the amendment carried out by the Finance Act, 2021, which substituted Section 50 of the CGST Act with retrospective effect from July 1, 2017. The amended proviso clarifies that interest on tax payable in respect of supplies made during a tax period and declared in the return furnished after the due date shall be levied on that portion of the tax which is paid by debiting the electronic cash ledger. The Court directed that the details of the interest to be paid by the petitioners are to be worked out by the concerned authorities as per the amended provision. The Court further directed that the respondents shall issue notice and hear the petitioners before quantifying the interest payable as per the amended Section 50 of the CGST Act. All pending miscellaneous applications were closed, and there was no order as to costs.

Facts

This batch of writ petitions concerns the calculation of interest on delayed payment of Goods and Services Tax (GST). The petitioners, including Raghava Constructions, M/s. Standard Automobiles, M/s. Thirupathi Steels, and Sri Upender Rao, are aggrieved by the demand of interest on the gross returned income rather than the net cash amount paid. The core issue revolves around the interpretation of Section 50 of the Central Goods and Services Tax Act, 2017. The petitioners argue that interest should be levied only on the portion of tax paid from the electronic cash ledger, not the entire tax liability. The revenue authorities, represented by various Deputy Commissioners and Commissioners of Central Tax, have issued notices demanding interest based on a broader interpretation.

Key Issues

1. Whether the interest on delayed payment of tax under Section 50 of the CGST Act, prior to its amendment by the Finance Act, 2021, should be calculated on the gross returned income or only on the portion of tax paid from the electronic cash ledger? Petitioner's contention: The petitioners argue that the proviso to Section 50(1) of the CGST Act, as it originally stood, stipulated that interest should be levied on the portion of tax paid by debiting the electronic cash ledger. Therefore, interest should not be charged on the entire tax amount but only on the amount paid through the cash ledger after the due date. Revenue's contention: The revenue authorities contend that the original Section 50(1) mandated interest on any tax that remains unpaid, and the proviso was introduced later to clarify the calculation method for specific scenarios. They likely argued for the broader interpretation of the main section before the amendment. 2. Whether the retrospective amendment to Section 50 of the CGST Act by the Finance Act, 2021, has addressed the grievance of the petitioners? Petitioner's contention: The petitioners acknowledge the amendment but seek clarification on its application and the working out of the interest amount. Revenue's contention: Not recorded.