Prema Automobiles PVT. LTD. vs. The State Of Bihar

Facts

The petitioner, Prema Automobiles Pvt. Ltd., filed a writ petition before the Patna High Court challenging an order dated February 23, 2020, passed by the Joint Commissioner of State Taxes, Patna North Circle. This order, issued under Section 75(12) read with Section 50(2) of the Bihar Goods and Services Tax Act, 2017, along with a consequential demand notice in form GST DRC-07, was challenged as being ex parte and violative of natural justice. The petitioner argued that the order was without jurisdiction as the necessary jurisdictional facts for exercising power under Section 50 were absent. The core of the dispute revolved around the liability to pay interest on delayed GST payments, particularly when the tax liability was discharged from the electronic credit ledger.

Held

The Court disposed of the petition based on the stand taken by the State in its affidavit dated January 11, 2021. The State acknowledged that following Notification No. 63/2020 dated August 25, 2020, and a press release from the Ministry of Finance on August 26, 2020, the amendment to Section 50(1) of the Act was made effective prospectively from September 1, 2020. Crucially, it was clarified that no recoveries would be made for interest charged on gross liability for past periods by either the central or state tax administration. The State further submitted that no recovery would be made for interest charged on delayed payment of tax if it was debited from the credit ledger. However, in terms of the amended Section 50(1), interest is payable on net liability (tax paid from the cash ledger). The Court took these averments on record and disposed of the proceedings accordingly. The primary reasoning was based on the State's concession and the clarification provided by the Central Board of Indirect Taxes & Customs (CBIC) circular, which assured relief to taxpayers by not recovering interest on past periods charged on gross liability.

Key Issues

1. Whether the impugned order and demand notice, issued under Section 75(12) read with Section 50(2) of the Bihar Goods and Services Tax Act, 2017, are liable to be quashed for being ex parte and violative of the principles of natural justice? (Petitioner's contention: Yes, as it was passed without proper notice or opportunity to be heard). 2. Whether the impugned order is without jurisdiction and unsustainable in law due to the absence of jurisdictional facts necessary for the exercise of power under Section 50 of the Act? (Petitioner's contention: Yes, the authority could not have passed the order without establishing the necessary preconditions for invoking Section 50). 3. Whether the liability of interest under Section 50 of the Act is attracted only in cases where the tax liability is discharged from out of the cash ledger, as held by the Madras High Court in Refex Industries Limited Vs. Asst. Commissioner of CGST and Central Excise? (Petitioner's contention: Yes, and in the petitioner's case, since the credit balance in the electronic credit ledger was sufficient, no interest liability should arise). 4. Whether, in the absence of any cash ledger debit for tax payment, no interest liability would be attracted under Section 75(12) of the Act, especially when returns were furnished and tax liabilities were paid in terms of Section 39(7)? (Petitioner's contention: Yes, as the payment was made as per the prescribed procedure). The Revenue did not record any specific arguments in the judgment.