Shree Automobiles (P) LTD & Anr vs. Jt Commissioner Of State Tax & Ors

Held

The Court held that the impugned order dated May 14, 2019, demanding interest under Section 50 of the GST Act was not sustainable in law due to the retrospective amendment of Section 50(1) by Section 112 of the Finance Act, 2021, effective from July 1, 2017. The Court reasoned that the amended provision clearly states that interest is payable only on the portion of tax paid by debiting the electronic cash ledger. The petitioner's claim that only Rs. 1,22,283/- was payable as interest, with the rest relating to tax paid via the electronic credit ledger, was not disputed by the respondents. Consequently, the Court set aside the impugned order and the garnishee notice dated May 27, 2019. The Court directed the respondent to recalculate the demand in accordance with the amended Section 50 within four weeks, refund any excess amount collected, and consider the petitioner's claim for interest on the excess amount.

Facts

The petitioner, Shree Automotive (P) Ltd., challenged the vires of certain sections of the GST Act, specifically Section 50, and an order dated May 14, 2019, which demanded interest of Rs. 2,51,15,982/- for the period July 2017 to March 2018. The petitioner also contested a garnishee notice dated May 27, 2019, issued to HDFC Bank, and the subsequent recovery of Rs. 1,42,74,642/-. During the pendency of the writ petition, Section 50(1) of the GST Act was amended retrospectively from July 1, 2017, by Section 112 of the Finance Act, 2021. The amendment clarified that interest is payable only on the portion of tax paid by debiting the electronic cash ledger.

Key Issues

1. Whether the impugned order dated May 14, 2019, demanding interest under Section 50 of the GST Act for the period July 2017 to March 2018, is sustainable in law, considering the retrospective amendment to Section 50(1) by the Finance Act, 2021? Petitioner's argument: The petitioner contended that the retrospective amendment to Section 50(1) mandates that interest is payable only on the tax paid through the electronic cash ledger. They asserted that the majority of the demanded interest pertained to tax paid via the electronic credit ledger, and therefore, only an interest of Rs. 1,22,283/- was legitimately payable. They relied on the amended Section 50(1) and their supplementary affidavit. Revenue/State's argument: The judgment does not record any specific arguments made by the respondents regarding the sustainability of the demand in light of the amendment.