Raghava Constructions vs. The Union Of INDIA

Held

The High Court allowed all the writ petitions. The Court noted that the grievance of the petitioners has been substantially redressed by the amendment carried out by the Finance Act, 2021, which retrospectively amended Section 50 of the CGST Act. 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 only on that portion of the tax which is paid by debiting the electronic cash ledger. The Court directed the respondents to issue notices and provide an opportunity to the petitioners to be heard before quantifying the interest payable as per the amended provision. Miscellaneous applications pending were closed, and no order as to costs was made.

Facts

This batch of writ petitions concerns the calculation of interest on delayed payment of GST. The petitioners, including Raghava Constructions, M/s. Standard Automobiles, M/s. Thirupathi Steels, and Sri Upender Rao, are challenging notices and orders demanding 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 (CGST Act). 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 demands and taken coercive steps, including garnishee notices to banks, to recover the alleged interest dues.

Key Issues

1. Whether the interest on delayed payment of tax under Section 50 of the CGST Act is to be calculated on the gross returned income or on the net amount paid from the electronic cash ledger? (Question of law) Petitioner's Arguments: The petitioners contend that interest should be levied only on the tax paid by debiting the electronic cash ledger, as per the proviso to Section 50(1) of the CGST Act. They argue that demanding interest on the entire tax liability, including amounts potentially paid through the electronic credit ledger, is illegal and arbitrary. They rely on the plain reading of the proviso which specifically mentions "that portion of the tax which is paid by debiting the electronic cash ledger". Revenue's Arguments: The revenue authorities, through their counsel, argued for the calculation of interest on the gross returned income. While not explicitly detailed in the provided text, their stance implies an interpretation of Section 50(1) that predates or disregards the specific limitation introduced by the proviso, or argues for a broader interpretation of 'tax payable'.