The ruling was made by the bench comprising of member Dr Justice Anita Sumanth in the case of M/s.Refex Industries Limited Vs. The Assistant Commissioner of CGST & Central Excise.
The petitioners have admittedly filed Returns of income belatedly for the period 2017-18. The respondent computed the delay in filing of Returns and consequently the interest to be remitted on the tax. Demand notices were issued to the Banks seeking to recover the arrears of interest from the balances in the accounts of the petitioners
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. The proceedings for coercive recovery of the interest are impugned in the present Writ Petitions.
The specific question for resolution before the court is as to whether the 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. The court considered the proper application of Section 50 is one where interest is levied on belated cash payment but not on ITC available all the while with the Department to the credit of the assessee.
The Court observed that, As per Section 50(1) of the CGST Act 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 be read as clarificatory and operative retrospectively.To Read the full text of the Judgment CLICK HERE