India Yamaha Motor Pvt. Ltd. vs The Assistant Commissioner

India Yamaha Motor Private Limited (Represented by Assistant General Manager, Khiroda Chandra Patra), Plot No.VV-I, SIPCOT Industrial Park, Vallam Vadagal Village, Sriperumbudur Taluk, Kanchipuram District, Tamil Nadu – 602 105.

1.The Assistant Commissioner, Sriperumbudur Division, Chennai Outer Commissionerate, C-48, TNHB Building, Anna Nagar, Chennai – 600 040.

2.The Commissioner of CGST & Central Excise, Chennai Outer Commissionerate, C-48, TNHB Building, Anna Nagar, Chennai – 600 040.

3.The Deputy Commissioner (CT) (LTU) – III, Duggar Towers, 5th Floor, Marshall Road, Egmore, Chennai – 600 008.

4.The Goods and Service Tax Network, East Wing 4th Floor, World Mark 1, Aerocity, New Delhi – 110 037. PRAYER: Writ Petition filed under Article 226 of the Constitution of India praying for issuance of writ of Certiorari, calling for the records on the files of the 1 st respondent herein in C.No.IV/16/22/2019-GST, dated 10.04.2019, along with his C.No.IV/16/22/2019-GST-Final Reminder dated 10.05.2019, as modified by the 2
nd respondent in his C.No.V/15/02/2020-Adj.Ch.Outer dated 18.01.2021 and quash the same insofar as it pertains to confirmation of interest demand of Rs.1,19,02,178/- The petitioner is an assessee under the provisions of the Tamil Nadu Goods and Service Tax Act, 2017, (‘TNGST Act’/‘Act’) and has challenged an order dated 10.04.2019 wherein the respondent calls upon it to remit interest of a sum of Rs.5,00,00,000/- (approx.) for belated remittance of Goods and Service Tax (‘GST’) for the period from July, 2017 to October, 2017.

2.When the matter had come up before me on 16.12.2020, I had passed the following order:

“Heard Mr.Prasad, learned counsel for the petitioner and Mr.Santhanaraman, learned Standing Counsel for the respondents.

2. Impugned order dated 10.04.2019 calling upon the petitioner to remit interest for the belated payment of GST has, admittedly, been passed without a pre-intimation notice/show cause notice. However, without having to set aside the impugned order, it would suffice that a direction be issued to R2, who is the jurisdictional Commissioner, to consider representation dated 28.09.2017 wherein the factual matrix of the matter has been set out in detail.

3. It appears that while seeking to file a return for the month of July, 2017, an error was discovered therein, as a result that the return was merely
 filed’ and not ‘submitted’ and the process was aborted at that stage. According to the petitioner, the output tax liability has been remitted in full into the cash ledger even prior to the ‘filing’ of the return. The petitioner has been making efforts to correct the error and to obtain opening of the GST portal in order that the corrected return could be filed, to no avail. According to the petitioner, the cascading effect of the aforesaid events have led to the subsequent monthly returns being delayed well as, till such time the error in the July return is rectified, the proper determination of output tax liability for the subsequent months cannot be made.

4. The petitioner will appear before R2 on 23.12.2020 at 10.30 a.m. without expecting any further notice in this regard. The Commissioner/R2 will hear the petitioner, either over video conference or physical hearing, consider the representation of the petitioner dated 28.09.2017 along with any other
material that may be supplied and pass orders thereupon within a period of four (4) weeks from today.

4. What follows in the succeeding paragraphs of this order addresses the contents of order dated 18.01.2021 alone, and the prayer in this writ petition thus stands moulded, to this extent. The levy of interest u/s 50 of the Act, arises from the fact that when the petitioner filed a GSTR 3B return for the month of July, 2017, there was an inadvertent error whereby the data pertaining to its plant at Faridabad was included instead of data pertaining to the Chennai plant.

5. This swap resulted in a short disclosure of liability for the period July to October 2017 leading to the levy of interest. The petitioner had filed a grievance petition seeking modification of the return for the month of July 2017 that had not been immediately disposed/addressed by the authorities 

6. Thus, the petitioner has admittedly not filed monthly returns for the months August to October 2017, on the premise that the proper ascertainment of tax liability for the aforesaid months would be dependent upon the adjudication of its grievance petition as above. According to the petitioner, it was for this reason that the petitioner did not file returns for the later periods, asa measure of containing the cascading effect of the error that had transpired in the return for July 2017.

7. The remittance of taxes for the subsequent periods are admittedly belated, and the period of delay and consequent levy of interest, are as tabulated below

8.The specific argument of the petitioner is that it had sufficient ITC credit in both the electronic cash ledger (‘ECR’) as well as the electronic credit register (‘ECrC’). Thus, there had been no loss caused to the revenue and hence no justification to levy interest since the interest is only compensatory in nature.

9. Taking note of the amendments to Section 50 of the Act, the respondent has recomputed the interest payable reducing the same from Rs.5,00,00,000/- (approx.) to an amount of Rs.1,19,00,000/-. Thus, credit to the extent of cash payments effected by the petitioner has been granted to the petitioner. The submission of the assessee is that the same logic that has merited acceptance by GST authorities in relation to the cash balance, should apply in the context of credit balance as well.

10. It may be recalled that there was substantial litigation in the context of levy of interest under Section 50 of the Act in cases where the assessee concerned had sufficient cash credit. This Court, in Refex Industries Limited vs The Assistant Commissioner of CGST and Central Excise, (order dated 06.01.2020 in W.P.Nos.23360 & 23361 of 2019) took note of the amendment to Section 50 that had been inserted by Act No.23 of 2019. The conclusion was that the proviso should operate retrospectively and thus, in a case where an assessee had sufficient cash credit, there is no question of the Department requiring to be compensated, since funds were available with it, to the credit of that assessee.

11. While it is the above reasoning that is found favour with the respondents qua cash credits, a distinction is sought to be made qua cash credits and credits available in the ECR and ECrR. While payments in cash denotes the actual availability of cash to the credit of the assessee concerned/petitioner, deposits standing to the credit of an assessee/petitioner, do not necessarily, and in all circumstances, imply that the resources to back such credit up, are within reach of the Department. This is all the more in a case such as the present where the petitioner has not actually filed the returns and effected a debit to the ECR and EcrR to the extent of the tax payable. Thus, credit cannot be equated with cash remittances.

12. The reasoning in the impugned order is as follows:

‘4.2.Sufficient Balance in Electronic Credit and Cash ledger:

4.2.1. The GST Registrant stated that in their case, eligible ITC in the Electronic Credit Ledger and sufficient cash balance in the Electronic Cash Ledger were available, in the common portal operated by the GST Network. The actual net tax liability was deposited in Electronic Cash Ledger before the due date of filing returns for the period from July 2017 to October 2017. The contention of the GST Registrant that they had sufficient closing balance in ITC and net tax liability was deposited in Electronic Cash ledger before due date of filing returns is not legally sustainable, because under the Goods and Service Tax, having sufficient balance of ITC in the Electronic Credit Ledger is immaterial unless the Return is filed and the same is debited towards payment of GST. To be precise, the system of Electronic Credit and Cash ledgers  maintained electronically in the Common portal operated by the GST Network. The tax payment happens only when the statutory Returns are filed and the two ledgers are debited towards the tax liability. Hence any kind of tax payment is final only when the Returns are electronically filed in the Common portal and the actual tax liability is debited in the Electronic Credit/ Cash Ledgers’ and the GST Registrant cannot claim that the tax was debited in their books of accounts, when as admitted, the filing of proper Return was delayed.

4.2.2.The GST Registrant stated that they generated e-challans for payment of tax. It is submitted that when the GST Registrant generates e-challan, the amount will be credited to the ‘Electronic Cash Ledger’. Whatever the

12. The reasoning in the impugned order is as follows:

‘4.2.Sufficient Balance in Electronic Credit and Cash ledger:

4.2.1. The GST Registrant stated that in their case, eligible ITC in the Electronic Credit Ledger and sufficient cash balance in the Electronic Cash Ledger were available, in the common portal operated by the GST Network. The actual net tax liability was deposited in Electronic Cash Ledger before the due date of filing returns for the period from July 2017 to October 2017. The contention of the GST Registrant that they had sufficient closing balance in ITC and net tax liability was deposited in Electronic Cash ledger before due date of filing returns is not legally sustainable, because under the Goods and Service Tax, having sufficient balance of ITC in the Electronic Credit Ledger is immaterial unless the Return is filed and the same is debited towards payment of GST. To be precise, the system of Electronic Credit and Cash ledgers is maintained electronically in the Common portal operated by the GST Network. The tax payment happens only when the statutory Returns are filed and the two ledgers are debited towards the tax liability. Hence any kind of tax payment is final only when the Returns are electronically filed in the Common portal and the actual tax liability is debited in the ‘Electronic Credit/ Cash Ledgers’ and the GST Registrant cannot claim that the tax was debited in their books of accounts, when as admitted, the filing of proper Return was delayed.

4.2.2.The GST Registrant stated that they generated e-challans for payment of tax. It is submitted that when the GST Registrant generates e-challan, the amount will be credited to the ‘Electronic Cash Ledger’. Whatever the

4.2.3.From the foregoing discussions, it is evident that unless the GST Registrant files the Returns and a debit entry towards tax liability is made in the Electronic Credit and Cash ledgers, in respect of the tax liability for the relevant tax period, it cannot be considered as tax payment made. In this regard, the observations of the Honorable Telangana High Court, in the Writ Petition No.44517 of 2018 filed M/s.Megha Engineering & Infrastructures Ltd, are relatable to the discussions made above.’

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