No interest to be levied if GST deposited within due date but GSTR-3B filed Late: HC

The High Court of Madars in the matter of M/s.Eicher Motors Limited Vs. Superintendent of GST and Central Excise has held that No interest to be levied if GST is deposited within the due date but GSTR-3B was filed Late.

The petitioner is a renowned manufacturer of mid-sized motorcycles (250-750CC), vide HS Code 8711 led by the iconic brand Royal Enfield, with its manufacturing unit in Tamil Nadu. They have their Global headquarters in Chennai and three manufacturing facilities at Oragadam, Vallam and Tiruvottiyur. The petitioner is operating through their dealers and distributors and by means of more than 1000 large stores and 900 studio stores in major cities and also having more than 800 authorized dealers in India alone.

The petitioner has paid a sum of Rs.15,033 Crores as GST for the period from the year 2017-18 till the year 2023. Out of the said amount, a sum of Rs.10,871 Crores was paid using the Input Tax Credit and a sum of Rs.4,162 Crores was paid in cash.

On the date of introduction of GST i.e., 01.07.2017, the petitioner had an accumulated balance of a sum of Rs.33,87,10,445 as CENVAT credit ready to be transitioned into the GST regime. However, owing to want of system readiness and technical glitches in the GST Common Portal during the initial stages of implementation of GST, the Department had extended the due dates for filing the Form GST TRAN-1 from time to time and accordingly, the petitioner had filed their Form GST TRAN 1 on 16.10.2017 under Sections 140(1) and 140(3) of the Goods and Services Tax Act, 2017 (hereinafter called as “GST Act”).

Due to unknown reasons, the credit in entirety sought to be transitioned was not made available forthwith as Input Tax Credit (ITC) on furnishing of Form GST TRAN-1 on 16.10.2017. Further, since the entire amount of Rs.33,87,10,445 was not reflected in the Electronic Credit Ledger, the petitioner could not file the monthly return in Form GSTR-3B for July 2017 within the due date i.e., 28.08.2023. Such non-filing of Form GSTR-3B for July 2017 had a domino effect and the petitioner was unable to file the GSTR-3B for subsequent months from August 2017 to December 2017, since Section 39(10) of the CGST Act disables an assessee from filing returns for the subsequent period if the returns for the previous tax period are not furnished. Though the petitioner was disabled from filing the returns, the petitioner had ensured that the tax dues were fully paid within the due dates without any delay and accordingly, the petitioner had discharged GST liability for the period from July 2017 to December 2017 by depositing the tax amounts in the Electronic Cash Ledger under the appropriate heads as CGST, SGST, IGST into the Government account within the due date for each month.

The entire amount of accumulated credit was not transitioned and hence, the petitioner was constrained to file a revised GST TRAN-1 on 27.12.2017. On such filing, the aforesaid amount of transitioned credit was reflected in the petitioner’s Electronic Credit Ledger, which enables the petitioner to file Form GSTR 3B for the month of July 2017. Since the return for July 2017 was filed, the GST portal permitted the petitioner to file the returns for the subsequent months as well. Accordingly, the petitioner filed all the Returns from the month July 2017 to December 2017 on 24.01.2018.

After a lapse of around 6 years, the petitioner was visited with a Recovery notice dated 16.05.2023, demanding the payment of interest of a sum of Rs.23,76,26,657 for the alleged belated payment of GST from July 2017 to December 2017. The said recovery proceedings were initiated directly even without the issuance of show cause notice. Even after the filing of a detailed response by the petitioner vide their letter dated 29.05.2023, the recovery proceedings were not withdrawn by the Department and hence, the petitioner challenged the said Recovery notice in W.P.No.16866 of 2023, in which, vide order dated 07.06.2023, this Court had granted stay of recovery proceedings subject to the payment of 30% of the interest amount demanded in the Letter dated 16.05.2023.

Aggrieved by the said interim order dated 07.06.2023, the petitioner had preferred an appeal in W.A.No.1263 of 2023 before the Hon’ble Division Bench of this Court. In the said writ appeal, an order came to be passed on 20.06.2023, wherein the Hon’ble Division Bench of this Court had directed the 1st respondent to consider the petitioner’s representation dated 29.05.2023 and pass an order within a period of 3 weeks.

In view of the finding and following the law laid down by the Gujarat High Court in the aforesaid Vishnu Aroma case, since in the present case, the tax amount has already been credited to the Government within the prescribed time limit, i.e., before due date, the question of payment of interest would not arise. Under these circumstances, this Court passes the following orders:

1) The credit to the account of the Government would always occur not later than the last date for filing the monthly returns in terms of the provisions of Section 39(7) of the Act.

2) Once the amount is paid by generating GST PMT-06, the said amount will be initially credited to the account of the Government immediately upon deposit, at which point, the tax liability of a registered person will be discharged to the extent of the deposit made to the Government. Thereafter, for the purpose of accounting only, it will be deemed to be credited to the ECL as stated in Explanation (a) to Section 49(11) of the Act.

3) As long as the GST, which was collected by a registered person, is credited to the account of the Government not later than the last date for filing the monthly returns, to that extent, the tax liability of such registered person will be discharged from the date when the amount was credited to the account of the Government. If there is any default in payment of GST, even subsequent to the due date for filing the monthly returns i.e., on or before 20th of every succeeding month, for the said delayed period alone a registered person is liable to pay interest in terms of Section 50(1) of the Act.

In view of the above, the impugned letter dated 16.05.2023 bearing DIN 20230559TK00020650 issued by the 1st respondent and impugned order OC.No.77/2023 bearing DIN 20230759TK000000E36E dated 12.07.2023 passed by the 1st respondent are liable to be quashed. Accordingly, quashed.

In the result, these writ petitions are allowed. No cost. Consequently, the connected miscellaneous petitions are also closed.

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