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

Facts

The petitioner, Gammon Engineers and Contractors Pvt. Ltd., challenged an order and demand notice dated February 22, 2020, issued by the Joint Commissioner of State Taxes, Patliputra Circle, Patna. The order was passed under Section 75(12) read with Section 50(1) of the Bihar Goods and Services Tax Act, 2017, and related provisions of the CGST and IGST Acts. The petitioner sought to quash the order and notice, asserting they were without jurisdiction. The core of the dispute revolved around the calculation of interest on delayed payment of GST, specifically whether it should be on the gross liability or the net liability discharged in cash, and if it applied to periods where the tax liability was met from the electronic credit ledger.

Held

The Court disposed of the 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, as decided in the 39th GST Council Meeting. This meant no recovery would be made for interest charged on delayed payment of tax that was debited from the credit ledger. The State prayed that taxpayers be directed to pay interest on delayed payment of tax debited from the cash ledger (i.e., on net liability) in terms of the amended Section 50(1). The Court accepted these submissions and disposed of the petition accordingly.

Key Issues

1. Whether the impugned order and demand notice, passed under Section 75(12) read with Section 50(1) of the Bihar GST Act, 2017, are without jurisdiction and unsustainable in law, particularly in the absence of a necessary jurisdictional fact? (Petitioner's contention: Yes, as the liability was discharged from the electronic credit ledger, and the case is covered by the Madras High Court's decision in *Refex Industries Limited* which held interest is attracted only on tax liability discharged from out of the cash ledger). 2. Whether the petitioner is liable to pay interest under Section 50(1) of the Act when the credit balance in their electronic credit ledger was sufficient to meet admitted tax liabilities for the respective months? (Petitioner's contention: No, interest should not be attracted if admitted liabilities are covered by the credit ledger). 3. Whether, in terms of Section 39(7) of the Act, no liability of interest would be attracted if the petitioner has furnished returns and made payment of tax liabilities? (Petitioner's contention: No interest liability arises in such circumstances). Revenue's contention: Not recorded in the judgment.