Sri Upender Rao Ponuganti vs. Deputy Commissioner And Another

Held

The High Court allowed all the writ petitions. The Court noted that the grievance of the petitioners regarding the calculation of interest has been redressed due to 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 for that period, 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 the respondents to issue notices and provide an opportunity for the petitioners to be heard before quantifying the interest payable as per the amended provision of Section 50 of the CGST Act. Miscellaneous applications were closed, and no order as to costs was made.

Facts

This batch of writ petitions, filed under Article 226 of the Constitution of India, primarily 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 demands for interest on the gross returned income, rather than on the net cash amount. The core issue revolves around the interpretation of Section 50 of the Central Goods and Services Tax Act, 2017 (CGST Act), which deals with interest on delayed payment of tax. The petitioners contend that the interest should be levied only on the portion of tax paid from the electronic cash ledger, not the entire tax liability.

Key Issues

1. Whether the interest on delayed payment of tax under Section 50 of the CGST Act should be calculated on the gross returned income or on the net cash amount paid by debiting the electronic cash ledger? Petitioner's Argument: The petitioners argue that interest 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. They rely on the principle that interest should not be charged on tax that has already been paid or is not due from the taxpayer. Revenue's Argument: The revenue authorities, by issuing notices demanding interest on the gross returned income, implicitly argue that the interest is leviable on the entire tax liability, irrespective of how it was paid or whether it was paid within the due date from other ledgers. They are likely relying on the initial wording of Section 50(1) before the amendment.