Bhole Baba Milk Food Industries Ltd. vs Union of India

Shri Arjit Gupta, holding brief of Ms. Pooja Talwar, learned counsel for the petitioner, Shri Naveen Chandra Gupta, learned counsel for the GSTN, Shri Ankur Agrawal, learned counsel for the revenue, and Shri Ankit Saran, learned counsel for the Bank. The present writ petition has been filed for the following reliefs: (i) To issue a writ, order, or direction in the nature of mandamus directing the respondents to permit the petitioner to file its GSTR 3B Return for the month of April 2023, treating it as being filed within time. (ii) To issue a writ, order, or direction in the nature of mandamus commanding the respondents to refund the amount of interest of Rs. 107,710.51 and penalty of Rs. 100 for the non-filing of Return on 20.05.2023, which was illegally debited from the Electronic Cash Ledger of the petitioner (Annexure No.1 of the writ petition). At first, it may be noted that, even according to the petitioner’s own representation made to the GST Council (Annexure No.7 to the writ petition), the petitioner appears to have made the deposit of Rs. 107,710.51 and a penalty of Rs. 100 for alleged non-filing of the monthly return for the month of April 2023. On facts, it is admitted between the petitioner and its banker, namely the State Bank of India, that the petitioner had generated corporate e-payment Challan No.23050900386618 on 19.05.2023 for Rs. 2,08,30,721/-. According to that, it was generated on 19.05.2023 at 18:09:35 IST and was approved by the Authorizer/bank on 25.05.2023 at 13:01:00 IST. The bank further states that the said amount was credited to the Tax Pooling Account of GST No.36959656818 against reference No. CKW9686117. On the other hand, the GSTN in its affidavit has stated that the said amount was not remitted by the Bank on 25.05.2023 at 13:00 P.M., but was credited later. The petitioner contends that due to the delay on the part of the bank in crediting the amount to the Tax Pooling Account, the petitioner was unable to file the GSTR 3B return within the stipulated time, resulting in the wrongful debit of interest and penalty from their Electronic Cash Ledger. The petitioner argues that the delay was beyond their control and that the respondents should allow the return to be filed as if it were within the due date and refund the debited amount. This case underscores the procedural complexities and potential pitfalls within the GST system, particularly regarding the timely filing of returns and the reconciliation of payments made through banking channels. The petitioner seeks relief to ensure that they are not unduly penalized for circumstances that were not within their control and to uphold the principles of natural justice by allowing them to comply with their tax obligations without incurring undue financial penalties.

Whatever be the true facts, this much is clear that the petitioner had initiated the payment of tax for the month of April 2023 within time, in the manner prescribed. The amount was debited from its account within the prescribed time. To that extent, “failure” may never be attributed to the petitioner in the timely payment of the tax amount. The levy of late fee (Section 47) and interest (Section 50) under the U.P. GST Act, 2017 may arise only in the event of “failure” on the part of an assessee to file a return and/or payment of due tax within time. Insofar as the delay may be attributed exclusively to the respondent-bank after such payment was made by the petitioner within time, on that statement itself, the levy of penalty remains unwarranted. What errors may have been committed by the bank or GSTN may not involve the petitioner. Thus, leaving it open to the GSTN and the Bank to devise a better mechanism to ensure prompt credit and debit entries to arise in real-time as may not create any doubts or disputes in the future, the present writ petition stands disposed of as below. The amount of penalty Rs. 1,07,710.51/- and interest Rs. 100/- deposited by the petitioner under protest may be adjusted against the tax liability for the month of April 2024 onwards without incurring any liability as to interest on that amount. This situation highlights the procedural complexities within the GST system, particularly the challenges that can arise from the interaction between taxpayers, banking institutions, and the GST network. The petitioner, having complied with the necessary steps to make the tax payment on time, faced undue penalties due to delays not attributable to their actions. This underscores the need for robust and efficient mechanisms to handle financial transactions and ensure that taxpayers are not unfairly penalized for systemic inefficiencies. The court’s decision to adjust the penalty and interest amounts against future tax liabilities is a practical solution that addresses the immediate issue while also acknowledging the need for improvements in the system to prevent similar occurrences in the future. This case serves as a reminder of the importance of timely and accurate communication and transaction processing between all parties involved in the tax payment process. The petitioner’s plight calls for the relevant authorities to streamline processes and implement fail-safes to ensure that delays and errors do not adversely affect compliant taxpayers. The outcome of this case may set a precedent for handling similar disputes and reinforce the principle that taxpayers should not be held liable for delays and mistakes beyond their control.

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Bhole Baba Milk Food Industries Ltd.

For reference visit:
Allahabad High Court 

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GST Case Law