2025 (6) TMI 419 - HC - GST

Levy of interest and penalty - delay in filing GSTR 3B returns despite having deposited the tax amount in the Electronic Cash Ledger on time - violation of principles of natural justice - HELD THAT - The issue with regard to payment of interest is considered by this Court in the case of M/s.Eicher Motors Limited Vs.The Superintendent of GST and Central Excise Range-II 2024 (1) TMI 1111 - MADRAS HIGH COURT wherein this Court has held that the interest liability stops accruing from the date on which the amount due is deposited in the tax payer s electronic cash ledger. The provision of Rule 88 B(1) of the C.G. S.T.Rules 2017 is clarificatory in nature and therefore the question of retrospective or prospective effect will not come into picture and therefore the question of payment of interest will not arise - As far as other payments or penalty is concerned if there is any non payment on or before the due date it is left open to the respondent to take appropriate action. The impugned order dated 30.12.2023 is quashed to the extent of levying of interest alone - Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

- Whether the petitioner is liable to pay interest under Section 50 read with Section 73(1) of the CGST Act, 2017/TNGST Act, 2017 for delay in filing GSTR 3B returns despite having deposited the tax amount in the Electronic Cash Ledger on time.

- Whether the levy of interest and penalties imposed by the respondent is contrary to the provisions of the CGST Act, 2017 and TNGST Act, 2017.

- Whether the principles of natural justice were violated in passing the impugned order.

- The applicability and interpretation of Rule 88B(1) of the C.G. & S.T. Rules, 2017, specifically regarding the effect of crediting tax amounts in the Electronic Cash Ledger on the calculation of interest.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability to pay interest for delay in filing GSTR 3B returns despite timely tax deposit in Electronic Cash Ledger

Relevant legal framework and precedents:

The Court referred to Section 50 read with Section 73(1) of the CGST Act, 2017/TNGST Act, 2017, which govern the levy of interest on delayed payment of tax. Additionally, Rule 88B(1) of the C.G. & S.T. Rules, 2017 was pivotal, which states:

"Provided that where any amount has been credited in the Electronic Cash Ledger as per provisions of sub-section (1) of section 49 on or before due date of filing the said return, but is debited from the said ledger for the payment of tax while filing the said return after the due date, the said amount shall not be taken into consideration while calculating such interest if the said amount is lying in the said ledger from the due date till the date of its debit at the time of filing return."

The Court also relied on a precedent decision of this Court in the case of M/s.Eicher Motors Limited Vs. The Superintendent of GST and Central Excise Range-II, which held that "the interest liability stops accruing from the date on which the amount due is deposited in the tax payer's electronic cash ledger."

Court's interpretation and reasoning:

The Court interpreted Rule 88B(1) as clarificatory, emphasizing that if the tax amount has been credited to the Electronic Cash Ledger on or before the due date, the delay in debiting this amount while filing the return should not attract interest. The Court reasoned that since the tax liability was discharged by depositing the exact amount in the Electronic Cash Ledger timely, the interest should not continue to accrue even if the return filing was delayed.

Key evidence and findings:

The petitioner demonstrated that due to technical glitches in the GST portal, specifically the non-acceptance of the digital signature of the Managing Director (initially) and later due to the retirement of the Managing Director and consequent expiry of the digital signature, they were unable to upload GSTR 3B returns from July 2017 to July 2019. Despite this, the petitioner deposited the exact tax liability in the Electronic Cash Ledger on time every month.

The respondent acknowledged the deposit of the entire tax amount but contended that interest was due because the returns were filed late and the cash ledger was debited only in August 2019.

Application of law to facts:

Applying Rule 88B(1) and the precedent, the Court found that since the amounts were credited timely to the Electronic Cash Ledger, the petitioner's interest liability should cease from the date of such deposit. The delay in debiting the ledger during return filing did not justify the continuation of interest liability.

Treatment of competing arguments:

The respondent's argument that interest was due because of late filing of returns and delayed debiting of the cash ledger was rejected by the Court based on the statutory provision and binding precedent.

Conclusion:

The Court concluded that the petitioner is not liable to pay interest for the period of delay in filing returns, as the tax amounts were deposited in the Electronic Cash Ledger on or before the due dates.

Issue 2: Validity of levy of penalties and other payments

Relevant legal framework:

Provisions under the CGST Act, 2017 and TNGST Act, 2017 relating to penalty and other payments for non-compliance or delayed compliance.

Court's interpretation and reasoning:

The Court clarified that its decision was limited to the issue of interest and did not extend to other penalties or payments. If there was any non-payment of tax on or before the due date, the respondent was free to take appropriate action in accordance with law.

Application of law to facts:

Since the petitioner had deposited the tax amounts timely, the question of penalty was not directly addressed. The Court left the issue open for the respondent to act if any other violations were found.

Conclusion:

The Court did not interfere with the levy of penalties or other payments, leaving it to the respondent's discretion to act as per law.

Issue 3: Alleged violation of principles of natural justice

The petitioner contended that the impugned order was passed contrary to principles of natural justice.

Court's consideration:

The Court did not find any specific argument or evidence indicating violation of natural justice principles in the impugned order. The petitioner had been given opportunity to raise objections and the respondent had considered the same before passing the order.

Conclusion:

No violation of natural justice principles was found or addressed as a separate issue by the Court.

3. SIGNIFICANT HOLDINGS

- "The interest liability stops accruing from the date on which the amount due is deposited in the tax payer's electronic cash ledger."

- Rule 88B(1) of the C.G. & S.T. Rules, 2017 is clarificatory in nature and provides that where tax amounts are credited to the Electronic Cash Ledger on or before the due date, delay in debiting the ledger during return filing shall not attract interest.

- The Court quashed the impugned order dated 30.12.2023 to the extent of levying interest alone, holding that the petitioner is not liable to pay interest for delay in filing GSTR 3B returns when tax was deposited timely in the Electronic Cash Ledger.

- The Court left open the respondent's right to take appropriate action regarding any other payments or penalties for non-payment on or before the due date.