GST Update No 281 on Section 73 and 74 of CGST Act, 2017 to be invoked in case of disputed interest liability

There had been catena of cases in the introduction phase of GST wherein the assessees failed to file appropriate and proper GST returns resulting into invocation of demand, interest and penalty provisions. However, time and again the revenue authorities are incompetent to provoke correct provisions of Law and hence, the Supreme Court and various High Courts come to the rescue of the taxpayers. Once again on similar parameters, one case was reported before Jharkhand High Court in the case of Bluestar Malleable Pvt. Ltd V/s The State of Jharkhand. The decision delivered in this case is subject matter of our present update.The petitioner was entitled to claim input tax credit of Rs. 3,11,43,255/- submitted a declaration regarding the same in TRAN-1. The accountant of the petitioner repeated the same claim in GSTR-3B furnished in July 2017. It was submitted that this repetition occurred due to human error, absence of adequate practice/familiarity in the working of the new concept of Goodsand Services Tax laws, which had been introduced in 2017 itself. Upon getting noticed of the same, it was rectified immediately in GSTR-3B for the month of July, 2018. It was submitted that the input tax credit was never utilized against the output tax liabilities. The departmental authorities demanded interest of Rs. 72,49,126/- in respect of irregularly availed credit. Meanwhile, the petitioner also filed an application seeking refund of excess amount available in cash ledger of Rs. 26,45,301/-. Although the departmental authorities sanctioned refund but the same was allowed after making adjustment of interest amount of Rs. 72,49,126/-. The part of refundsanctioned order was challenged as it relates to adjustment of refund against the demand of interest. Interest of Rs. 40,71,403/- was demanded by the revenue authorities. The appeal preferred against the same was also rejected.The petitioner submitted that the interest under Section 50 is compensatory in nature and thus cannot be levied if input tax credit is availed twice. Further it was argued thatproper procedure must be followed by the department for realization of interest. Also, no intimation of invoking Section 50 of the Act was initiated by the department.The Counsel of revenue submitted that the claim of taxpayer is not at all tenable since as per Section 42 of the Act, irregularly availed credit is to be reversed by adding the same in output tax liability in GSTR-3B for Aug, 2017.Further, there is facility of reversal of claim on common portal itself and hence, the plea of taxpayer that the online portal had shortcomings is not sustainable. It was argued that it is established law that ignorance of law cannot be an excuse for non-compliance of legal provisions. The petitioner trying to put their failure on online portal which is not appropriate. The department has correctly issued letterto deposit interest as per Section 50 of the Act. Further, necessary instructions were also taken from GSTN and appropriate query was made to GSTN. It was argued that procedure for reversal and reclaim of input tax credit is mentioned under Section 42 of the Act. There is provision in GSTR-3B return itself to reverse the credit in Column 4(B) under the head “ITC reversed”.The Court held that that question under consideration is whether interest is to be levied under Section 50 of the Act or under Section 73/74 of the Act. Reference was drawn to the decision of Mahadeo Construction Co. Vs. Union of India wherein it is stated that if any assessee disputes the liability of interest under Section 50 of the JGST Act then the revenue will have to follow the specific procedure as stipulated under Section 73 or 74 of the JGST Act. Looking into the present situation, it demonstrates that procedure under Section 73 or 74 of the Act is not followed. It was therefore decided to quash the appellate order. The matter is remitted back to revenue and issueorder is accordance with the Law.The above decision upheld the view that proper and due procedure needs to be followed by the subordinate authorities failing which will jeopardize the basic intention of law and leading to further quashing of appeal. It is high time that This will further lead to wastage of precious time of courts and of aggrieved taxpayers. Moreover, the interest is to be charged on credit taken and utilised. Even the amendment to this effect is incorporated in statue book with effectfrom 1.4.2022. Hence, interest should not be charged. Even the author of this update has also successfully pleaded the similar case before Chennai appellate authority that interest under section 50 ibid is to be charged when it is utilised. Even the case study on the same was posted by us on 26.10.2021.

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GST Update No 281 on Section 73 and 74 of CGST Act, 2017 to be invoked in case of disputed interest liability

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