M/S. Appl-Vdb (Jv) vs. The Union Of INDIA

Held

The High Court allowed all the writ petitions. The Court noted that the grievance of the petitioners regarding the levy of interest on delayed payment of tax 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 should be worked out by the concerned authorities as per the amended provision. Furthermore, the respondents were directed to issue notice and hear the petitioners before quantifying the interest payable as per the amended Section 50 of the CGST Act. Miscellaneous applications pending were closed, and there was no order as to costs.

Facts

This judgment concerns a batch of writ petitions filed before the Telangana High Court. The petitioners, including Raghava Constructions, M/s. Standard Automobiles, M/s. Thirupathi Steels, and Sri Upender Rao, are challenging actions by various Central Tax authorities. The core grievance revolves around the levy of interest on delayed payment of GST. Specifically, petitioners argue that interest is being calculated on the gross returned income rather than the net cash amount paid. In one instance (WP No. 16885 of 2019), the petitioner sought a writ of mandamus directing a bank to release funds held pursuant to an order from the Deputy Commissioner, Central Tax, alleging the demand was illegal and arbitrary. Another petition (WP No. 23006 of 2019) challenges a Garnishee Notice issued to a bank for recovery of alleged dues without prior determination of the petitioner's tax liability.

Key Issues

1. Whether the interest on delayed payment of tax under Section 50 of the CGST Act, as it stood prior to the amendment by the Finance Act, 2021, should be levied on the gross returned income or the net cash amount paid by the petitioner? 2. Whether the action of the respondent authorities in issuing a Garnishee Notice to the petitioner's bank for recovery of alleged dues without first determining the petitioner's tax liability and issuing a proper notice or order to the petitioner is arbitrary and in violation of the CGST/SGST Acts and principles of natural justice? Arguments for the Petitioners: The petitioners contended that interest should be calculated only on the portion of tax paid from the electronic cash ledger, not the entire tax liability. They argued that levying interest on the gross returned income is illegal and arbitrary. In WP No. 23006 of 2019, the petitioner argued that the Garnishee Notice was issued without following the mandatory procedures under Section 76 of the Act, thus violating principles of natural justice and constitutional rights. Arguments for the Respondents: The respondents, represented by counsel, did not explicitly detail their arguments on the interpretation of Section 50 in the provided text. However, their actions in issuing notices and demanding interest suggest they were relying on the prevailing interpretation of the law at the time.