Gammon Engineers And Contractors PVT. LTD. vs. The State Of Bihar

Facts

The petitioner, Gammon Engineers and Contractors Pvt. Ltd., filed a writ petition before the Patna High Court challenging an order and demand notice dated February 22, 2020, issued by the Joint Commissioner of State Taxes. The challenge was primarily against the levy of interest under Section 50(1) read with Section 75(12) of the Bihar Goods and Services Tax Act, 2017. The petitioner contended that interest should not be levied on tax liabilities discharged from the electronic credit ledger, especially when sufficient credit balance was available. The petitioner relied on a judgment from the Madras High Court in the case of Refex Industries Limited.

Held

The Court disposed of the present proceedings based on the stand taken by the State in its affidavit dated January 9, 2021. The affidavit clarified 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) was made effective prospectively from September 1, 2020. Crucially, it was assured that no recoveries would be made for interest charged on gross liability for past periods by central and state tax administrations. The State further stated that no recovery would be made for interest charged on delayed payment of tax that has been made by the taxpayer debiting the credit ledger. The Court took these averments on record and disposed of the petition in terms of these submissions. The ratio is that interest under Section 50(1) of the GST Act, as amended, is to be charged on net liability (discharged from cash ledger) and not on gross liability, and this amendment is prospective. No recovery will be made for past periods where tax was paid from the credit ledger.

Key Issues

1. Whether the impugned order and demand notice, levying interest under Section 50(1) read with Section 75(12) of the Bihar Goods and Services Tax Act, 2017, are without jurisdiction and unsustainable in law, particularly when the tax liability was discharged from the electronic credit ledger? (Mixed question of law and fact). Petitioner's arguments: The petitioner argued that interest under Section 50 of the Act is attracted only when tax liability is discharged from the cash ledger. They contended that in the absence of the jurisdictional fact necessary for exercising power under Section 50, the assessing authority could not have passed the impugned order. They relied on the Madras High Court's decision in Refex Industries Limited, which held that interest is attracted only on tax liability discharged from the cash ledger. The petitioner also argued that if returns and tax liabilities were paid in terms of Section 39(7), no interest liability would arise under Section 75(12). Revenue's arguments: The judgment records no specific arguments from the revenue's side regarding the petitioner's contentions. However, the State, through its affidavit, agreed to certain terms that led to the disposal of the petition.