Ashmeet Automobiles Private Limited vs. State Of West Bengal And Ors.

Held

The Court held that the impugned adjudication order dated June 24, 2019, and the order of the appellate authority dated February 24, 2020, relating to the demand of interest under Section 50(1) of the GST Act, are not sustainable in law. The Court reasoned that the amendment to Section 50(1) of the GST Act, made effective retrospectively from July 1, 2017, by the Finance Act, 2021, fundamentally alters the basis for calculating interest. The amended provision clarifies that interest is payable only on the portion of tax paid by debiting the electronic cash ledger, subject to certain conditions. The ratio decidendi is that statutory amendments with retrospective effect must be applied to pending matters, and any demand contrary to the amended provision is invalid. Consequently, the Court set aside the impugned demand notice and the order of attachment of the bank account. However, the Court permitted the respondents to recalculate the demand after taking into account the amendment to Section 50(1) of the GST Act.

Facts

The petitioner, Ashmeet Automobiles Private Limited, challenged an adjudication order dated June 24, 2019, and an appellate authority order dated February 24, 2020. The challenge pertained to the demand of interest under Section 50(1) of the GST Act for the Assessment Year 2017-18. The petitioner contended that an amendment to Section 50(1) of the GST Act, effective from July 1, 2017, rendered the impugned interest demand unsustainable. The State of West Bengal and its authorities were the respondents. The procedural history involves the issuance of the adjudication order, an appeal to the appellate authority, and the subsequent writ petition before the High Court challenging these orders.

Key Issues

1. Whether the impugned adjudication order and the order of the appellate authority demanding interest under Section 50(1) of the GST Act are sustainable in light of the amendment to Section 50(1) of the GST Act by the Finance Act, 2021, which is deemed to have been substituted with effect from July 1, 2017? The petitioner argued that the amendment to Section 50(1) of the GST Act, which clarifies that interest on delayed payment of tax is payable only on the portion of tax paid by debiting the electronic cash ledger (provided the return is filed after the due date but before commencement of proceedings under Section 73 or 74), makes the original demand for interest unsustainable. The petitioner relied on the amended provision and the subsequent appellate order dated February 24, 2020, which presumably dealt with the interest issue. The State did not record any specific arguments against the petitioner's contention regarding the retrospective application of the amendment.