Royale Edible Company VS State Tax Officer

The petitioner is a partnership firm operating an industrial unit that manufactures coconut oil from copra. The petitioner sells a significant portion of its products to SUPPLYCO and FACT, both of which deduct a 2% tax from payments made to the petitioner, in accordance with Section 51 of the GST Act. To comply with the GST Act’s procedural requirements, the petitioner must maintain two electronic ledgers with the tax department: the Electronic Cash Ledger and the Electronic Credit Ledger. These ledgers are governed by Section 49 of the CGST Act. The Electronic Cash Ledger records every deposit made by the petitioner towards tax, interest, penalty, fee, or any other payable amount under the Act.

The petitioner, a partnership firm engaged in manufacturing coconut oil from copra, states that a significant portion of its sales are to SUPPLYCO and FACT. These entities deduct tax at a rate of 2% on payments to the petitioner in accordance with Section 51 of the GST Act. To comply with the GST Act, the petitioner must maintain two electronic ledgers: the Electronic Cash Ledger and the Electronic Credit Ledger, as outlined in Section 49 of the CGST Act.

The Electronic Cash Ledger records every deposit made towards tax, interest, penalty, fee, or any other payable amount under the Act. The Electronic Credit Ledger credits the Input Tax Credit (ITC) available to the petitioner based on self-assessment. Section 49 also specifies how the amounts in these ledgers can be used to pay output tax and other amounts under the GST Act.

In their writ petition, the petitioner argues that the tax deductions by SUPPLYCO and FACT have impacted their financial transactions and compliance under the GST framework.

The petitioner, a partnership firm, operates an industrial unit manufacturing coconut oil from copra. A significant portion of its sales are made to SUPPLYCO and FACT, who deduct 2% tax on payments to the petitioner as per Section 51 of the GST Act. To comply with the GST Act, the petitioner maintains two electronic ledgers: the Electronic Cash Ledger and the Electronic Credit Ledger, as stipulated by Section 49 of the CGST Act.

The Electronic Cash Ledger records all deposits made towards tax, interest, penalties, fees, or other amounts payable under the Act. The Electronic Credit Ledger records the Input Tax Credit available to the petitioner, based on self-assessment. Section 49 also outlines how the amounts in these ledgers can be used for paying output tax and other amounts under the GST Act.

In the writ petition, the petitioner claims that the tax deductions by SUPPLYCO and FACT have increased the balance in the Electronic Cash Ledger, resulting in an excess amount in the ledger. As of April 30, 2019, there was an excess of Rs. 93,38,884/- in the Electronic Cash Ledger, exceeding the petitioner’s known liabilities under the Act. Since there were no liabilities toward tax, penalty, interest, or other amounts, the petitioner filed an application (Ext.P2), later bifurcated into Ext.P3(a), to address the excess amount in the Electronic Cash Ledger.

The petitioner, a partnership firm engaged in manufacturing coconut oil from copra, primarily supplies to SUPPLYCO and FACT, who deduct 2% tax on payments made to the petitioner as per Section 51 of the GST Act. The petitioner is required to maintain two electronic ledgers with the GST department: the Electronic Cash Ledger and the Electronic Credit Ledger, as outlined in Section 49 of the CGST Act. The Cash Ledger records deposits made towards tax, interest, penalty, fee, or any other payable amounts, while the Credit Ledger records Input Tax Credit based on the petitioner’s self-assessment. Section 49 also specifies how amounts in these ledgers can be used to pay output tax and other amounts under the GST Act.

In the writ petition, the petitioner claims that tax deductions by SUPPLYCO and FACT increased the balance in its Electronic Cash Ledger, which already had a substantial surplus exceeding the known liabilities under the Act. As of April 30, 2019, the excess amount in the Cash Ledger was Rs. 93,38,884/-. Since there was no known tax, penalty, interest, or other liabilities, the petitioner applied for a refund of the excess amount through an application to the 1st respondent. This application was later divided into two separate applications for different periods, which were forwarded to the 2nd respondent for adjudication. However, the 2nd respondent rejected the refund claim through an order (Ext.P4), citing Section 51 of the CGST Act and stating that there was no excess or erroneous deduction by the tax deductors, thus the refund could not be processed under Section 54 of the Act.

The petitioner appealed against the 2nd respondent’s order to the 3rd respondent but also filed the current writ petition challenging the Ext.P4 order on various grounds, including the contention that the 2nd respondent’s decision was incorrect.

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