Bluestar Malleable PVT LTD Through Its Authorised Signatory Sanjay Kumar Mishra vs. The Union Of INDIA Through The Secretary Ministry Of Finance

Held

The Court held that interest under Section 50 of the JGST Act, 2017, is indeed compensatory in nature. It found that the petitioner had inadvertently included transitional credit in GSTR-3B after it was already claimed in GSTR TRAN-1, and this credit was subsequently reversed and never utilized. Crucially, the Court noted that the revenue had not followed the mandatory procedure stipulated under Section 73 or 74 of the JGST Act for the realization of interest when the petitioner had raised objections to the demand. The Court observed that while the liability to pay interest might be automatic, its quantification requires an arithmetic exercise after considering the assessee's objections. Since the revenue failed to follow the prescribed procedure, the impugned letters and appellate order were quashed. The matter was remitted back to the revenue to initiate fresh proceedings in accordance with law, following the procedures laid down in the JGST Act, and to issue a fresh refund order thereafter.

Facts

The petitioner, Bluestar Malleable Pvt. Ltd., challenged two letters from the CGST Superintendent, Jamshedpur. The first letter dated November 6, 2018, demanded interest of Rs. 72,49,126/- on alleged irregular input tax credit (ITC) taken on August 24, 2017, and reversed on August 13, 2018. The second letter dated January 28, 2019, rejected the petitioner's objection to this interest demand under Section 50 of the Jharkhand Goods & Service Tax (JGST) Act, 2017. The petitioner argued that it inadvertently included transitional credit of Rs. 3,11,43,255/- in GSTR-3B for July 2017, which was already claimed in GSTR TRAN-1, and this credit was never utilized. The petitioner also challenged a refund sanction order dated November 9, 2018, which adjusted the claimed refund against the disputed interest demand, and a subsequent appellate order dated January 31, 2020, which upheld this adjustment.

Key Issues

1. Whether interest under Section 50 of the JGST Act, 2017, which is primarily compensatory, can be levied upon the petitioner if the ITC was not availed twice, was mistakenly filed in GSTR-3B after being carried forward as transitional credit in GSTR TRAN-1, and was subsequently reversed in July 2018, with no tax dues remaining unpaid during the period? The petitioner argued that interest is compensatory and should not be levied if ITC was not utilized twice and tax dues were not outstanding. The petitioner also contended that the revenue failed to follow the prescribed procedure for realizing interest under Section 50(3) of the JGST Act after the petitioner raised objections. 2. Whether the revenue followed the prescribed procedure for realization of interest under Section 50(3) of the JGST Act, 2017, after the petitioner raised objections to the demand notice?