M/S. Orange Auto Private Limited vs. Superintendent Of Central Tax

Held

The Court allowed the writ petitions. It held that the grievance of the petitioners has been redressed due to the amendment carried out by the Finance Act, 2021. The Court directed that the details of interest to be paid by the petitioners should be worked out by the concerned authorities in accordance with 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. The Court did not expressly leave any issue undecided, as the amendments effectively addressed the core of the petitioners' grievances regarding the calculation of interest.

Facts

The petitioners, M/s. Orange Auto Private Limited and Esmario Export Enterprises Pvt. Ltd., filed writ petitions challenging notices demanding interest under Section 50 of the Central Goods and Services Tax (CGST) Act, 2017. The notices were issued by the Superintendent of Central Tax. The petitioners argued that the proviso to Section 50, inserted by the Finance (No. 2) Act, 2019, should apply retrospectively from July 1, 2017. They also contended that GSTR-3B is not a return prescribed under Section 39(1) and that interest should not be levied on gross tax liability without considering input tax credit. The dispute primarily concerns the calculation and applicability of interest on delayed payment of GST.

Key Issues

1. Whether the proviso to Section 50 of the CGST Act, 2017, inserted by Section 100 of the Finance (No. 2) Act, 2019, applies retrospectively from July 1, 2017? The petitioner argued for retrospective application, seeking to set aside the interest demand notice dated July 22, 2019. The respondents did not record specific arguments on this point in the judgment. 2. Whether GSTR-3B, prescribed under Rule 61(5) of the CGST Rules, is a return prescribed under Section 39(1) of the CGST Act, and consequently, whether interest under Section 50 can be applied in its context? The petitioner contended that GSTR-3B is not a return under Section 39(1), thus precluding interest levy. The respondents' arguments on this issue are not explicitly recorded. 3. Whether Section 50(1) of the CGST Act, in levying interest on gross tax liability without reducing input tax credit, is illegal, confiscatory, and unconstitutional? The petitioner argued that such a levy is a colourable exercise to impose a penalty in the guise of interest. The respondents' arguments on this issue are not explicitly recorded.