M/S Sunrise Polypack Private Limited vs. Union Of INDIA

Facts

The petitioners, including M/s Sumilon Polyster Limited, challenged the action of the respondent-authorities in levying interest on delayed payment of GST under Section 50 of the CGST Act and GGST Act. The core of the dispute was whether the interest should be calculated on the gross tax liability or the net tax liability after considering the admissible input tax credit. The petitioners argued that a decision in the 31st GST Council Meeting and subsequent amendment to Section 50 of the CGST Act by the Finance Act, 2021, addressed this grievance. The respondent-authorities conceded that the amendment would resolve the petitioners' issue.

Held

The Court held that the petitions had become infructuous due to the amendment of Section 50(1) of the CGST Act by Section 112 of the Finance Act, 2021. The amendment, which substituted a proviso and was made effective retrospectively from July 1, 2017, by Notification No. 16 of 2021, clarified that interest on delayed payment of tax is payable only on the portion of the tax paid by debiting the electronic cash ledger. This effectively resolved the petitioners' grievance of interest being levied on the gross GST liability instead of the net liability after considering input tax credit. The Court directed the respondents to give effect to this amendment within twelve weeks. The ratio decidendi is that legislative amendments aimed at rectifying tax administration issues, especially when made retrospective, should be applied to resolve pending disputes.

Key Issues

1. Whether interest on delayed payment of tax under Section 50 of the CGST Act and GGST Act should be levied on the gross tax liability or the net tax liability after accounting for input tax credit? Petitioner's Arguments: The petitioners contended that as per the 31st GST Council Meeting decision, interest should only be charged on the net liability after considering admissible credit. They further argued that the amendment to Section 50(1) of the CGST Act by Section 112 of the Finance Act, 2021, which was made effective retrospectively from July 1, 2017, specifically addresses this grievance by providing that interest is payable on the portion of tax paid by debiting the electronic cash ledger. They relied on Notification No. 16 of 2021 for the effective date of the amendment. Revenue's Arguments: The respondent-authorities submitted that the amendment to Section 50(1) of the CGST Act, inserting the proviso effective from July 1, 2017, would indeed redress the petitioners' grievance regarding the charging of interest on the gross amount of GST liability.