Ms R P M Distributors Through Its Proprietor Mr Mitesh Kumar Drolia vs. Union Of INDIA Through The Commissioner Central Goods And Services Tax

Held

The Court noted the submissions of both parties. It was observed that the issue concerning the levy of interest on delayed payment of tax on gross tax liability has been addressed by the CBIC, and respondent authorities have been instructed to impose such interest on the net tax liability. Consequently, the Court found no purpose in keeping the writ petition pending. The Court disposed of the writ petition, explicitly reserving liberty for the petitioner to approach the Court again if the respondents chose to realize the interest on the gross tax liability for the period in question. The Court did not make a specific finding on the legality of the initial notice or the exact amount of interest, but rather disposed of the matter based on the assurance of the respondents regarding the calculation on net tax liability.

Facts

The petitioner, M/s R.P.M. Distributors, is challenging an interest liability of Rs. 4,81,664/- imposed by the Superintendent, CGST & CX, Ranchi South Division, Ranchi, through a notice dated 17th February 2020. The petitioner contends that this interest was calculated for the delay in payment of GST for the financial years 2017-18, 2018-19, and 2019-20 without any adjudication process under Section 73 or 74 of the CGST Act. The petitioner claims to have discharged its tax liability without default and argues that the interest has been calculated on the gross tax liability rather than the net tax liability, which would be evident from its electronic credit ledger showing excess input tax credit. The petitioner also notes that for some months, tax was paid in cash.

Key Issues

1. Whether the levy of interest on the gross tax liability, without adjudication under Section 73 or 74 of the CGST Act, is permissible for delayed payment of GST for the financial years 2017-18, 2018-19, and 2019-20? Petitioner's arguments: The petitioner argues that the interest liability has been imposed without following the mandatory adjudication process under Section 73 or 74 of the CGST Act. They contend that the interest has been calculated on the gross tax liability, whereas it should be on the net tax liability, considering the excess input tax credit available in their ledger and cash payments made. They rely on a previous order of the High Court in W.P.(T) No.1908/2020 (M/s. BGR Mining & Infra Limited, Dhanbad Vrs. The State of Jharkhand & Ors.) and a CBIC communication dated 18th September 2020, which instructs recovery of interest only on net cash tax liability. They also refer to the amendment in Section 50 of the CGST Act by the Finance (No.2) Act, 2019. Revenue's arguments: The respondent CGST counsel submits that as per the CBIC circular, interest for delayed payment is now being levied on the net tax liability and not on the gross tax liability, and therefore, the writ petition can be disposed of in the same lines as the cited case.