Utkal Automobiles Pvt Ltd VS Union Of India

In the context of the petitioner challenging the jurisdiction of the Assessing Authority in imposing interest under Section 50 of the Central Goods and Services Tax Act, 2017 (CGST Act), the primary contention revolves around the methodology of calculating interest on the gross GST liability without first considering the adjustment of the available input tax credit (ITC) in the credit ledger. This issue was raised following the issuance of the Demand Information Notice DIN-20200262WJ00005DF3DE in Communication C.No. GST/01/INTEREST/BBSRIX/2020/64 dated 18th February 2020 (Annexure-3). The periods in question are the financial years 2017-18, 2018-19, and the partial year 2019-20 (up to December 2019).

The petitioner has approached the court, challenging the notice on several grounds:

1. Jurisdictional Overreach: The petitioner asserts that the Assessing Authority exceeded its jurisdiction by levying interest on the gross GST liability without offsetting the ITC available in the petitioner’s credit ledger. According to the petitioner, such an imposition contradicts the principles laid down in the CGST Act.

2. Interpretation of Section 50 of the CGST Act: Section 50 of the CGST Act deals with the interest on delayed payment of tax. The petitioner argues that the proper interpretation of this section necessitates the calculation of interest only on the net tax liability, which is the amount payable after adjusting the ITC. The gross liability approach adopted by the Assessing Authority, the petitioner contends, results in an undue financial burden and is not supported by the statutory framework.

3. Legal Precedents and Clarifications: The petitioner refers to various legal precedents and clarifications issued by the GST Council and the Central Board of Indirect Taxes and Customs (CBIC), which suggest that interest should only be calculated on the net tax liability. The petitioner argues that these clarifications should have a binding effect on the Assessing Authority’s actions.

4. Constitutional and Statutory Principles: By imposing interest on the gross liability, the petitioner claims that the Assessing Authority violates constitutional principles of fairness and justice. The petitioner emphasizes the importance of interpreting tax statutes in a manner that avoids unfair enrichment at the expense of taxpayers.

5. Financial Implications: The notice for the periods 2017-18, 2018-19, and 2019-20 involves significant financial implications for the petitioner. The imposition of interest on the gross liability, without considering the ITC, results in a higher interest amount, adversely affecting the petitioner’s financial health and business operations.

6. Relief Sought: The petitioner seeks the court’s intervention to quash the Demand Information Notice and the corresponding communication. Additionally, the petitioner requests a directive to the Assessing Authority to recalculate the interest based on the net tax liability after adjusting the ITC.

In summary, the petitioner’s approach to the court centers on a legal and statutory interpretation of Section 50 of the CGST Act, arguing against the imposition of interest on the gross GST liability without considering the ITC. The petitioner seeks judicial relief to ensure that the interest calculation aligns with the net tax liability, as supported by various legal precedents and statutory guidelines.

The petitioner has approached the Court under Article 226/227 of the Constitution of India, challenging the jurisdiction of the Assessing Authority in levying interest under Section 50 of the Central Goods and Services Tax Act, 2017 (CGST Act) on the gross GST liability before adjusting input tax credit (ITC) available in the credit ledger. This is in response to a Demand Information Notice (DIN-20200262WJ00005DF3DE) and a communication (C.No. GST/01/INTEREST/BBSRIX/2020/64) dated 18th February 2020, which pertains to the belated payment of tax for the periods 2017-18, 2018-19, and 2019-20 (up to December 2019).

The petitioner seeks the following reliefs from the Court:

1. Certiorari: Quashing the DIN dated 20.02.2020, which levies interest under Annexure-3 by the opposite party No.4.

2. Mandamus: Declaring that interest under Section 50(1) should be levied on the payment of tax by the electronic cash ledger and not the electronic credit ledger.

3. Mandamus: Holding that the proviso to Section 50(1) is clarificatory and retrospective in nature.

4. Mandamus: Restraining the opposite parties, particularly opposite party No.4, from enforcing the demand of interest as communicated by DIN dated 20.02.2020 under Annexure-3.

5. Any other writ(s) or orders deemed just and proper in the interest of justice.

In the writ petition, the petitioner states that it has filed its statutory returns in Form GSTR-3B for the periods from April 2019 to December 2019. However, there was a delay in filing these returns through electronic mode. As required under Section 50 of the CGST Act, the petitioner calculated the interest component on its gross tax liability. The dispute centers on whether the interest should be calculated on the gross tax liability before adjusting the ITC or only on the net tax liability after such adjustment.

The key arguments revolve around the interpretation of Section 50 of the CGST Act, particularly whether the interest should apply to the gross liability or only the cash component after adjusting the ITC. The petitioner contends that the proviso to Section 50(1), which suggests that interest should be calculated only on the net tax liability (cash component), is clarificatory and should apply retrospectively. This interpretation would reduce the interest burden significantly, as it would only apply to the amount actually paid in cash after utilizing the available ITC, rather than the gross tax liability.

The petitioner argues that the interest demand as per the DIN dated 20.02.2020 is incorrect and exceeds the lawful interest payable under the CGST Act. They seek judicial intervention to quash the demand and provide clarity on the proper calculation of interest under the law.

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