Donsung Automotive Pvt Ltd VS Superintendent Of Central Taxes

Mr. Muthuvenkataraman, the learned counsel representing the writ petitioner, and Mr. V. Sundareswaran, the learned senior panel counsel for GST who accepted notice on behalf of the first and second respondents the previous day, appeared before the court. The third respondent in this case is the Indian Overseas Bank. Given the nature of the matter, the bank is considered a Garnishee, meaning its role is limited to holding assets and it is not an active opponent in the dispute. Consequently, the court determined that communicating its forthcoming order to the third respondent would suffice, as the bank is merely a formal party without adversarial involvement in this case.

In the case before the court, Mr. Muthuvenkataraman, the counsel for the writ petitioner, and Mr. V. Sundareswaran, the senior panel counsel for GST representing respondents 1 and 2, appeared. The third respondent in the case is the Indian Overseas Bank, which is involved in the capacity of a Garnishee rather than as an adversary. Given the nature of the involvement of the third respondent, it was decided that the court’s order would be communicated to them by the Registry.

With the agreement of both counsels, the court decided to take up, hear, and dispose of the main writ petition.

The writ petitioner, who is a party involved in the case, has been diligently claiming Input Tax Credit (ITC) according to the relevant laws. This process involves using invoices and other legally required documents to substantiate the claims.

Input Tax Credit is a mechanism that allows businesses to reduce the tax they have paid on inputs from the tax they have to pay on outputs. Essentially, it prevents the cascading effect of taxes by ensuring that tax is only paid on the value added at each stage of the supply chain.

To ensure compliance with tax regulations, the writ petitioner has been meticulously maintaining the necessary documentation, such as invoices and other supporting documents. These documents are critical for validating the ITC claims and ensuring that they align with the legal requirements set forth by tax authorities.

In addition to claiming ITC, the writ petitioner has been fulfilling their tax obligations by filing returns on a monthly basis. These monthly returns are a statutory requirement and provide a detailed account of the transactions, tax paid, and tax collected by the petitioner. Regular filing of these returns helps in maintaining transparency and accountability in the tax system, and ensures that the petitioner stays compliant with tax laws.

The process of filing returns involves compiling all the relevant transaction details for the month, calculating the tax liabilities, and submitting the required forms and documents to the tax authorities. This ongoing compliance indicates that the writ petitioner is committed to adhering to the legal framework governing taxation and is taking all necessary steps to ensure proper tax conduct.

This summary provides an overview of the writ petitioner’s actions regarding the claiming of Input Tax Credit and the filing of monthly tax returns, highlighting their compliance with legal requirements and their diligence in maintaining proper tax practices.

The writ petitioner, involved in a legal matter concerning Input Tax Credit (ITC), has been adhering to the required procedures for claiming ITC based on invoices and other relevant documents as stipulated by law. Additionally, the writ petitioner has been consistently filing monthly returns.

However, it is acknowledged that the writ petitioner was unable to pay the full amount of taxes due in cash by the stipulated deadline, resulting in liability for interest charges.

On March 14, 2019, the writ petitioner received a communication (Communication No. 50 of 2019) from the first respondent, citing Section 50 of the Central Goods and Services Tax (CGST) Act. This communication mandated the payment of interest at an annual rate of 18% for the delayed tax payments spanning from July 2017 to November 2018. Notably, this specific period extends from July 1, 2017, to November 30, 2018. Although the financial year typically runs from April of one year to March of the next, the GST regime in this case began on July 1, 2017, explaining the specific period cited.

In response to the communication, the writ petitioner sent a letter dated March 29, 2019, explaining their inability to pay the cash component of their tax dues on time. The petitioner attributed this to a customer who consistently delayed payments. Furthermore, the petitioner pointed out that the ITC credit for each month accounted for approximately 73% of their total GST liability. They clarified that they had adjusted the ITC against the total GST payable and calculated the interest based on the remaining balance.

The writ petitioner, a taxpayer under the Central Goods and Services Tax (CGST) regime, has been diligently taking ‘Input Tax Credit’ (ITC) based on invoices and documents as required by law and filing monthly returns. However, the petitioner was unable to fully pay their tax dues in cash by the deadlines, resulting in a liability for interest.

On March 14, 2019, the petitioner received a communication from the first respondent, citing Section 50 of the CGST Act. This communication demanded interest at an annual rate of 18% for delayed tax payments covering the period from July 2017 to November 2018. The petitioner responded on March 29, 2019, explaining that a significant customer had consistently delayed payments, which hindered the petitioner’s ability to pay the cash component of their taxes on time. The petitioner noted that ITC accounted for about 73% of their monthly GST liabilities, and they had adjusted the ITC against the total GST payable, calculating interest only on the remaining cash component. A detailed worksheet was attached to support this calculation.

The central issue in this case is whether the petitioner is required to pay interest on the ITC portion of their tax liabilities as well. Following the petitioner’s response, the Office of the Superintendent of Central Tax issued a communication demanding a payment of Rs. 1,00,91,755. Subsequently, on May 23, 2019, the second respondent directed the petitioner’s bank, the third respondent, to make this payment, referencing Section 79 of the CGST Act. The petitioner’s bank account, held with the third respondent bank, was thus called upon to fulfill the payment obligation as per the impugned communication.

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