No interest if GST is deposited in cash ledger

 This is to apprise you about an important decision by the Hon’ble Madras High Court (‘HC'), in the case of Eicher Motors Limited, WP No. 16866 & 22013 of 2023, wherein the Court held that where GST was deposited in Electronic Cash Ledger (‘ECL’), it would amount to payment to Government and interest cannot be levied merely because GSTR-3B was not filed.

 

Facts

 

·            The Petitioner had accumulated balance of CENVAT Credit as on June 30, 2017, to be passed to GST regime via Form GST TRAN-1. However, due to technical glitches, the petitioner was not able to file the form on time.

 

·            Consequently, the petitioner could not file return in Form GSTR-3B for July 2017 and for the subsequent months till December 2017. However, the taxes due for all the months were paid vide Form GST PMT-06 within the due dates of filing GSTR-3B. Further, post reflection of transitioned ITC in ECL, all the pending GSTR-3B returns were filed.

 

·            The Department issued a recovery notice for demanding interest on late payment of GST for 6 months.

 

·            However, the petitioner contended that the taxes were transferred from their accounts to the Government Accounts at the time of payment into ECL vide Form GST PMT-06.

 

HC Decision

 

·            The Court observed that Section 39(7) states that payment of GST is to be made not later than the due date of GSTR-3B. This means that the law has clearly distinguished filing of return with payment of taxes.

 

·            The Court also observed that in Form GST PMT-06, the name of the beneficiary bank has been mentioned as Reserve Bank of India (‘RBI’) i.e., the amount deposited will go to the Government. Once tax is deposited vide Form GST PMT-06, the amount is available to the Government for their use and utilisation cannot be postponed till return filing date.

 

·            The Court, thus, held that tax was already credited to the Government within the due date, hence, question of payment of interest would not arise.

 

 | Remarks

 

·            Look at it from another perspective also, the Government states that ECL is nothing but taxpayer’s own wallet or bank account. However, this is not true at legal as well as ground level.

 

·            Section 49 imposed conditions and situations on refund of cash lying in ECL. Therefore, the law itself has imposed encumbrances on the ECL. Thus, it cannot be said that ECL is merely a taxpayer wallet.

 

·            Further, ECL is not like a bank account that taxpayer places a withdrawal request and gets the money. The refund from ECL involves quasi-judicial decision by Proper Officer.

 

·            In our view, the decision is correct. It gives boost to our contentions taken before various Appeal matter of our clients.

 

·            Taxpayers should make it an additional ground wherever applicable.