SINCON INFRASTRUCTURE PVT. LTD. Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioner an assessee under the Central Goods and Services Tax Act, 2017 (for brevity, the Act) is aggrieved with the peremptory recovery sought as against two objections raised on audit, relating to interest payable for the assessment years 2017-18 and 2018-19, while the other seven objections raised on audit are the subject of a notice issued under Sec. 74 of the Act.

(2.) Sri Gautam Kejriwal, the learned counsel for the petitioner argued that the audit report dtd. 26/8/2022 (Annexure-P/3) raised nine objections, all of which were replied to by Annexure-P/4 dtd. 12/9/2022. The Proper Officer after considering the reply invoked Sec. 74 read with Sec. 65 (7) of the Act and issued a notice with respect to the seven of the nine objections raised on audit. As far as two objections relatable to the interest payable for the two assessment years, straight away a demand notice was issued under Sec. 74(5) read with Rule 142 of the Act by Annexure-P/7, dtd. 30/12/2022. Later a notice under Sec. 74(1) was issued as Annexure-P/9 dtd. 18/7/2023, regarding the seven objections other than the two for which a demand was raised. The petitioner is aggrieved with the peremptory demand made and the recovery proceeded with, when the objections against the said demand on interest also ought to have been considered by the Proper Officer. It is pointed out that the Proper Officer even as per the demand notice has acted on the dictates of the Monitoring Committee.

(3.) The question of interest though automatic under the Act depends upon the factual situation of when the tax became due and when the payment of tax was made and under what mode. In the goods and services tax regime, the levy of interest would depend upon whether the debit has been made from the Electronic Credit Ledger or the Electronic Cash Ledger. It is the submission of the learned counsel for the petitioner that even as per the audit report as seen at Annexure- P/3, for the financial year 2018-19, the GST liabilities were offset from the Electronic Credit Ledger. The audit report notices that Sec. 51 of the Act requires payment of interest, if delay is occasioned and hence, the liability mulcted on the petitioner. However, it is pointed out that the proviso to Sec. 50(1) clearly imposes an interest liability only when the tax payment is made by a debit to the Electronic Cash Ledger. As far as the Electronic Credit Ledger is concerned it is the input tax credited to the assessee's account, which is the tax made on his purchases remitted to the government by the assessee's suppliers. This amount is already in the coffers of the government and the set off towards output tax is only a book adjustment, which would absolve the assessee from the interest liability. The learned counsel for the petitioner relied on a decision of the learned Single Judge produced as Annexure-P/11 of the High Court of Judicature at Madras in M.s. Refex Industries Ltd. vs. The Assistant Commissioner of CGST & Central Excise in W.P. Nos. 23360 and 23361 of 2019 decided on 6/1/2020. The specific proviso under Sec. 50(1) has been relied on to find that this was introduced to correct an anomaly in Sec. 50(1) and required a levy of interest only on that part of the tax which is paid in cash.