NO INTEREST ON GST LIABILITY IF CASH DEPOSITED OR ITC AVAILABLE BEFORE DUE DATE, EVEN IF RETURN FILED LATE

ISSUE

Whether interest under Section 50 of the CGST Act is leviable on the tax liability (both Cash and ITC components) when the returns (GSTR-3B) were filed belatedly, but the assessee had already deposited the cash amount in the Electronic Cash Ledger and had sufficient balance in the Electronic Credit Ledger on or before the due date.

FACTS

Period: July 2017, August 2017, September 2017, and February 2018.
The Delay: The assessee filed their GST returns for these periods after the due date.
The Payment Status:
- Cash Component: The assessee had deposited the required cash amount into their Electronic Cash Ledger on or before the due date, although the debit entry (offset) happened later when the return was filed.
- ITC Component: The assessee had sufficient Input Tax Credit (ITC) available in their Electronic Credit Ledger to cover the remaining liability.
The Demand: The Department issued a notice demanding interest on the entire tax liability (Gross Liability) solely because the returns were filed late, arguing that tax is “paid” only when the return is filed and ledgers are debited.

DECISION

Interest on Cash Portion: The High Court held that since the cash was actually deposited into the Government exchequer (Electronic Cash Ledger) by the due date, the tax was effectively paid. Levying interest merely for the delay in filing the return (which technically triggers the debit) is contrary to the proviso of Section 50, which restricts interest to cases of delayed payment, not just delayed filing.
Interest on ITC Portion: Regarding the ITC component, the Court ruled that since sufficient credit was available in the Electronic Credit Ledger, there was no failure to pay tax to that extent. The proviso to Section 50 specifically limits interest liability only to the portion of tax paid by debiting the Electronic Cash Ledger.
Ruling: The demand for interest on both the cash portion (deposited on time) and the ITC portion (available on time) was held to be illegal and without authority of law. The impugned notice was quashed.

KEY TAKEAWAYS

Deposit vs. Debit: This judgment reinforces the favorable view that “Deposit” in the Cash Ledger halts the interest clock. If you have put money in the Cash Ledger by the 20th, you shouldn’t pay interest even if you file the return on the 30th. Note: This is a highly litigated point; the Department’s portal often auto-calculates interest based on the return filing date. You may need to contest this manually.
Net Liability Principle: The proviso to Section 50 (introduced retrospectively) clarifies that interest applies only to the Net Cash Liability. This judgment takes it a step further by protecting even the cash component if it was pre-deposited.
Strategic Payment: If you are unable to file your return on time (e.g., due to portal glitches or missing data), strictly ensure you deposit the estimated tax liability in the Cash Ledger by the due date to save on the 18% interest cost.

HIGH COURT OF KARNATAKA

Bangalore International Airport Ltd.

Union of India

S.R.Krishna Kumar, J.

WRIT PETITION NO. 6502 OF 2020 (T-RES)

NOVEMBER 13, 2025

G. Shivadass, SR. COUNSEL, P.B. Harish, Rishab.J and Dhanyatha.R., Advs. for the Petitioner. Shishira Amarnath, Adv. for the Respondent.

ORDER

1. In this petition, the petitioner seeks for the following reliefs:

(i)

To issue writ of declaration or in the nature of a certiorari or mandamus or any other appropriate writ, order or direction holding that impugned letter issued vide O.C.No.564/2020 dated 17/03/2020 with Document Identification Number (DIN) – 20200357YW00005N4070) vide Annexure A is without authority of law, manifestly unreasonable, discriminatory, illegal and void.

(ii)

To issue order(s), direction(s), writ(s) or any other relief(s) as this Hon’ble Court deems fit and proper in the facts and circumstances of the case and in the interest of justice;

(iii)

To award Costs of and incidental to this application be paid by the Respondents.

2. Heard the learned Senior Counsel for the petitioner and learned Counsel for the respondents and perused the material on record.

3. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned Senior Counsel appearing for the petitioner invited my attention to the notice at Annexure ‘M’ dated 17.02.2020, issued by the respondents to the petitioner, calling upon the petitioner to pay interest in a sum of Rs.1,33,21,214/- towards delayed payment of tax, as enumerated in the table mentioned in the notice for the periods July 2017, August 2017, September 2017, and February 2018. It was submitted that in response to the said notice, the petitioner submitted a reply dated 11.03.2020, giving the details and breakup as to how the payment of the tax was made by way of cash on or before the due date i.e., 20^th of the succeeding / following month, and that the remaining portion was available in the Electronic Credit Ledger of the petitioner by way of input tax credit, and consequently, merely because the petitioner did not submit returns as on the last date for payment of tax, but subsequently, the delayed filing of returns could not have been made the basis to fasten the liability to pay the interest on the said tax which had undisputedly been paid /credited on or before the due date, which is 20^th of the following month.

4. In this context, learned Senior Counsel invited my attention to the proviso to Section 50 of the Central Goods and Service Tax Act, 2017 in order to contend, that the said proviso makes a taxpayer liable to pay interest only in relation to delayed tax payment by way of cash through the cash ledger and the same would not be applicable to utilisation of credit from the Electronic Credit Ledger, as held by various Courts in the following judgements:

(i)

Eicher Motors Ltd. v. Superintendent of GST And Central Excise GSTL 418/102 GST 49 (Madras)/(2024) 14 Centax 323 (Mad.);

(ii)

Tamilnadu State Transport Corporation (Villupuram) Ltd. v. Additional Commissioner of Central Tax (Madras)/(2025) 31 Centax 305 (Mad.);

(iii)

Arya Cotton Industries v. Union of India GST 191 (Gujarat)/(2024) 20 Centax 8 (Guj.).

(iv)

Symphony Ltd. v. Union of India (Gujarat)/2025 – VIL – 1037 – Guj.; and

(v)

Refex Industries Ltd. v. Asstt. Commissioner of CGST & Central Excise (Madras)/[2020] 34 GSTL 588 (Madras)

5. It is submitted that despite the aforesaid grounds and contentions urged by the petitioner in its reply dated 11.03.2020, the respondents have issued the impugned notice at Annexure ‘A’ dated 17.03.2020, which is illegal and the same deserves to be quashed.

6. Per contra, learned counsel for the respondents would reiterate the various contentions urged in the statement of objections and submits that there is no merit in the petition and the same is liable to be dismissed.

7. Before adverting to the rival submissions, it would be necessary to extract Section 50 of the CGST Act, which reads as under:

50.

Interest on delayed payment of tax.

(1)

Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council.

[Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 [or section 74A] in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.]

(2)

The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid.

(3)

Where the input tax credit has been wrongly availed and utilised, the registered person shall pay interest on such input tax credit wrongly availed and utilised, at such rate not exceeding twenty-four per cent. as may be notified by the Government, on the recommendations of the Council, and the interest shall be calculated, in such manner as may be prescribed.

8. Under identical circumstances, in the case of Eicher Motors Ltd.(supra), the Madras High Court held as under:

“6. I have given due consideration to the submissions made by Mr.Vijay Narayan, learned Senior counsel appearing for the petitioner and Mr. A.P. Srinivas, learned Senior Standing Counsel appearing for the respondents and also perused the materials available on record.

7. In the present case, on the date of introduction of GST i.e., 1-7-2017, 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, due to the technical glitches and other difficulties faced by the assessees, the petitioner was not able to file the GST TRAN-1 in time, however, 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 GST Act.

8. Further, since Form GST TRAN 1 was not filed in time by the petitioner, the credit in entirety sought to be transitioned was not made available as ITC and thus the entire amount of Rs. 33,87,10,445/- did not reflect in the Electronic Credit Ledger, therefore the petitioner could not file the monthly return in Form GSTR-3B for July 2017 within the due date i.e., 28-8-2023. Due to such non-filing of Form GSTR-3B for July 2017, the petitioner was unable to file the GSTR-3B for subsequent months from August, 2017 to December, 2017, since Section 39(10) of GST 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 discharged GST liability in time without any delay for the period from July, 2017 to December, 2017 by depositing the tax amounts both in the Electronic Credit Ledger and Electronic Cash Ledger under the appropriate heads as CGST, SGST, IGST into the Government account within the due date for each month as provided under the Act.

9. Thereafter, the petitioner was constrained to file revised GST TRaN-1 on 27-12-2017 and on such filing, the aforesaid amount of transitioned credit got 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 returns for July, 2017 was filed by the petitioner, the GST portal permitted them 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 24-1-2018.

* * * * *

44. In the present case, as stated above, the GST amount has been paid by generating GST PMT-06 before the due date without any delay. If any amount is deposited after due date, for the said amount alone, the payment of interest would arise in terms of provisions of section 50(1) of the Act.

45. Now let me examine section 49(1)(3) & (6) of the Act and thus, it would be apposite to extract the same, which reads as follows:

“49. Payment of tax, interest, penalty and other amounts.— (1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed.

(2) ** ** **

(3) The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of this Act or the rules made thereunder in such manner and subject to such conditions and within such time as may be prescribed.

(4) & (5) ** ** **

(6) The balance in the electronic cash ledger or electronic credit ledger after payment of tax, interest, penalty, fee or any other amount payable under this Act or the rules made thereunder may be refunded in accordance with the provisions of section 54.”

46. Section 49(1) of the Act deals with the amount to be credited to the Electronic Cash Ledger i.e., every deposit made towards the tax, interest, penalty, fee or any other amount shall be credited to the Electronic Cash Ledger of such person to be maintained in such manner as may be prescribed. Further, as discussed above, the explanation (a) to section 49(11) of the Act clearly states that any tax amount, which is to be paid by generating GST PMT-06, will be directly credited to the account of the Government and thereafter, for the purpose of accounting, it would deemed to be credited to the Electronic Cash Ledger, which is only for the limited purpose of the quantification of the liability towards GST and to verify as to whether the entire liability has been paid/deposited/discharged by the registered person in accordance with the provisions of the Act and Rules made thereunder. It is not that the discharge has been made only when the debit entries are made since whenever the amount is deposited or credited to the Government, that will be the actual date of discharge of tax liability to the extent of deposit and the ECL is only a ledger which will ultimately ensure the discharge of tax liabilities are made in time as per the due date.

47. Section 49(3) of the Act states that the amount available in the Electronic Cash Ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount etc., which means upon payment of tax by a registered person under the IGSt, CGST, SGST, if any excess amount is available under any particular head, the said person can utilise said amount against other heads of tax liabilities, if there is any due. The amount available under one head can be utilized against the other head in terms of the provisions of section 49(3) of the Act.

48. Section 49(6) of the Act states that the balance amount in electronic cash ledger or electronic credit ledger after the payment of tax/interest/penalty/fee or any other amount, payable under the Act and Rules made thereunder, will be refunded in accordance with section 54 of the Act. The excess amount will be refunded, since the claim for refund would be made while filing the GSTR-3 and the column No. 14 deals with the refund claim made by a registered person.

Therefore, in this background, let me examine the provisions of section 50(1) of the Act, which reads as follows: “50. Interest on delayed payment of tax.— (1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council”

49. A reading of the above provision makes it clear that every person, who is liable to pay the tax in accordance with the provisions of the Act and Rules made thereunder, but fails to pay the tax within a prescribed period, which remains unpaid, shall pay on his own interest at such rate not exceeding 18% per annum.

50. The aforesaid Section deals with the interest, which has to be paid, if the tax is not paid within the prescribed period. If such being the case, what would be the prescribed period? To answer this, we have to analyse the provisions of section 39(7) of the Act.

51. The provisions of section 39(7) of the Act states that the tax shall be paid to the Government not later than the last date, on which he required to furnish the monthly returns in terms of section 39(7) of the Act, otherwise, the tax has to be paid along with interest in terms of the provisions of section 50(1) of the Act. Thus, the prescribed date mentioned in section 50(1) of the Act refers to the last date for payment of GST in terms of the provisions of section 39(7) of the Act.

52. In the present case, the notice was sent in terms of the proviso to section 50(1) of the Act, whereby called upon the petitioner to pay interest. At this juncture, it would be apposite to extract the proviso to section 50(1) of the Act hereunder:

“50. Interest on delayed payment of tax.—

(1) ** ** **

Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.”

53. The above proviso deals with the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with section 39 of the Act, shall be payable on that portion of tax, which is paid by debiting the electronic cash ledger.

54. The said provision has been interpreted by the respondents by stating that once if the debit entry is made in the electronic cash ledger, that will be the date of actual payment of tax, whereas, section 50(1) of the Act states that cash should have been paid to the Government within the prescribed period, which is 20th day of every month in terms of section 39(7) of the Act. The said prescribed period is the only time limit provided under section 50(1) of the Act. However, the said proviso was also interpreted otherwise as discussed above vide the judgement rendered in RSB Transmission case by the Hon’ble Division Bench of the Jharkand High Court, which is not permissible since the same is beyond the scope of the provision of section 50(1) of the Act.

55. Normally, a proviso does not travel beyond the provision, to which it is a proviso. It carves out an exception and to the main provision, to which it has been enacted as a proviso to no other. The normal function of a proviso is to except the something out of the enactment or to quantify something enacted therein, which but for the proviso would be within the purview of the enactment.

56. With regard to the above aspect, it would apposite to extract the law laid down by the Hon’ble Apex Court with regard to the usage of the proviso as rendered in Romesh Kumar Sharma case, which reads as follows:

“The normal function of a proviso is to except something out of the enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. As was stated in Mullins v. Treasurer of Survey [1880(5) QBD 170, (referred to in Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash Chandra Yograj Sinha (AIR 1961 SC 1596) and Calcutta Tramways Co. Ltd. v. Corporation of Calcutta (AIR 1965 Sc 1728); when one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject matter of the proviso. The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment and its effect is confined to that case. It is a qualification of the preceding enactment which is expressed in terms too general to be quite accurate. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule. “If the language of the enacting part of the statute does not contain the provisions which are said to occur in it you cannot derive these provisions by implication from a proviso.” Said Lord Watson in West Derby Union v. Metropolitan Life Assurance Co. (1897 AC 647)(HL). Normally, a proviso does not travel beyond the provision to which it is a proviso. It carves out an exception to the main provision to which it has been enacted as a proviso and to no other. (See A.N. Sehgal and Ors. v. Raje Ram Sheoram and Ors. (AIR 1991 SC 1406), Tribhovandas Haribhai Tamboli v. Gujarat Revenue Tribunal and Ors. (AIR 1991 SC 1538) and Kerala State Housing Board and Ors. v. Ramapriya Hotels (P)Ltd. and Ors. (1994 (5) SCC 672).

“This word (proviso) hath divers operations. Sometime it worketh a qualification or limitation; sometime a condition; and sometime a covenant” (Coke upon Littleton 18th Edition, 146) “If in a deed an earlier clause is followed by a later clause which destroys altogether the obligation created by the earlier clause, the later clause is to be rejected as repugnant, and the earlier clause prevails.But if the later clause does not destroy but only qualifies the earlier, then the two are to be read together and effect is to be given to the intention of the parties as disclosed by the deed as a whole” (per Lord Wrenbury in Forbes v. Git[1922] 1 A.C. 256).

A statutory proviso “is something engrafted on a preceding enactment” (R. v. Taunton, St James, 9 B. & C. 836).

“The ordinary and proper function of a proviso coming after a general enactment is to limit that general enactment in certain instances” (per Lord Esher in Re Barker, 25 Q.B.D. 285).

A proviso to a section cannot be used to import into the enacting part something which is not there, but where the enacting part is susceptible to several possible meanings it may be controlled by the proviso (See Jennings v. Kelly [1940] A.C. 206).”

57. In view of the above, it is clear that at any cost, the proviso cannot be beyond the scope of the provision of Section.

58. In the present case, the proviso to section 50(1) of the Act was interpreted in such way to give a meaning so as to the proviso will override the provision. In the provision of section 50(1) of the Act, it has been stated that every person is liable to pay tax within the prescribed period. This Court has already given its findings for the words “prescribed period” holding that the date prescribed under section 39(7) of the Act would be the last date for the payment of tax. Hence, when a specific date is prescribed in the provisions, the proviso cannot alter the said date, since it is contrary to that provision. In the present case, the Hon’ble Division Bench of the Jharkand High Court had interpreted the said proviso in such a way that the proviso will override the provision and whereby altered the date for payment of tax to the Government, which is not permissible and thus, the same is contrary to the provisions of section 50(1) of the Act.

59. Further, section 54(12) of the Act deals with the payment of interest at the rate of 6% for the delay in refund of GST. If there is any delay in refund of GST in terms of section 54(12) of the Act, the Government has to refund the same along with interest. However, the learned Senior Standing counsel for the respondent had contended that no tax amount will be passed on to the Government until the filing of Form GSTR-3B. In such case, merely for taking the refund from ECL, without even passing on the said amount to the Government, why should the Government has to pay the interest for delay in refund at the rate of 6%? Therefore, the submission of the learned Senior Standing counsel, that no tax amount will be passed on to the Government until filing of GSTR-3B, would be contrary to section 54(12) read with 39(7) of the Act.

60. The respondent’s further contention was that as long as the amount is available to the credit of Electronic Cash Ledger, the tax amount would be retained until the suitable debit entries are made by filing GSTR3B. If it is so, then why should Section 54(12) of the Act dealt with the refund with interest for getting back the excess amount of tax paid by a registered person. Therefore, as discussed above, Electronic Cash Ledger is maintained only for the accounting purpose and ultimately to determine the final tax liability and to verify the payment of said tax liability within the time prescribed under the Act and Rules made thereunder as discussed herein above.

61. A reference has also been made to Rule 61(1) and 61(2) of the GST Rules and it would be apposite to extract the aforesaid rules below:

“Rule 61. Form and manner of furnishing of return.-

(1) Every registered person other than a person referred to in section 14 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017) or an Input Service Distributor or a non-resident taxable person or a person paying tax under section 10 or section 51 or, as the case may be, under section 52 shall furnish a return in FORM GSTR-3B, electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner, as specified under –

(i) sub-section (1) of section 39, for each month, or part thereof, on or before the twentieth day of the month succeeding such month:

(ii) proviso to sub-section (1) of section 39,for each quarter, or part thereof, for the class of registered persons mentioned in column (2) of the Table given below, on or before the date mentioned in the corresponding entry in column (3) of the said Table, namely:-

S. No	Class of Registered persons	Due date
(1)	(2)	(3)
1.	Registered persons whose principal place of business is in the States of Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands or Lakshadweep.	twenty-second day of the month succeeding such quarter.
2.	Registered persons whose principal place of business is in the States of Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha, the Union territories of Jammu and Kashmir, Ladakh, Chandigarh or Delhi.	twenty fourth day of the month succeeding such quarter.

(2) Every registered person required to furnish return, under sub-rule (1) shall, subject to the provisions of section 49, discharge his liability towards tax, interest, penalty, fees or any other amount payable under the Act or the provisions of this Chapter by debiting the electronic cash ledger or electronic credit ledger and include the details in the return in FORM GSTR-3B.”

62. The aforesaid rule 61(1) deals with regard to the furnishing the Form GSTR-3B and 61(2) states about the discharge of liability towards the tax, interest, penalty, fees and any other amount under the Act by debiting the electronic cash or credit ledger and include the details in the GSTR-3B returns.

63. As discussed above, once GSTR-3B is filed, the total amount of tax would be quantified, by which it would be ascertained about the discharge of tax liabilities. In terms of rule 61(1), the registered person has to file the monthly return on or before 20th of succeeding month.

64. As far as rule 61(2) is concerned, it deals with the discharge of liability in terms of Section 49(1) of the Act. This Court had already discussed above elaborately about when the instance of discharge of tax liability would occur.

65. Further, a reference was also made to rules 87(6) and 87(7), which is extracted hereunder:

“Rule 87. Electronic Cash Ledger.-

(6) On successful credit of the amount to the concerned government account maintained in the authorised bank, a Challan Identification Number shall be generated by the collecting bank and the same shall be indicated in the challan.

(7) On receipt of the Challan Identification Number from the collecting bank, the said amount shall be credited to the electronic cash ledger of the person on whose behalf the deposit has been made and the common portal shall make available a receipt to this effect.”

66. The aforesaid rule 87(7) and (8) deals with the credit to Electronic Cash Ledger. Immediately on receipt of challan identification number from the collecting bank, the said amount shall be credited to the Electronic Cash Ledger of the person, on whose behalf the deposit has been made, which means, as stated in Explanation (a) to section 49(11) of the Act, initially the amount is credited to the Government and thereafter, it will deemed to be credited to the Electronic Cash Ledger, which is an automatic process, i.e., once GSTR-3B is filed, automatically, it will appear in the electronic cash ledger, which is only for the accounting purpose and nothing more than that.

67. In a judgement Modipon Ltd. (referred supra), the Hon’ble Apex Court had taken a similar view and held as follows:

“9. Deposit of Central Excise Duty in the PLA is a statutory requirement. The Central Excise Rules, 1944, specify a distinct procedure for payment of excise duty leviable on manufactured goods. It is a procedure designed to bring in orderly conduct in the matter of levy and collection of excise duty when both manufacture and clearances are a continuous process. Debits against the advance deposit in the PLA have to be made of amounts of excise duty payable on excisable goods cleared during the previous fortnight. The deposit once made is adjusted against the duty payable on removal and the balance is kept in the account for future clearances/removal. No withdrawal from the account is permissible except on an application to be filed before the Commissioner who is required to record reasons for permitting an assessee to withdraw any amount from the PLA. Sub-rules (3), (4), (5) and (6) of Rule 173G indicates a strict and vigorous scrutiny to be exercised by the central excise authorities with regard to manufacture and removal of excisable goods by an assessee. The self removal scheme and payment of duty under the Act and the Rules clearly shows that upon deposit in the PLA the amount of such deposit stands credited to the Revenue with the assessee having no domain over the amount(s) deposited.

12. The above discussions, coupled with the peculiar features of the case, noticed above i.e. consistent practice followed by the assessee and accepted by the Revenue; the decisions of the two High Courts in favour of the assessee which have attained finality in law; and no contrary view of any other High Court being brought to our notice, should lead us to the conclusion that the High Courts were justified in taking the view that the advance deposit of central excise duty constitutes actual payment of duty within the meaning of section 43B of the Central Excise Act and, therefore, the assessee is entitled to the benefit of deduction of the said amount.”

68. In the aforesaid case, the interpretation, which was made with regard to the deposit made to the PLA, is squarely applicable to the present case, since in the present case, the issue is with regard to the ECL, which is equivalent to PLA.

69. Further in the judgement of Megha Engineering and Infrastructures Ltd. v. CCT reported in MANU/TL/41/2019, which was rendered by Telangana High Court, it has been held as follows:

“37. In other words, until a return is filed as self assessed, no entitlement to credit and no actual entry of credit in the electronic credit ledger takes place. As a consequence, no payment can be made from out of such a credit entry. It is true that the tax paid on the inputs charged on any supply of goods and/services, is always available. But, it is available in the air or cloud. Just as information is available in the server and it gets displayed on the screens of our computers only after connectivity is established, the tax already paid on the inputs, is available in the cloud. Such tax becomes an in-put tax credit only when a claim is made in the returns filed as self-assessed. It is only after a claim is made in the return that the same gets credited in the electronic credit ledger. It is only after a credit is entered in the electronic credit ledger that payment could be made, even though the payment is only by way of paper entries.

38. If we take a common example of banking transactions, this can be illustrated much better. An amount available in the account of a person, though available with the bank itself, is not taken to be the money available for the benefit of the bank. Money available with the bank is different from money available for the bank till the bank is 14 VRS,J & PKR,J W.P.No.44517/2018 allowed to appropriate it to itself. Similarly, the tax already paid on the inputs of supplies of goods or services, available somewhere in the air, should be tapped and brought in the form of a credit entry into the electronic credit ledger and payment has to be made from out of the same. If no payment is made, the mere availability of the same, there in the cloud, will not tantamount to actual payment.

39. Admittedly, the petitioner filed returns belatedly, for whatever reasons. As a consequence, the payment of the tax liability, partly in cash and partly in the form of claim for ITC was made beyond the period prescribed. Therefore, the liability to pay interest under section 50 (1) arose automatically. The petitioner cannot, therefore, escape from this liability.”

70. For all the reasons as discussed above, this Court is of the view that the law laid down by the Hon’ble Division Bench of the Jharkand High Court in RSB Transmission case and the judgement rendered by Telangana High Court in Megha Engineering case in my humble opinion are not in line with the provisions of the Act and Rules made thereunder and hence, this Court is unable to follow the same.

71. Further, in the judgement of Vishnu Aroma Pouching (P.) Ltd. v. Union of India reported in 2020 (38) G.S.T.L. 289 (Guj.), the Gujarat High Court had taken a view, which is similar to the view of this Court and held as follows:

“12. From the facts as emerging from the record, it is manifest that despite the fact that the petitioner had approached them at the earliest point of time, the respondent authorities maintained silence for a considerable period of time and did not provide remedial measures till directed by this court. The errors in uploading the return were not on account of any fault on the part of the petitioner but on account of error in the system. In these circumstances, it would be unreasonable and inequitable on the part of the respondents to saddle the petitioner with interest on the amount of tax payable for August 2017, despite the fact that the petitioner had discharged its tax liability for such period well within time.

13. The respondents, in paragraph 19 of their affidavit-inreply, have submitted that CIN is generated after deposit of money by the petitioner for the purpose of payment of tax. CIN is generated by the authorised banks/Reserve Bank of India (RBI) when payment is actually received by such authorised banks or RBI, which then is seen as credit balance in the electronic cash ledger of the petitioner. In response to such submission made on behalf of the respondents, the learned advocate for the petitioner invited the attention of the court to the averments made in paragraphs 5.4 and 5.5 of the petition, wherein it has been stated that when any payment is made by an assessee by internet banking, a number for the challan for making payment is generated, which is known as Challan Portal Identification Number (CPIN). For two challans dated 19-9-2017, through which the petitioner has paid a total sum of Rs. 114.51 crores (rounded off), such CPINs have been generated on the common portal, and such numbers appear on the challans with other details. CPIN for payment of taxes by the petitioner are 17092400195007 and 17092400195744. On successful credit of the amount to the concerned Government account maintained in the authorised bank, a Challan Identification Number is generated by the collecting bank, and the same is indicated in the challan as laid down under sub-rule (6) of rule 87 of the CGST Rules. In the petitioner’s case, such CINs have been generated, and such Challan Identification Numbers have been recorded on the challans also, which are HDFC17092400195007 and HDFC17092400195744. These facts have not been disputed by the respondents. Thus, it is evident that the amount in question had actually been deposited by the petitioner on 19-9-2017 for the purpose of payment of tax and was received in the bank designated by the respondents. Moreover, it is an admitted fact that Rs. 114.51 crores (rounded off) paid in the designated bank on 19-9-2017 and also input tax credit of Rs. 14,12,35,762/- debited on 19-9-2017 have been lying to the credit of the GST Department, and the petitioner has not utilised this sum aggregating to Rs. 128.63 crores (rounded off) for discharging any other tax liability.

14. Thus, the petitioner had duly discharged the tax liability of August, 2017 within the period prescribed therefor; however, it was only on account of technical glitches in the System that the amount of tax paid by the petitioner for August 2017 had not been credited to the Government account. Hence, the interests of justice would best be served if the declaration submitted by the petitioner in October, 2019 along with the return of September, 2019 is treated as discharge of the petitioner’s tax liability of August, 2017 within the period stipulated under the GST laws. Consequently, the petitioner would not be liable to pay any interest on such tax amount for the period from 21-9-2017 to October, 2019.”

9. The said judgment has been followed subsequently by the Madras High Court in the case of Tamilnadu State Transport Corporation (Villupurlam) Ltd.(supra) wherein it is held as under:

“This Writ Petition has been filed challenging the impugned proceedings of the respondent in Order-In-Original No.98/2023-GST (ADC) dated 30.12.2023 passed in DIN-20231259XL000061186E and quash the impugned order in so far as the levy of interest and penalties as passed contrary to the provisions of the CGST Act 2017 and TNGST Act, 2017 and also contrary to the principles of natural justice.

2. The learned counsel for the petitioner would submit that even though GST was implemented on July 1st 2017, there were many technical issues during the initial months of implementation of GST, due to which the petitioner could not upload their GSTR 3B returns for the period from July 2017 to March 2018 initially as the portal was not supporting the Digital signature of the petitioner’s Managing Director. This was brought to the knowledge of the Commercial Tax Officer Villupuram by the petitioner every month through their letters and through a ticket raised in the GST portal. But there was no solutions forthcoming from the department. Despite the technical issues, the petitioner discharged their output tax without adjusting any nput tax credit by depositing their exact tax liability in their Electronic Cash ledger.

3. Further, he would submit that the petitioner experienced the same technical issues even from April 2018 till July 2019 s their Managing Director got retired and the new incumbent’s digital signature could not be supported by the GST portal During this period also, even in the absence of uploading their GSTR 3B monthly returns, the petitioner discharged their exact tax liability by depositing in the Electronic Cash ledger. However, it is the case of the respondent that the petitioner had only deposited the money into the electronic cash ledger and they have not filed their GSTR 3B returns in time and debited cash ledger for payment of tax which they have done only in the month of August 2019 and so for the delay in debiting the tax which was available in the petitioner’s electronic cash ledger towards the actual tax liability for the period from July 20171 19 by filing GSTR 3B returns, the petitioner is liable for interest under Section 80 read with Section 73(1) of the CGST A 17/TNGST Act, 2017. Alleging the same, the respondent issued show cause notice dated 25.06.2021 to the petitioner, for which the petitioner in its objections dated 16.07.2021, 13.07.2022 and 20.07.2023 submitted that the delay in filing GSTR 3B returns fro the period from July 2017 to July 2019 were due to technical glitches and also due to the retirement of their Managing Director and the consequential expiry of digital signature to approve the filing of their statutory returns and even in this delicate situations, the exact/entire taxes relating to their outward supply were paid/remitted then and there by remitting in their electronic cash ledger and requested the respondent to drop the proposal to levy interest under Section 50 of the CGST Act, 2017/TNGST Act, 2017. But the respondent rejected the objections filed by the petitioner and passed the impugned order dated 30.12.2023, confirming the demand made in the show cause notice. Challenging which, the present writ petition has been filed.

4. The learned counsel for the petitioner relied upon the decision of this Court in the case of Eicher Motors Limited v. Superintendent of GST and Central Excise Range-II 2024 (81) G.S.T.L. 418 (Mad.) =(2024) 14 Centax 323 (Mad.) wherein this Court has held that the interest liability stops accruing from the date on which the amount due is deposited in the tax payer’s electronic cash ledger and submitted that the issue raised in this writ petition is squarely covered by the aforesaid decision of this Court.

5. Per contra, the learned Senior Standing Counsel appearing for the respondent would submit that the entire tax amount has already been remitted by the petitioner and the same was also recorded in the impugned order. But the interest was called for due to the reason that there was a delay in filing the returns.

6. Heard both sides. Perused the records.

7. The issue with regard to payment of interest is considered by this Court in the case of Eicher Motors Limited (supra) wherein this Court has held that the interest liability stops accruing from the date on which the amount due is deposited in the tax payer’s electronic cash ledger.

8. In this context, it would be apposite to extract Rule 88 B(1) of the C.G. & S.T.Rules, 2017 and the same is extracted hereunder:

‘Provided that where any amount has been credited in the Electronic Cash Ledger as per provisions of sub-section (1) of section 49 or before due date of filing the said return, but is debited from the said ledger for the payment of tax while filing the said return after the due date, the said amount shall not be taken into consideration while calculating such interest if the said amount is lying in the said ledger from the due date till the date of its debit at the time of filing return.”

9. The aforesaid provision is clarificatory in nature and therefore the question of retrospective or prospective effect will not come into picture and therefore the question of payment of interest will not arise.

10. As far as other payments or penalty is concerned, if there is any non payment on or before the due date, it is left open to the respondent to take appropriate action.

11. In the result, the impugned order dated 30.12.2023 is quashed to the extent of levying of interest alone.

12. Accordingly, this writ petition is disposed of. No costs.

Consequently, connected miscellaneous petitions is closed.”

10. In the case of Arya Cotton Industries (supra) the Gujarat High Court has held as under:

“10. On perusal of the above provisions of the Act and the Rules, of the CGST Act for payment of interest for levy of interest on the outstanding tax payable by the assessee, the scheme of the CGST Act is required to be considered.

11. The provisions of the CGST Act provides for self assessment by the assessee. Section 39 provides for furnishing of returns. Section 39(1) provides for furnishing of return electronically of inward and outward supplies of goods or services of both input tax credit availed, tax payable, tax paid and such other particulars in such form on manner and within such time as may be prescribed. Sub-section (7) of Section 39 stipulates that every person who is required to furnish return under Sub-section (1) shall pay to the Government the tax due as per such return not later than the last date on which he is required to furnish such return. Section 49 of the CGST Act provides for payment of tax, interest, penalty and other amounts. Sub-section (1) of Section 49 stipulates that every deposit made toward tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards etc. shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed whereas, Subsection (3) provides that amount available in electronic cash ledger may be used for making any payment towards tax, interest, penalty, etc. under the provisions of the CGST Act or the rules made there under in such manner and subject to such condition and within such time as may be prescribed. Sub-section (6) of Section 49 provides the balance in electronic cash ledger or electronic credit ledger after payment of tax, interest, etc., may be refunded in accordance with the provisions of Section 54. Sub-section (8) of Section 49 provides for discharging the tax liability by self assessed tax. Explanation to Section 49 reads as under:

“Explanation.–For the purposes of this section, –

(a) the date of credit to the account of the Government in the authorised bank shall be deemed to be the date of deposit in the electronic cash ledger;

(b) the expression,-

(i) “tax dues” means the tax payable under this Act and does not include interest, fee and penalty; and

(ii) “other dues” means interest, penalty, fee or any other amount payable under this Act or the rules made thereunder.”

12. As per the above explanation, the date of credit to the account of the Government in the authorised bank shall be deemed to be the date of deposit in electronic cash ledger. Therefore, when the return is filed by the assessee in Form GSTR-3B and if there is sufficient balance available in the electronic cash ledger, than liability as per the return is simply offset against such balance by debit in electronic cash ledger. Hence, the tax paid at the time of deposit into electronic cash ledger which is adjusted against liability at the time of filing of return is merely setting off of the amount from electronic cash ledger to be utilised for payment of tax liability as per the return filed. Therefore, the amount in the electronic cash ledger is nothing but in nature of advance tax lying in the account of the assessee which cannot be withdrawn or utilised in any manner by the assessee except for payment of tax liability as per the return filed.

13. Section 50 of CGST Act provides for interest on delayed payment of tax. Proviso to Section 50(1) refers to interest on tax payable in respect of supplies made during a tax period and declaring the return for the said period furnished after the due date in accordance with the provisions of Section 39 shall be payable on the portion of the tax which is paid by debit in electric cash ledger. It appears that the respondents have literally interpreted the words “interest shall be payable on that portion of the tax which is paid by debit in the electronic cash ledger”. The debit in electronic cash ledger is on the date of filing of the return and therefore, interest is calculated till date of filing of return ignoring the fact that the assessee might have deposited the amount in electronic cash ledger prior to the date of filing of return and return may be filed belatedly for various reasons. Debiting of electronic cash ledger is only adjustment of the amount of deposit made in the electronic cash ledger. Therefore, on plain reading of the provisions of Section 50(1) which applies for calculating levy of interest on delayed payment of tax cannot be literally interpreted to the effect that interest is payable on the amount which is already deposited and utilised for the payment and thereafter adjusted for payment of tax is contrary to the fundamental principle for charging interest which is compensatory in nature. If the mechanical and literal interpretation is done by the respondent is accepted, the same would convert the interest into the nature of penalty. It appears that for the purpose of introduction of the proviso to Section 50(1), is with regard to remove the controversy which earlier existed as to whether interest is leviable on gross tax liability without considering admissible input tax credit or whether it was only applicable on net tax liability paid by the taxable person. The GST Counsel in his 31st meeting decided to incorporate proviso to Section 50 of the Act so as to clarify that interest was leviable only on net tax liability and accordingly, the proviso was introduced prospectively by Finance Act, 2019 and notified vide notification No.63/2020 dated 25.08.2020 and thereafter, in the 39th meeting of the GST Counsel, it was decided to apply the proviso with effect from 01.07.2017 by Finance Act, 2021. The retrospective of the provisio was notified by notification No.16 of 2021 dated 01.06.2021.

14. Therefore the purpose of introduction of the proviso to Section 50 was only to clarify with regard to levibility of the interest on net tax liability and not on gross tax liability of the assessee. The proviso has therefore nothing to do with the period for which the interest is to be levied.

15. Therefore, the interest can be levied only from the due date of payment of tax till the deposit of such tax in the electronic cash ledger on demand of interest even for subsequent period from the date of deposit in electronic cash ledger till date of filing of return is therefore not tenable.

16. Rule 88B which has come into effect from 1st July, 2017 as per notification No. 14 of 2022 dated 5th July, 2022 is in context of amendment to Section 50(3) of the CGST Act as per decision taken by the GST counsel in his 47th meeting in relation to the transfer of the balance of CGST/IGST in electronic cash ledger of registered person to electronic cash ledger of CGST/IGST of the distinct person. Section 50(3) of the CGST Act was also amended clarifying that where ITC has been wrongly utilised, the registered person shall be paid interest only on such input cash credit which is wrongly availed and utilisedand in that context, Rule 88B was introduced with effect from 01.07.2017 for calculation of interest on delayed payment of tax for wrongly availed and utilised input tax credit on the portion of wrongly utilised input tax credit. The Hon’ble Supreme Court in case of Dhwarka Prasad (supra) regarding the proviso to the section has held as under:

“16. There is some validity in this submission but if, on a fair constriction, the principal provision is clear, a proviso cannot expand or limit it. Sometimes a proviso is engrafted by an apprehensive draftsman to remove possible doubts, to make matters plain, to light up ambiguous edges. Here, such is the case. In a country where factories and industries may still be in the developmental stage, It is not unusual to come across several such units which may not have costly machinery or plant or fittings and superficially consist of bare buildings plus minor fixtures. For example, a beedi factory or handicraft or carpentry unit a few tools, some small contrivances or connection of materials housed in a building, will superficially look like a mere ‘accommodation’ but actually be a humming factory or business with a goodwill as business, with a prosperous reputation and a name among the business community and customers. Its value is qua business, although it has a habitation or building to accommodate it. The personality of the thing let out is a going concern or enterprise, not a lifeless edifice. The legislature, quite conceivably, thought that a marginal, yet substantial, class of buildings with minimal equipments may still be good businesses and did not require protection as in the case of ordinary building tenancies. So, to dispel confusion from this region and to exclude what seemingly might be leases only of buildings but in truth might be leases of business, the legislature introduced the exclusionary proviso.

17. While rulings and text books bearing on statutory construction have assigned many functions for provisos, we have to be selective, having regard to the text and context of a statute. Nothing is gained by extensive references to luminous classics or supportive case law. Having explained the approach we make to the specific ‘proviso’ situation in s. 2(a) of the Act, what strikes us as meaningful here is that the legislature by the amending Act classified what was implicit earlier and expressly carved out what otherwise might be mistakenly covered by the main definition. The proviso does not. in this case, expand, by implication, the protected area of building tenancies to embrace ‘business’ leases.

18. We may mention fairness to counsel that the following, among other decisions, were cited at the bar bearing on the uses of provisos in statutes: Commissioner of Income-tax v. IndoMercantile Bank Ltd.(1); M/s. Ram Narain Sons Ltd. v. Asst. Commissioner of Sales Tax (2); Thompson v. Dibdin (8); Rex v. Dibdin (4) and Tahsildar Singh v. State of U.P. (5). The law is trite. A proviso must be limited to the subject matter of the enacting clause. It is a settled rule of construction that a proviso must prima facie be read and considered in relation to the principal matter to which it is a proviso. It is not a separate or independent enactment. ‘Words are dependent on the principal enacting words, to which they are tacked as a proviso. They cannot be read as divorced from their context’ (1912 A.C. 544). If the rule of construction is that prima facie a proviso should be limited in its operation to the subject matter of the enacting clause, the stand we have taken is sound. To expand the’ enacting clause, inflated by the proviso, sins against the fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. A proviso ordinarily is but a proviso, although the golden rule is to read the whole section, inclusive of the proviso, in such manner that they mutually throw light on each other and result in a harmonious construction.”

17. The Hon’ble Supreme Court in case of Commissioner of Income Tax versus Indo Merchantile Bank Limited has held as under with regard to the function of a proviso to a section of the statute as under:

“10. Thus the Privy Council emphasised that the object of s. 24(1) was to allow a set off of profits against losses arising under different heads and Only in such cases could recourse be had to s. 24(1). In cases where profits and losses arose under the same head they had to be adjusted against each other. This Court in Anglo-French Textiles Co. Ltd. v. Commissioner of Income tax, Madras (1) again emphasised that distinction in the following words: –

“Next, a, set off under section 24(1) can only be claimed when the loss arises under one head and the profits against which it is sought to be set off arises under a different head. When the two arise under the same head, of course the loss can be deducted but that is done under section 10 and not under section 24(1) (Per Bose, J.)”

Indeed it is not disputed that when profit and loss arose under the same head in any place which was not an Indian State recourse had to be had to the provisions of ss. 7 to 12B and not to any other section. But it was contended on behalf of the Revenue that the first proviso to s. 24(1) of the Indian Act not only affected the generality of the main enactment but also introduced an addendum that where the profits of the business arose in what was British India in the case of the Indian Act or what was Travancore State in the case of the Travancore Act and the losses under the head business were sustained in an Indian State or in the latter case in any other Indian State or British India, these losses could not by virtue of the proviso be deducted from profits made in British India or Travancore State as the case may be. They could only be adjusted against profits arising in an Indian State or in the case of Travancore State in British India or another Indian State. Thus the proviso, it was contended, was a modification of the method of computation under s. 10(2) of the Indian Act for determining profits and gains of the business of any resident. We should be averse to lend any countenance to such a mode of construing a proviso unless the language used expressly or by necessary intendment leads to that conclusion. The proper function of a proviso is that it qualifies the generality of the main enactment, by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Ordinarily it is foreign to the proper function of a proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment. “It is a fundamental rule of construction that a proviso must be considered with relation to the principal matter to which it stands as proviso”. Therefore it is to be construed harmoniously with the main enactment (Per Das, C. J.) in Abdul Jabar Butt v. State of Jammu & Kashmir (1). Bhagwati, J., in Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax (2) said:

“It is a cardinal rule of interpretation that a proviso to a particular provision of a statute only embraces the field which is covered by the main provision. It carves out an exception to the main provision to which it has been enacted as a proviso and to no other”.

11. Lord Macmillan in Madras & Southern Mahratta Railway Co. v. Bezwada Municipality (3) laid down the sphere of a proviso as follows: –

“The proper function of a proviso is to except and deal with a case which would otherwise fall within the general language of the main enactment, and its effect is confined to that case. Where, as in the present case, the language of the main enactment is clear and unambiguous, a proviso can have no repercussion on the interpretation of the main enactment, so as to exclude from it by implication what clearly falls within its express terms”.

The territory of a proviso therefore is to carve out an exception to the main enactment and exclude something which otherwise would have been within the section. It has to operate in the same field and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly says unless the words of the proviso are such that that is its necessary effect. (Vide also Corporation of The City of Toronto v. Attorney-General for Canada) (1).”

18. The Hon’ble Supreme Court in case of Commissioner of Income Tax versus Modipon Limited has held that the amount deposited in personal ledger account “PLA” under the excise provisions of the Central Excise Act is nothing but payment of tax and therefore, it was held to be an admissible deduction under Section 43B of the Income Tax Act, 1961 as under:

10. In C.I.T. v. Pandavapura Sahakara Sakkare Karkhane Ltd. 7 and C.I.T. v. Nizam Sugar Factory Ltd. 8 cited at the Bar, the High Courts of Karnataka and Andhra Pradesh 7 198 ITR 690 (Kar.) 8 253 ITR 68 (AP) respectively had occasion to consider as to whether the amounts credited to the Molasses Storage Fund out of the sale proceeds of molasses received by the assessee constitute taxable income of the assessee. Under the scheme, the assessee had no control over the amounts deposited in the fund and the assessee was also not entitled to withdraw any amount therefrom without the approval of the authorities. Further the amount deposited could be utilized only for the purpose specified. In those circumstances, the High Court held and in our view correctly, that the deposits made, though a part of the sale proceeds of the assessee, did not constitute taxable income at the hands of the assessee. We do not see why the same analogy would not be applicable to the case in hand.”

19. This Court in case of State of Gujarat v/s T.J. Agro Fertilizer Pvt. Ltd. held that the interest could not be imposed for the period between the date of ad-hoc payment of tax and date of passing of assessment order as the amount was already received by the State as under:

“4.1. Considering the aforesaid provisions and even otherwise considering the fact that once the dealer has made payment before the actual order of assessment, may be on ad-hoc basis, meaning thereby, the amount of tax due and payable as per the assessment order, already paid prior to the assessment order and the State/Department received the said amount of tax, there cannot be any interest levied during the aforesaid period. It cannot be disputed that levy of interest would be on delayed payment of tax due and payable. It is not the case that on finalization of the assessment, any amount more than the amount paid on ad-hoc basis, was assessed and/or required to be paid by the assessee.”

20. The Hon’ble Apex Court in case of Indodan Industries Limited versus State of U.P. & Others has held as under:

“7. One more aspect needs to be highlighted. In the present case, we are concerned with the levy of interest for delayed payment. Under subSection (2B) to Section 9, such interest for delayed payment is given the status of “tax due”. The said interest is compensatory in nature in the sense that when the assessee pays tax after it becomes due, the presumption is that the Department has lost the revenue during the interregnum period (the date when the tax became due and the date on which the tax is paid). The assessee enjoys that amount during the said period. It is in this sense that the interest is compensatory in nature and in order to recover the lost revenue, the levy of interest is contemplated by Section 120 of the Finance Act, 2000 retrospectively.”

21. The Hon’ble Supreme Court in case of Mahalaxmi Sugar Mills Co. versus C.I.T. Delhi has held as under:

“10. It is apparent that section 3(2) requires the payment of cess on the date prescribed under the rules. Rule 4 of the U.P. Sugarcane Cess Rules, 1956 provides that the cess due on the sugarcane entering into the premises during the first fortnight of each calendar year must be deposited in the Government treasury by the twenty second day of that month and the cess due for the remainder of the month must be deposited before the seventh day of the next following month. If the cess is not paid by the specified date, then by virtue of s.3(3) the arrear of cess will carry interest at the rate of six per cent per annum from the specified date to the date of payment. Section 3(5) is a very different provision. It does not deal with the interest paid on the arrears of cess but provides for an additional sum recoverable by way of penalty from a person who defaults in making payment of cess. It is a thing apart from an arrear of cess and the interest due thereon.

11. Now the interest payable on an arrear of cess under s. 3(3) is in reality part and parcel of the liability to pay cess. It is an accretion to the cess. The arrear of cess “carries” interest; if the cess is not paid within the prescribed period a larger sum will become payable as cess. The enlargement of the cess liability is automatic under s. 3(3). No specific order is necessary in order that the obligation to pay interest should accrue. The liability to pay interest is as certain as the liability to pay cess. As soon as the prescribed date is crossed without payment of the cess, interest begins to accrue. It is not a penalty, for which provisions has been separately made by s.3(5). Nor is it a penalty within the meaning of s.4, which provides for a criminal liability and a criminal prosecution. The penalty payable under s.3(5) lies in the discretion of the collecting officer or authority. In the case of the penalty under s.4, no prosecution can be instituted unless, under s.5(1), a complaint is made by or under the authority of the Cane Commissioner or the District Magistrate. There is another consideration distinguishing the interest payable under s.3(3) from the penalty imposed under s.3(5). Section 3(6) provides that the officer or authority empowered to collect the cess may forward to the Collector a certificate under his signature specifying the amount of arrears including interest due from any person, and on receipt of such certificate the Collector is required to proceed to recover the amount specified from such person as if it were an arrear of land revenue. The words used in s.3(6) are “specifying the amount of arrears including interest”, that is to say that the interest is part of the arrear of cess. In the case of a penalty imposed under s.3(5), a separate provision for recovery has been made under s.3(7). Although the manner of recovery of a penalty provided by s.3(7) is the same as the manner for recovery provided by s.3(6) of the arrears of cess, the Legislature dealt with it as something distinct from the recovery of the arrears of cess including interest. In truth, the interest provided for under s.3(3) is in the nature of compensation paid to the Government for delay in the payment of cess. It is not by way of penalty. The provision for penalty as a civil liability has been made under s.3(5) and for penalty as a criminal offence under s.4. The Delhi High Court proceeded entirely on the basis that the interest bore the character of a penalty. It was, according to the learned Judges “penal interest”. The learned Judges failed to notice s.3(5) and s.4 and the other provisions of the Cess Act.”

22. From the above decision, if applied to the facts of the present case, when the assessee petitioner deposited the amount which is credited into electronic cash ledger after actual deposit in the Government Treasury, there is no loss to the Government Revenue merely because such deposit gets adjusted against the actual liability at the later date at the time of filing of return. The Hon’ble Madras High Court in case of Eicher Motors Limited versus The Superintendent of GST & Central Excise (HC) Madras has taken into consideration the entire scheme of the GST Act and thereafter arrived at a conclusion that no interest is leviable under Section 50 of the Act if sufficient balance is available in the electronic cash ledger as under:

“43. As discussed above, for the payment of tax to the account of Government, the filing of GSTR-3B is immaterial, which means either with or without filing of monthly returns, the tax can be remitted to the Government. Therefore, no interpretation can be made as held in the judgement of the Hon’ble Division Bench of Jharkhand High Court rendered in RSB Transmission case (referred supra) stating that no payment of tax can be made until the filing of GSTR-3B, which is against the provisions of Section 39(1) and 39(7) of the Act and thus, the said finding would render a disastrous consequences in utilisation of GST collections by the exchequers. Merely, for the default on the part of a registered person in filing the GSTR-3B, the utilisation of tax amount, which was already deposited into the account of Government, cannot be postponed. The GST collections made by the registered person, have been made on behalf of Government and once the said collections were deposited to the Government account and the same is made available to the Government for its use at once, otherwise the rights of the exchequers in utilising the GST collections in time for welfare measures of public will be deprived, which is not permissible under the Act.

** ** **

72. In view of the above 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 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 the 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.”

23. The Hon’ble Supreme Court in case of Maruti Wire Industries Pvt. Ltd. versus S.T.O IST Circle Mattancherry and Others [2001-VIL-11-SC] has held that there can be no interest liability if no return is filed at all by the assessee and the tax liability would crystalized only upon filing of return. Therefore, if the contention raised by the respondent is accepted, then there cannot be any liability to pay the tax before the same is adjusted against the liability at the time of filing return and therefore, such liability can be said to have arisen only at the time of filing of return and therefore the question of delayed payment of tax could not arise so as to levy interest under Section 50(1) of the Act.

24. In view of the above analysis of the provisions of the Act, the decided case laws and reliance placed by the respondents on the decisions in cases of M/s. Megha Engineering & Infrastructures Ltd. (supra), M/s RSB Transmissions (India) Limited (supra) and India Yamaha Motors Private Limited (supra) taking a contrary view, are not in line of the provisions of the Act and the Rules made thereunder and therefore, the same are not followed but the judgment in case of the Vishnu Aroma Pouching Pvt. LTD. (supra) is followed and it is therefore held that the tax amount which has already been credited to the Government by depositing an electronic cash credit ledger by the petitioner is required to be considered as a payment of tax which gets adjusted at the time of filing of the return by debit in the electronic cash ledger as per the scheme of the CGST Act and therefore, the question of payment of interest would not arise for the period from the date of deposit of the amount in the electronic cash ledger by the petitioner till the date of filing of the return. As per the provisions of the Act, the amount deposited by the petitioner by generating Challan will get credited to the account of the Government immediately upon deposit and later on the same shall be adjusted against the tax payable as per the return filed by debiting the electronic cash ledger and therefore, the tax liability of the registered person will be discharged to the extent of the deposit made to the Government. As per the Scheme of the Government, it is only for the purpose of accounting that the debit in electronic cash ledger will be made at the time of filing of the return otherwise the amounts get credited to the account of the Government immediately upon the deposit. Therefore, once the amount deposited by the petitioner is credited to the account of the Government, the tax liability of such registered person stands discharged on the said date subject to setting off by debit in electronic cash ledger for accounting purpose at the time of filing of return to set off liability against such deposit of the amount which was credited to the account of the Government and therefore, the petitioner cannot be made liable to pay the interest from the date of deposit in the account of the electronic cash ledger till the date of filing of the return.

25. In view of the above foregoing reasons, the impugned communication through email dated 26.04.2022 and the letter dated 27.12.2021 in Special Civil Application No.8871 of 2022 as well as impugned notice dated 10.08.2022 in Special Civil Application No.17657 of 2022 are hereby quashed and set aside. In the result, these petitions are allowed. Rule is made absolute. No order as to cost.”

11. So also the Gujarat High Court in the case of Symphony Limited (supra) has held as under:

“8. Learned Senior Advocate Mr. Kamal Trivedi with learned advocates Mr. Anuj Trivedi and Mr. Vinay Bairagra for the petitioners submitted that by the impugned communications in both the petitions, the petitioner Company is asked to pay the amount of interest considering the date of filing of Form GSTR -3B without considering the actual date of payment by the petitioner Company from the electronic cash ledger.

8. 1 It was submitted that by the impugned letters the respondents have called upon the petitioner Company to make the payment for the period from 20.09.2017 till date of filing of Form GSTR – 3B i.e. 14.08.2018 whereas the debit in electronic cash ledger has taken place on the date of filing of Form DRC-03 on 19.09.2017. It was therefore submitted that the respondents could not have asked for the interest payable under Section 50 of the GST Act after debit of the amount from the electronic cash ledger.

9. In support of his submission, reliance was placed on the decision of this Court in case of Arya Cotton Industries and Anr. v. Union of Indian and Anr. reported in (2024) 130 GSTR 81 – 2024-VIL-634-GUJ and submitted that the case of the petitioner is squarely covered in favour of the petitioner. It was, therefore, submitted that the impugned communications for payment of interest by the respondent authorities are required to be quashed and set aside.

10. Per contra, learned advocate Mr. Ankit Shah for the respondents submitted that as per Section 50 of the GST Act liability to pay interest would continue till the date of filing of the return in Form GSTR- 3B and not from the date of debit in the electronic cash ledger by the assessee as the liability to pay the tax and interest would crystalise on the date of the filing of the return and therefore, the interest would continue to be accruing upon the amount of tax payable. It was submitted that merely debiting the electronic cash ledger would not amount to payment of tax by the assessee.

10.1. In support of his submissions, reference was made to the following averments made in the affidavitin-reply filed on behalf of the respondents in Special Civil Application No. 4464 of 2022.

“8.7. With reference to the contents of paragraph no. 7 of the petition, it is submitted that the petitioner time and again tries to misguide the Hon’ble High Court, Ahmedabad by submitting that ‘once the amount of duty has been debited from the bank account of the petitioner company and credited to the government treasury, then in that case, there arises no question of charging any interest on such amount.’

8.7.1. In fact, until and unless the amount is made available in the electronic cash ledger or electronic credit ledger and is further debited from the electronic cash ledger or electronic credit ledger, the payment of tax does not happen. In the instant case, the petitioner was required to deposit GST amounting to Rs.3,61,27,024/- from their electronic cash ledger on 25.08.2017 by debiting the same on 25.08.2017 to the government exchequer. However, the petitioner credited Rs.3,61,27,024/- in their electronic cash ledger on 19.09.2017 and after a lapse of about 1 year, Rs.3,61,27,024/- was debited from electronic cash ledger on 14.08.2018. Hence, Ra. 3,61,27,024/-was deposited into the government exchequer on 14.08.2018 by debiting Rs. 3,61,27,024/- from electronic cash ledger.

8.7.2. In short, the petitioner was required to deposit Rs. 3,61,27,024/ on 25.08.2017 but they deposited Rs. 3,61,27,024/- in government exchequer on 14.08.2018 and hence petitioner is liable to remit interest for delayed payment (i.e. from 26.08.2017 to 13.08.2018) under Section 50 of the CGST Act, 2017. The petitioner by crediting Rs.3,61,27,024/- in electronic cash ledger (not in government exchequer) on 19.09.2017 has assumed that they have deposited Rs.3,61,27,024/-in government in exchequer. In this case, the petitioner contradicted himself by depositing Rs.3,61,27,024/- government exchequer by debiting from electronic cash ledger on 14.08.2018. Here, the provisions of Section 49 & Section 50 of the CGST Act, 2017 and Rule 87of CGST Rules, 2017 would be relevant to mention here:

Section 49. Payment of tax, interest, penalty and other amounts.-

(1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed.

(2) The input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with section 41 or section 43A), to be maintained in such manner as may be prescribed.

(4) The amount available in the electronic credit ledger may be used for making any payment towards output tax under this Act or under the Integrated Goods and Services Tax Act in such manner and subject to such conditions and within such time as may be prescribed.

Section 50. Interest on delayed payment of tax.-

(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent., as may be notified by the Government on the recommendations of the Council:

[Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.]

Rule 87. Electronic Cash Ledger.-

(1) The electronic cash ledger under sub-section (1) of section 49 shall be maintained in FORM GST PMT-05 for each person, liable to pay tax, interest, penalty, late fee or any other amount, on the common portal for crediting the amount deposited and debiting the payment therefrom towards tax, interest, penalty, fee or any other amount.

Further, to remove any confusion among the traders, CBIC in FAQs at question no. 10 has clarified that “Can the amount available in cash ledger be deemed as payment for any liability?

Answer: No, unless the taxpayer makes a debit entry from a cash ledger for a specific liability, the amount lying in the cash ledger cannot be assigned to any liability.”

On minute perusal of the provisions of Section 49, Section 50 of CGST Act, 2017 and Rule 87 of CGST Rules, 2017 & clarification issued by the CBIC, it is apparent that deposit to electronic cash ledger cannot be considered as deposit into government exchequer until and unless the amount deposited into the electronic cash ledger is debited from the ledger.

On going through the electronic cash ledger and electronic credit ledger (Annexure-I), it is very clear that in each and every month, first the amount is credited into the electronic cash ledger or electronic credit ledger and then the petitioner deposited the GST amount into the government exchequer by debiting the amount from electronic cash ledger or by debiting from the electronic credit ledger. But the disputed amount of GST of Rs.3,61,27,024/- was credited into the electronic cash ledger on 19.09.2017 but not debited from the electronic cash ledger on the same date. The petitioner debited the GST amount of Rs.3,61,27,024/- from electronic cash ledger on 14.08.2018.A chart (Annexure-II) has also been prepared on the basis of electronic cash ledger. On going through this chart which has been prepared on the basis of electronic cash ledger maintained by the petitioner, it is apparent that amount debited from the electronic cash ledger for any month matches with payment of tax in cash mentioned in monthly return of GSTR-3B of the respective month. Hence, amount credited into the electronic cash ledger will not be considered as payment of tax, rather, amount debited from the electronic cash ledger or electronic credit ledger is treated as actual payment of tax.

Thus, the petitioner have submitted wrong information before the Hon’ble Court that once the amount of duty has been debited from the bank account of the petitioner company it would be considered as credited into the government exchequer.”

11. Considering submissions made by the parties and facts of the case, it would be germane to refer to decision of this court in case of Arya Cotton Industries &Anr. (supra) wherein in the similar facts, it is held as under: –

“12. As per the above explanation, the date of credit to the account of the Government in the authorised bank shall be deemed to be the date of deposit in electronic cash ledger. Therefore, when the return is filed by the assessee in Form GSTR- 3B and if there is sufficient balance available in the electronic cash ledger, than liability as per the return is simply offset against such balance by debit in electronic cash ledger. Hence, the tax paid at the time of deposit into electronic cash ledger which is adjusted against liability at the time of filing of return is merely setting off of the amount from electronic cash ledger to be utilised for payment of tax liability as per the return filed. Therefore, the amount in the electronic cash ledger is nothing but in nature of advance tax lying in the account of the assessee which cannot be withdrawn or utilised in any manner by the assessee except for payment of tax liability as per the return filed.

13. Section 50 of CGST Act provides for interest on delayed payment of tax. Proviso to Section 50(1) refers to interest on tax payable in respect of supplies made during a tax period and declaring the return for the said period furnished after the due date in accordance with the provisions of Section 39 shall be payable on the portion of the tax which is paid by debit in electric cash ledger. It appears that the respondents have literally interpreted the words “interest shall be payable on that portion of the tax which is paid by debit in the electronic cash ledger”. The debit in electronic cash ledger is on the date of filing of the return and therefore, interest is calculated till date of filing of return ignoring the fact that the assessee might have deposited the amount in electronic cash ledger prior to the date of filing of return and return may be filed belatedly for various reasons. Debiting of electronic cash ledger is only adjustment of the amount of deposit made in the electronic cash ledger. Therefore, on plain reading of the provisions of Section 50(1) which applies for calculating levy of interest on delayed payment of tax cannot be literally interpreted to the effect that interest is payable on the amount which is already deposited and utilised for the payment and thereafter adjusted for payment of tax is contrary to the fundamental principle for charging interest which is compensatory in nature. If the mechanical and literal interpretation is done by the respondent is accepted, the same would convert the interest into the nature of penalty. It appears that for the purpose of introduction of the proviso to Section 50(1), is with regard to remove the controversy which earlier existed as to whether interest is leviable on gross tax liability without considering admissible input tax credit or whether it was only applicable on net tax liability paid by the taxable person. The GST Counsel in his 31st meeting decided to incorporate proviso to Section 50 of the Act so as to clarify that interest was leviable only on net tax liability and accordingly, the proviso was introduced prospectively by Finance Act, 2019 and notified vide notification No.63/2020 dated 25.08.2020 and thereafter, in the 39th meeting of the GST Counsel, it was decided to apply the proviso with effect from 01.07.2017 by Finance Act, 2021. The retrospective of the proviso was notified by notification No.16 of 2021 dated 01.06.2021.

“16. There is some validity in this submission but if, on a fair constriction, the principal provision is clear, a proviso cannot expand or limit it. Sometimes a proviso is engrafted by an apprehensive draftsman to remove possible doubts, to make matters plain, to light up ambiguous edges. Here, such is the case. In a country where factories and industries may still be in the developmental stage, It is not unusual to come across several such units which may not have costly machinery ‘or plant or fittings and superficially consist of bare buildings plus minor fixtures. For example, a beedi factory or handicraft or carpentry unit a few tools, some small contrivances or connection of materials housed in a building, will superficially look like a mere ‘accommodation’ but actually be a humming factory or business with a goodwill as business, with a prosperous reputation and a name among the business community and customers. Its value is qua business, although it has a habitation or building to accommodate it. The personality of the thing let out is a going concern or enterprise, not a lifeless edifice. The legislature, quite conceivably, thought that a marginal, yet substantial, class of buildings with minimal equipments may still be good businesses and did not require protection as in the case of ordinary building tenancies. So, to dispel confusion from this region and to exclude what seemingly might be leases only of buildings but in truth might be leases of business, the legislature introduced the exclusionary proviso.

18. We may mention fairness to counsel that the following, among other decisions, were cited at the bar bearing on the uses of provisos in statutes: Commissioner of Income-tax v. Indo-Mercantile Bank Ltd.(1); M/s. Ram Narain Sons Ltd. v. Asst. Commissioner of Sales Tax (2); Thompson v. Dibdin (8); Rex v. Dibdin (4) and Tahsildar Singh v. State of U.P. (5). The law is trite. A proviso must be limited to the subject matter of the enacting clause. It is a settled rule of construction that a proviso must prima facie be read and considered in relation to the principal matter to which it is a proviso. It is not a separate or independent enactment. ‘Words are dependent on the principal enacting words, to which they are tacked as a proviso. They cannot be read as divorced from their context’ (1912 A.C. 544). If the rule of construction is that prima facie a proviso should be limited in its operation to the subject matter of the enacting clause, the stand we have taken is sound. To expand the’ enacting clause, inflated by the proviso, sins against the fundamental rule of construction that a proviso must be considered in relation to the principal matter to which it stands as a proviso. A proviso ordinarily is but a proviso, although the golden rule is to read the whole section, inclusive of the proviso, in such manner that they mutually throw light on each other and result in a harmonious construction.”

12. It is also emerging from the record more particularly from the averments made in the affidavitin-reply of the respondent authorities reproduced herein above to the effect that there is no dispute with regard to the debit from electronic cash ledger by the petitioner Company as the amount of tax and interest was already deposited in electronic cash ledger by the petitioner on 19.09.2017 and thereafter from the electronic cash ledger the same amount is adjusted towards tax and interest in Form GSTR 3B. Therefore, the contention of the respondent authorities that interest would continue to be accrued from 20.09.2017 till 14.08.2018 would not be sustainable in view of the aforesaid decision of this Court in case of Arya Cotton Industries and Anr. (supra), wherein the similar issue is determined to the effect that once the amount is credited in the electronic cash ledger towards payment which cannot be withdrawn or utilised in any manner by the assessee except for payment of tax liability as per the returned filed, the assessee cannot be saddled with the interest liability from the date of deposit in the credit of the electronic cash ledger till date of filing of the return in Form GSTR 3B as the tax amount along with interest which has already been credited to the Government by depositing the same in electronic cash ledger is required to be considered as a payment of tax which gets adjusted at the time of filing of the return by debit in electronic cash ledger as per the Scheme of the GST Act and therefore, the question of payment of interest would not arise for the period from the date of deposit of the amount in electronic cash ledger by the petitioner till the date of filing of the return.

13. Moreover as per the provisions of the Act, the amount deposited by the petitioner by generating challan will get credited to the account of the Government immediately upon deposit and later on the same shall be adjusted against the tax payable as per the return filed by debiting the electronic cash ledger and, therefore, the tax liability of the registered person will be discharged to the extent of deposit made with the Government.

14. As per the Scheme of the GST Act, it is only for the purpose of accounting that the debit in electronic cash ledger will be made at the time of filing of the return otherwise an amount which is credited to the account of the Government immediately upon the deposit in electronic cash ledger, the same would be appropriated in the Government treasury and the tax liability of the assessee would stand discharged. Moreover, as per the Scheme of the GST Act, the deposit in electronic cash ledger would be in nature of advance payment by the assessee which would be adjusted at the time of filing of the return in Form GSTR 3B while computing the tax liability. Therefore, no interest can be levied from the date of deposit of the amount by the assessee in the electronic cash ledger till the time the return in Form GSTR-3B is submitted.

15. In view of the above foregoing reasons, the communications dated 17.11.2021 and 11.02.2022 (Annexure-B and Annexure-C respectively) in Special Civil Application No. 4464 of 2024 and communications dated 24.08.2022, 12.09.2022 and 04.02.2023 (Annexure-C, Annexure-D and Annexure-E respectively) in Special Civil Application No. 832 of 2022 are hereby quashed and set aside.

16. In the result, both the petitions are allowed. Rule is made absolute. No order as to costs.”

12. A similar view has been taken by the Madras High Court in the case of Refex Industries Limited (supra) which reads as under:

“The petitioners are registered as assessees under the provisions of the Central Goods and Service Tax Act, 2017 (in short ‘CGST Act’). The petitioners have admittedly filed Returns of income belatedly for the period 2017-18. Communications dated 07.05.2019 (in W.P.No.23360 of 2019) and 15.05.2019 (in W.P.No.23361 of 2019) computing the delay in filing of Returns and consequently the interest to be remitted on the tax accompanying the Returns were issued by the 2 nd respondent in the following terms: W.P.No.23360 of 2019: Sl.No. Month Delay (No. of days) Duty paid (in Rs.) Interest to be paid @ 18% 1. August – 17 140 5016431 346340 2. September17 110 2103842 114126 3. October – 17 81 817158 32642 4. November-17 51 817158 20552 5. December -17 18 629658 5589 6. January – 18 91 5312557 238410 7. February – 18 63 1566965 48683 8. March – 18 32 22789660 359640 Total 1165982 W.P.No.23361 of 2019: Sl.No. Month Delay (No. of days) Duty paid (in Rs.) Interest to be paid @ 18% 1. July – 17 31 27000 413 2. August – 17 258 900000 114510 3. October – 17 197 534714 52045 4. November-17 167 534714 44119 5. December -17 134 268898 17769 6. January – 18 181 13535680 1208199 7. February – 18 155 12103153 925145 8. March – 18 143 7750 547 Total 2362746.

2. Demand notices were issued to the Banks (R3) seeking to recover the arrears of interest from the balances in the accounts of the petitioners.

3. The petitioners objected stating that they had sufficient Input Tax Credit (ITC) available with the Department and thus interest could be demanded, if at all, only on the cash component of the tax remitted belatedly. This amounted to a sum of Rs.1,21,701/-(in W.P.No.23360 of 2019) and Rs.1,25,751/-(in W.P.No.23361 of 2019) and the amounts have been remitted on 14.06.2019. According to the petitioners, the total tax payable, being Rs.3,94,49,225/- in W.P.No.23360 of 2019 and Rs.2,74,71,771/- in W.P.No.23361 of 2019, was remitted by way of cash to an extent of Rs.19,55,634/- (in W.P.No.23360 of 2019) and Rs.12,19,151/- (in W.P.No.23361 of 2019) and Rs.3,74,93,591/- (in W.P.No.23360 of 2019) and Rs.2,62,52,620/- (in W.P.No.23361 of 2019) from out of the available ITC. The proceedings for coercive recovery of the interest are impugned in the present Writ Petitions.

4. Though the petitioners have raised other grounds as well, including one of the violation of principles of natural justice, the only issue agitated is the legal issue as to whether interest would at all be payable on the component of ITC that was, admittedly, available with the Department throughout and that has been adjusted towards the tax demands for the period August, 2017 to March, 2018.

5. There is some history to this matter as this very issue appears to have been raised earlier by a petitioner in W.P.No.15978 of 2019. A learned single Judge, by order dated 13.06.2019, directed the petitioner therein to remit the admitted tax, being tax on the cash component of the demand belatedly paid and the Department to dispose the representation of the petitioner in that case to the effect that there would be no liability to interest in regard to the ITC available with the Department.

6. As against the aforesaid order, Writ Appeals were filed before the Division Bench and by order dated 23.07.2019, the two Hon’ble Judges expressed divergent views. One Judge dismissed the Writ Appeals, whereas the second Judge was of the view that the legal issue on the leviability of interest called for a deeper consideration than had been extended by the learned single Judge at the stage of admission and such summary dismissal required revisiting.

7. The matter was thus referred to a Third Judge, who by his order delivered on 19.12.2019, held that Writ Appeals of the Revenue were not warranted, since the learned single Judge had not in the original instance determined the legal issue in a manner detrimental to the Revenue, but only remitted the matter back to the Assessing Officer to determine the quantum of liability. The aforesaid orders are circulated for my benefit by learned counsel.

8. The question crystallised by the Third Judge for consideration is as to whether interest on belated payment of tax as contemplated under Section 50 of the CGST Act is automatic or whether the same would have to be determined after considering the explanation offered by the assessee. At paragraph 29, the Hon’ble Judge holds that the liability to pay interest under Section 50 is automatic. However, since the petitioner in that case had raised disputes with regard to the period for which the tax had allegedly not been paid, as well as the quantum of tax remaining unpaid in excess of ITC, all being questions of fact, he was of the view that such matters would have to be resolved after hearing the assessee. He categorically states ‘therefore in my considered view though the liability fastened on the assessee to pay interest is an automatic liability, quantification of such liability certainly needs an arithmetical exercise after considering the objections if any, raised by the assessee.’ The objections raised in that case are thus factual and relate to disputed questions of fact as noted by me in the earlier portion of this paragraph.

9. However, the objection raised by the petitioners before me is not one of fact but one of law. According to the petitioners, Section 50 that provides for levy of interest on belated payments would apply only to payments of tax by cash, belatedly, and would not stand triggered in the case of available ITC, since such ITC represents credit due to an assessee by the Department held as such.

10. In order to decide the purely legal issue raised by the petitioners, it is necessary to extract Section 50 itself, which I do below: ‘Interest on delayed payment of tax: “(1) Every person who is liable to pay tax in accordance with the provisions of this Act or the rules made thereunder, but fails to pay the tax or any part thereof to the Government within the period prescribed, shall for the period for which the tax or any part thereof remains unpaid, pay, on his own, interest at such rate, not exceeding eighteen per cent, as may be notified by the Government on the recommendations of the Council. (2) The interest under sub-section (1) shall be calculated, in such manner as may be prescribed, from the day succeeding the day on which such tax was due to be paid. (3) A taxable person who makes an undue or excess claim of input tax credit under sub-section (10) of section 42 or undue or excess reduction in output tax liability under sub-section (10) of section 43, shall pay interest on such undue or excess claim or on such undue or excess reduction, as the case may be, at such rate not exceeding twenty-four per cent, as may be notified by the Government on the recommendations of the Council.”

11. The Section provides for interest on belated payment of tax and as held by the third Judge, such levy is ‘automatic’, and is intended to compensate the revenue for the remittance of tax belatedly and beyond the time frames permitted under law. Though in the context of the Income Tax Act, 1961, the question of whether remittance of interest under Sections 234 A, 234B and 234C of the Income Tax Act, 1961 for belated filing of return, belated remittances of advance tax and deferment of advance tax are mandatory came to be considered by the Supreme Court in the case of Commissioner Of Income Tax, Mumbai v. Anjum M.H.Ghaswala & Ors (252 ITR 1), and held to be compensatory and hence mandatory. The principle of the said judgment applies on all fours to the present case.

12. The specific question for resolution before me is as to whether in a case such as the present, where credit is due to an assessee, payment by way of adjustment can still be termed ‘belated’ or ‘delayed’. The use of the word ‘delayed’ connotes a situation of deprival, where the State has been deprived of the funds representing tax component till such time the Return is filed accompanied by the remittance of tax. The availability of ITC runs counter to this, as it connotes the enrichment of the State, to this extent. Thus, Section 50 which is specifically intended to apply to a state of deprival cannot apply in a situation where the State is possessed of sufficient funds to the credit of the assessee. In my considered view, the proper application of Section 50 is one where interest is levied on a belated cash payment but not on ITC available all the while with the Department to the credit of the assessee. The latter being available with the Department is, in my view, neither belated nor delayed.

13. The argument that ITC is liable to be reversed if it is found to have been erroneously claimed, and that it may be invalidated in some situations, does not militate with my conclusion as aforesaid. The availment and utilization of ITC are two separate events. Both are subject to the satisfaction of statutory conditions and it is always possible for an Officer to reverse the claim (of availment or utilization) if they are found untenable or not in line with the statutory prescription. Credit will be valid till such time it is invalidated by recourse to the mechanisms provided under the Statute and Rules.

14. I am supported in my view by a recently inserted proviso to Section 50(1) reading as below: Provided that the interest on tax payable in respect of supplies made during a tax period and declared in the return for the said period furnished after the due date in accordance with the provisions of section 39, except where such return is furnished after commencement of any proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion of the tax that is paid by debiting the electronic cash ledger.

15. The above proviso, as per which interest shall be levied only on that part of the tax which is paid in cash, has been inserted with effect from 01.08.2019, but clearly seeks to correct an anomaly in the provision as it existed prior to such insertion. It should thus, in my view, be read as clarificatory and operative retrospectively.

16. Learned counsel for the petitioners also draw my attention to the decision of the Telengana High Court in the case of Megha Engineering and Infrastructures Ltd. V. The Commissioner of Central Tax and others (2019-TIOL-893), where the Division Bench interprets Section 50 as canvassed by the Revenue. The amendment brought to Section 50(1), was only at the stage of press release by the Ministry of Finance at the time when the Division Bench passed its order and the Division Bench thus states that ‘unfortunately, the recommendations of the GST Council are still on paper. Therefore, we cannot interpret Section 50 in the light of the proposed amendment’. Today, however, the amendment stands incorporated into the Statute and comes to the aid of the assessee.

17. In the light of the above discussion, these Writ Petitions are allowed and the impugned notices are set aside. No costs. Connected Miscellaneous Petitions are closed.”

13. As held by the Madras High Court and Gujarat High Court in the aforementioned judgments, so long as the petitioner had deposited the cash portion of the tax liability on or before the due date as can be seen from the details given by the petitioner in its reply at the Annexure ‘N’, the question of the petitioner being held to be liable to pay interest on the cash portion, on the ground that there was delayed filing of returns, is clearly contrary to the principles laid down in the aforementioned judgements.

14. Insofar as the interest demanded on the Input Tax Credit portion by the respondents is concerned, having regard to the fact that the amount towards tax by way of Electronic Credit Ledger was available in the Electronic Credit Ledger of the petitioner, in view of the proviso to Section 50 of the CGST Act, which restricts the liability of the petitioner to pay interest only in relation to delayed payment of tax from the cash ledger, it cannot be said that the petitioner is liable to pay interest on tax towards input tax credit portion, as held by the Madras High Court and Gujarat High Court in the aforementioned judgments.

15. Under these circumstances, I am of the considered opinion that the impugned notice dated 17.03.2020 vide Annexure ‘A’ is illegal, arbitrary, and without jurisdiction or authority of law, and contrary to the provisions contained in Sections 49 and 50 of the CGST Act, and the same deserves to be quashed.

16. In the result, I pass the following:

ORDER

(i)

The writ petition is hereby allowed.

(ii)

The impugned notice vide Annexure ‘A’ dated 17.03.2020 issued by the respondents to the petitioner is hereby quashed.