Maansarovar Motors Private Limited VS Assistant Commissione

The batch of writ petitions in question centers on the interpretation of Section 50 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the ‘Act’), with a specific focus on determining the effective date of the application of the proviso inserted by Section 100 of the Finance (No.2) Act of 2019.

Key Points of Section 50 of the Act:

1. Tax Remittance Requirement:

* Every person liable to pay tax under the Act must remit the tax either in cash or through adjustment of the credit available in the Input Tax Credit (ITC) register.

2. Interest on Delayed Remittance:

* If there is a delay in the remittance of tax, interest is payable for the period of the delay.

* While the imposition of interest on the remittance of tax in cash is uncontested, the authorities have also levied interest on the remittance of tax through the adjustment of available ITC, which has become the focal point of the legal challenge.

Petitioners’ Arguments:

1. Availability of Credit:

* Petitioners argue that the ITC was available even before the output tax liability arose. Therefore, there should be no question of delay concerning the adjustment of available ITC.

Legal Context and Dispute:

• The central issue is the interpretation of the proviso inserted in Section 50 by the Finance (No.2) Act of 2019. This proviso pertains to the application and computation of interest on delayed tax payments.
• The petitioners challenge the authorities’ approach of levying interest on tax payments made through ITC adjustments, arguing that since the credit was pre-existing, no delay can be attributed to such adjustments.

Judicial Consideration:

• The court is tasked with examining the correct interpretation of Section 50, especially in light of the recent amendment.
• The decision hinges on whether interest should be levied on tax remittances made through ITC adjustments and the appropriate date from which this proviso should be effectively applied.

Conclusion:

The court’s determination will clarify the application of Section 50 regarding the levy of interest on tax remittances via ITC adjustments and establish the effective date of the proviso’s application as per the Finance (No.2) Act of 2019. This clarification is crucial for the correct implementation of the Act and the resolution of disputes related to delayed tax payments and the associated interest liabilities.

The batch of writ petitions focuses on the interpretation of Section 50 of the Central Goods and Services Tax Act, 2017 (CGST Act), specifically regarding the effective date of the proviso added by Section 100 of the Finance (No.2) Act of 2019.

Key Points of Section 50 of the CGST Act:

1. Tax Remittance: Every person liable to pay tax under the Act must remit the tax either in cash or by adjusting the credit available in the Input Tax Credit (ITC) register.

2. Interest on Delayed Remittance: If there is a delay in remitting the tax, interest is payable for the period of the delay. The controversy arises over whether this interest applies to remittances made by adjusting available ITC.

Petitioners’ Arguments:

1. Availability of Credit: Petitioners argue that the credit was available before the output tax liability arose, so there should be no question of delay.

2. Lack of Opportunity: They claim no opportunity was given before raising the impugned demand and subsequent proceedings.

3. Nature of Interest: Interest is a compensatory measure, and since ITC is already available in the electronic ledger, it shouldn’t be due to the revenue.

4. Retrospective Operation of Proviso: The proviso to Section 50 states that interest should only be levied on the part paid in cash. This proviso was inserted to correct an anomaly and should therefore apply retrospectively.

The petitioners relied on several legal precedents to support their arguments:

(i) Eicher Motors Ltd. vs. Union of India (1999)

(ii) Pratibha Processors vs. Union of India (1996)

(iii) Refix Industry vs. Assistant Commissioner of CGST (2020)

Revenue’s Arguments:

1. Provisional Nature of ITC: The revenue contends that under Section 16(2), a person is entitled to take input tax credit, and under Section 41(1), this credit entry in the electronic ledger is provisional.

2. Filing of Returns: Entitlement to credit can only be availed after a return is filed by the assessee, as per self-assessment.

3. Utilization Against Output Tax Liability: Once the return is filed and the credit is entered into the register, the assessee can use it against the output tax liability.

4. Reference to Section 49: They emphasize that payment of tax, interest, penalty, and other amounts should follow the process outlined in Section 49, which supports their argument about the timing and utilization of ITC.

In essence, the dispute centers on whether interest should be levied on tax paid by adjusting ITC and whether the proviso inserted in 2019 should apply retrospectively. The petitioners argue for no interest on ITC adjustments and retrospective application of the proviso, while the revenue emphasizes the provisional nature of ITC and the necessity of filing returns for entitlement and utilization.

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