Messrs Vishnu Aroma Pouching PVT LTD vs. Union Of INDIA

Held

The Court held that the petitioner had duly discharged its tax liability for August 2017 within the prescribed period. The Court found that the petitioner had made payments totaling Rs. 114.51 crores in cash and utilized ITC of Rs. 14,12,35,762/-, aggregating to the total liability of Rs. 128.63 crores. Crucially, the Court noted that the generation of CPINs and CINs for the cash payments, as well as the debit of ITC, were not disputed by the respondents. It was evident that the amounts were deposited by the petitioner on September 19, 2017, and received by the designated bank. The Court concluded that the failure to credit the amount to the government account was solely due to technical glitches in the system, not attributable to any fault of the petitioner. Therefore, it would be unreasonable and inequitable to levy interest on the petitioner for a period where the tax was paid on time. The Court directed that the declaration submitted by the petitioner in October 2019 along with the return of September 2019 be treated as a discharge of the August 2017 tax liability within the stipulated period, and consequently, the petitioner would not be liable to pay any interest from September 21, 2017, to October 2019.

Facts

The petitioner, Messrs Vishnu Aroma Private Limited, engaged in manufacturing Pan Masala, challenged a decision conveyed via letter dated March 7, 2019. For August 2017, the petitioner's total tax liability was Rs. 128,63,47,508/-. This was discharged partly by cash (Rs. 87,62,55,084/- and Rs. 26,88,56,662/- via two challans on September 19, 2017) and partly by Input Tax Credit (ITC) (Rs. 14,12,35,762/-). The petitioner contended that despite making payments and having CPINs and CINs generated, the tax was not credited to the government account due to system errors. The respondent authorities, however, sought to levy interest on the tax liability for August 2017, citing Circular No. 26/26/2017-GST dated December 29, 2017, which required adjustment of short-paid tax in the subsequent period. The petitioner sought a writ of mandamus or certiorari to quash the decision and direct regularization of its GSTR-3B for August 2017.

Key Issues

1. Whether the petitioner had discharged its tax liability for August 2017 within the stipulated period under the GST laws, considering the alleged system errors in crediting the payment to the government account? (Question of mixed law and fact, concerning Section 49 of the CGST Act and Rules 85, 87, and 88 of the CGST Rules). Petitioner's Arguments: - The petitioner argued that it had duly discharged its tax liability for August 2017 by making payments through internet banking, evidenced by generated CPINs and CINs, and that the failure to credit the amount was due to technical glitches in the GST system, not its fault. - It contended that it should not be saddled with interest for a period where the tax was paid on time but not reflected due to system errors. Revenue's Arguments: - The revenue authorities relied on Circular No. 26/26/2017-GST dated December 29, 2017, which stipulated that any amount not paid or short-paid in a GSTR-3B return of a previous month could be adjusted in the return of the following tax period. - They argued that the petitioner was required to follow this circular and pay interest on the delayed reflection of tax payment.