M/S. Thirupathi Steels vs. The Assistant Commissioner Of Central Tax

Held

The Court allowed the writ petitions. It noted that the grievance of the petitioners regarding the calculation of interest on delayed tax payments has been addressed by the amendment to Section 50 of the CGST Act carried out by the Finance Act, 2021, which has retrospective effect from July 1, 2017. The amended proviso clarifies that interest is payable on the portion of tax paid by debiting the electronic cash ledger. The Court directed the respondents to issue notices and hear the petitioners before quantifying the interest payable as per the amended provision. For WP No. 23006 of 2019, the Court implicitly set aside the garnishee notice by allowing the writ petition and directing the authorities to follow the amended Section 50 and provide a hearing. The ratio decidendi is that interest on delayed tax payment under Section 50 of the CGST Act, as amended retrospectively, is to be calculated on the tax paid through the electronic cash ledger, and proper procedure including hearing the assessee must be followed.

Facts

A batch of writ petitions was filed before the Telangana High Court challenging actions by GST authorities concerning the levy of interest on delayed tax payments. The petitioners, including Raghava Constructions, M/s. Standard Automobiles, M/s. Thirupathi Steels, and Sri Upender Rao, argued that interest was being calculated on the gross returned income rather than the net cash amount. The core of their grievance was the interpretation of Section 50 of the Central Goods and Services Tax Act, 2017 (CGST Act). In one instance (WP No. 23006 of 2019), a garnishee notice was issued to a bank without prior determination of the petitioner's tax liability. The petitioners sought to declare these actions illegal and arbitrary.

Key Issues

1. Whether the interest on delayed payment of tax under Section 50 of the CGST Act, prior to its amendment, was leviable on the gross returned income or only on the portion of tax paid by debiting the electronic cash ledger? Petitioner's contention: The petitioners argued that interest should be levied only on the net cash amount paid, not the entire tax liability declared in the return. They relied on the proviso to Section 50(1) as it originally stood, which suggested interest was on the portion of tax paid by debiting the electronic cash ledger. Revenue's contention: The revenue authorities contended that interest was leviable on the entire tax due, irrespective of how it was paid, based on the initial wording of Section 50(1). They likely argued that the proviso was intended to clarify, not limit, the scope of interest. 2. Whether the garnishee notice issued to the bank in WP No. 23006 of 2019 was valid without a prior determination of the petitioner's tax liability and without issuing any notice to the petitioner? Petitioner's contention: The petitioner argued that the garnishee notice was arbitrary, contrary to the CGST/SGST Acts, and violated constitutional rights and principles of natural justice, as it was issued without determining their tax liability and without any prior notice. Revenue's contention: Not recorded in the provided text.