GSTR 3B─Late filing─Reversal of ITC & Levying interest on Gross Tax Liability

[OmPrakash jain]

Section 16(2)(d), CGST Act, 2017 lays down the following condition for availment of ITC;

“Filing of Return u/s 39”

The other four conditions for availment of ITC have been laid down under  Section 16(2)(a) to (c) and 16(2)(aa), CGST Act, 2017.

The section 16(2) starts with notwithstanding clause, meaning thereby that it supersedes sub-section 4 of section 16, based on the following cases of Supreme court & High Courts;

CENTRAL BANK OF INDIA VERSUS STATE OF KERALA AND OTHERS [2009 (2) TMI 451 - SUPREME COURT] ,  SYNERGY FERTICHEM PVT. LTD VERSUS STATE OF GUJARAT [2019 (12) TMI 1213 - GUJARAT HIGH COURT] : SKILL LOTTO SOULUTIONS PVT. LTD. VERSUS UNION OF INDIA AND ORS. [2020 (12) TMI 140 - SUPREME COURT]

As such, demanding interest u/s 50(1), on Gross Tax Liability from the taxable persons for late filing of return, against whom, any proceedings under section 73 or section 74 have been initiated, under the proviso to S.50(1) passed    retrospectively w.e.f. 1.7.2017 by the Finance Act, 2021, is illegal per explicit provision of S.16(2), CGST Act, 2017 for ITC availment. Once the return is filed u/s 39 after paying Late Fee and other conditions stipulated in S.16(2) are complied with, the compliance of S.16(2) is fulfilled for availment of ITC and Interest can not be demanded on Gross Tax Liability from any person.

Moreover, the exclusion clause was not recommended by any GST council meetings.

The Finance Act has been has been passed to legalise the wrong doing by CBIC inspite of;

i) Explicitly clear provision of sub-section (1) to charge interest on Net Tax Liability.

ii) Number of decided cases of various High Courts. To cite some of these;

PRASANNA KUMAR BISOI VERSUS UNION OF INDIA, COMMISSIONER, CENTRAL GST, SUPERINTENDENT, CENTRAL GST AND CENTRAL EXCISE [2020 (8) TMI 775 - ORISSA HIGH COURT], KLT AUTOMOTIVE AND TUBULAR PRODUCTS LIMITED THROUGH ITS DIRECTOR MR. JUBIN THAKKAR VERSUS UNION OF INDIA AND OTHERS [2020 (10) TMI 1173 - BOMBAY HIGH COURT], M/S. MAANSAROVAR MOTORS PRIVATE LIMITED VERSUS THE ASSISTANT COMMISSIONER, THE SUPERINTENDENT OF GST & CENTRAL EXCISE, THE BRANCH MANAGER [2020 (11) TMI 107 - MADRAS HIGH COURT], M/S. REFEX INDUSTRIES LIMITED, M/S. SHERISHA TECHNOLOGIES PVT. LTD. VERSUS THE ASSISTANT COMMISSIONER OF CGST & CENTRAL EXCISE, THE SUPERINTENDENT OF CENTRAL TAX, BANK MANAGAR, BANK MANAGAR, ICICI BANK [2020 (2) TMI 794 - MADRAS HIGH COURT].

No Trade unions have ever raised this crucial issue in the past.

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Om Prakash Jain

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