Yamaha loses: ITC credit balance alone can’t shield you from GST interest

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Case Name

India Yamaha Motor Private Limited vs. The Assistant Commissioner, Sriperumbudur Division & Others

Court Name: High Court of Judicature at Madras

Case No.: WP.No.19044 of 2019 and WMP.No.18404 of 2019

Pronounced on: 29.08.2022

Before: Hon’ble Dr. Justice Anita Sumanth

Key Takeaways

1. ITC credit balance Tax Payment: Just having money sitting in your Electronic Credit Ledger (ECrR) does NOT mean you’ve paid your taxes. Payment is only complete when you actually file your return AND debit the ledger.

2. Interest under Section 50 is strict: The language of Section 50 of the TNGST Act is very clear — interest kicks in when tax is not paid on time, and protection from interest is only available when payment is made by actually debiting the electronic cash ledger.

3. The proviso to Section 50 applies only to cash payments: The amendment (inserted by Act No. 23 of 2019) that reduced the interest burden applies only to cash credits, not to ITC/credit ledger balances.

4. Interest demand reduced significantly: The original demand of ~₹5 crore was reduced to ₹1,19,02,178/- after giving credit for cash payments made.

5. Errors in filing don’t automatically excuse interest: Even if the delay was caused by a genuine technical/data error, interest liability still applies for the period of delay.

6. Credit may be erroneous: The court noted that ITC credits could have been availed erroneously or on a mistaken interpretation of law, making it risky to assume that available credit automatically offsets tax liability.

Issue

The central legal question was:

Can a GST taxpayer avoid paying interest on delayed tax payments under Section 50 of the TNGST Act, 2017, simply because they had sufficient balance in their Electronic Credit Register (ECrR) and Electronic Cash Register (ECR) — even though they had not actually filed their returns and debited those ledgers?

The Court’s answer: NO.

Facts

Who is involved?

• Petitioner: India Yamaha Motor Private Limited, operating from SIPCOT Industrial Park, Vallam Vadagal Village, Sriperumbudur, Kanchipuram District, Tamil Nadu.
• Respondents: The Assistant Commissioner (Sriperumbudur Division), The Commissioner of CGST & Central Excise (Chennai Outer Commissionerate), The Deputy Commissioner (CT)(LTU)-III, and the GST Network.

What went wrong?

When Yamaha tried to file their GSTR-3B return for July 2017, they accidentally uploaded data from their Faridabad plant instead of their Chennai plant. This was an inadvertent data swap.

Because of this error, the return was “filed” but not “submitted” — the process was aborted midway.

Yamaha deposited the full output tax liability into the cash ledger even before filing the return. But the return itself had the wrong data.

Yamaha filed a grievance petition seeking correction/modification of the July 2017 return, but the authorities didn’t address it promptly.

Because the July 2017 return error wasn’t fixed, Yamaha decided not to file returns for August, September, and October 2017 either — their logic being that the correct tax liability for those months couldn’t be determined until the July error was resolved.

The delay in numbers:

Tax Period - Due Date - Date of Payment - Days Delayed

July 2017: 25.08.2017 - 20.09.2017 - 26 days

July 2017(RCM): 25.08.2017 - 19.07.2019 - 693 days

August 2017: 20.09.2017 - 14.12.2017 - 85 days

September 2017: 20.10.2017 - 20.12.2017 - 61 days

October 2017: 20.11.2017 - 20.12.2017 - 30 days

What did the tax department do?

The Assistant Commissioner issued an order on 10.04.2019 demanding interest of approximately ₹5 crore for the belated payment of GST — and this was done without even issuing a show cause notice first!

What happened in court?

• On 16.12.2020, the court directed the Commissioner (R2) to hear Yamaha’s representation dated 28.09.2017 and pass orders.
• On 18.01.2021, the Commissioner passed a revised order, reducing the interest demand from ~₹5 crore to ₹1,19,02,178/-, giving credit for cash payments.
• Yamaha still challenged the remaining interest demand, arguing that their ITC credit balance should also be considered.

Arguments

Yamaha’s Arguments (Petitioner):

1. No loss to revenue: Yamaha had sufficient balance in both the Electronic Cash Register (ECR) and the Electronic Credit Register (ECrR). Since funds were available, the government suffered no actual loss, and interest — being compensatory in nature — should not apply.

2. Same logic for cash should apply to credit: The tax authorities had already accepted that cash balances in the ECR should reduce the interest burden (following the amendment to Section 50). Yamaha argued the same logic should extend to ITC credit balances in the ECrR.

3. Reliance on Supreme Court judgment: Yamaha’s counsel relied on Union of India vs. Bharti Airtel Limited & Ors (2021 (11) TMI 109 - SC), arguing that the scheme of the TNGST Act recognizes that a registered person self-assesses their liability by reckoning balances in both cash and credit ledgers.

4. Other case laws cited: Yamaha also cited:

• Eicher Motors Ltd. and Another vs. Union of India and Others [(1999) 2 SCC 361]
• Commissioner of C.Ex., S.T. & Cus., Cochin vs. Fact Ltd. [(2017) 355 ELT 55]
• N.C. Mukherjee and Co. vs. Union of India and Another [68 ITR 500]
• Vijaya Oil Mills vs. State of Kerala [(1979) Tax. L.R. 1799]
• Mahant Bhagwan Bhagar vs. G.N. Bhagat and Others [(1972) 1 SCC 486]
• Mahavir Manakchand Bhansali vs. Commissioner of Income Tax (Nagpur Bench, Bombay High Court)

5. Delay was justified: The delay in filing subsequent returns was a deliberate but reasonable decision to avoid a cascading effect from the July 2017 error.

Tax Department’s Arguments (Respondents):

1. Credit Payment: Having a balance in the Electronic Credit Ledger is not the same as paying tax. Tax payment under GST happens only when:

• A return is filed, AND
• The ledger is actually debited towards the tax liability.

2. E-challans are not enough: Generating e-challans only credits money to the Electronic Cash Ledger, which remains the property of the taxpayer until a return is filed and the debit is made. The taxpayer can even claim a refund of that balance at any time!

3. ITC credit could be erroneous: Credits in the ECrR may have been availed incorrectly or based on a wrong interpretation of law. It would be risky for the revenue to assume that available credits will automatically offset tax liability.

4. Telangana High Court precedent: The department relied on the observations of the Telangana High Court in Writ Petition No. 44517 of 2018 filed by M/s Megha Engineering & Infrastructures Ltd., which supported the view that tax payment is complete only upon filing of returns and debiting the ledgers.

5. Interest is compensatory: Citing the Hon’ble Supreme Court in Pratibha Processors vs. Union of India - 1996 (88) ELT 12 (SC), the department argued that interest is compensatory and is imposed when tax is withheld beyond the due date.

Key Legal Precedents

1. Section 50 of the TNGST Act, 2017 — Interest on Delayed Payment of Tax

This is the central provision of the entire case. It states that any person who fails to pay tax within the prescribed period shall pay interest at a rate not exceeding 18% per annum. The proviso (inserted by Act No. 23 of 2019) limits interest to only that portion of tax paid by debiting the electronic cash ledger. The court held that this language is categorical and cannot be stretched to cover mere availability of credit.

2. Refex Industries Limited vs. The Assistant Commissioner of CGST and Central Excise (Order dated 06.01.2020 in W.P.Nos.23360 & 23361 of 2019 — Madras High Court)

This Madras High Court judgment established that the proviso to Section 50 (inserted by Act No. 23 of 2019) should operate retrospectively. It held that where an assessee had sufficient cash credit, there is no need for the department to be compensated since funds were available. This precedent was used to reduce Yamaha’s interest from ₹5 crore to ₹1.19 crore — but only for the cash portion.

3. Union of India vs. Bharti Airtel Limited & Ors (2021 (11) TMI 109 - Supreme Court)

This Supreme Court case dealt with rectification of GSTR-3B forms. The Supreme Court reversed the High Court’s decision that had allowed rectification. Yamaha tried to use paragraphs 33-36 of this judgment (which discuss the scheme of the TNGST Act and self-assessment of ITC) to argue that credit availability should protect them from interest. However, the court found this judgment not directly applicable to the interest levy issue.

4. Writ Petition No. 44517 of 2018 — M/s Megha Engineering & Infrastructures Ltd. (Telangana High Court)

Cited by the tax department to support the position that tax payment is only complete when returns are filed and ledgers are debited. The court found these observations “relatable” to the present case.

5. Pratibha Processors vs. Union of India — 1996 (88) ELT 12 (SC) (Supreme Court)

The Supreme Court held that “Interest is compensatory in character and is imposed on an assessee who has withheld payment of tax as and when it is due and payable. The levy of interest is geared to actual amount of tax withheld and the extent of the delay in paying the tax on the due date. Essentially, it is compensatory and different from penalty — which is penal in character.” This was used to justify the interest levy.

6. Mahavir Manakchand Bhansali vs. Commissioner of Income Tax (Nagpur Bench, Bombay High Court)

Cited by Yamaha for the principle that Parliament enacts laws on the basis that the State will act fairly and not place an unjustified burden on the subject. The court noted this was an Income Tax case and its application would depend on whether the impugned action was proper and legally sound.

7. Other cases cited by Yamaha (but found inapplicable):

• Eicher Motors Ltd. and Another vs. Union of India and Others [(1999) 2 SCC 361]
• Commissioner of C.Ex., S.T. & Cus., Cochin vs. Fact Ltd. [(2017) 355 ELT 55]
• N.C. Mukherjee and Co. vs. Union of India and Another [68 ITR 500]
• Vijaya Oil Mills vs. State of Kerala [(1979) Tax. L.R. 1799]
• Mahant Bhagwan Bhagar vs. G.N. Bhagat and Others [(1972) 1 SCC 486]

The court carefully perused all these judgments but found that none of them touched upon the specific points agitated in this writ petition.

Judgment

The Tax Department won on the main issue. The Writ Petition was partly allowed — only to the extent of the relief already granted under the order dated 18.01.2021 (i.e., the reduction from ₹5 crore to ₹1.19 crore). The remaining interest demand of ₹1,19,02,178/- was confirmed.

The Court’s Reasoning:

Step 1 — The language of Section 50 is clear:

The court looked at the exact wording of Section 50 of the TNGST Act and found it to be categorical. The proviso specifically says interest applies to tax “paid by debiting the electronic cash ledger.” This means protection from interest is only available when there is an actual debit — not just an available balance.

Step 2 — Credit balance ≠ Utilization:

The court agreed with the department that credit in the ECrR cannot be equated with actual payment. Since Yamaha had not filed returns and not debited the registers, the credit sitting in their ledger cannot be treated as tax paid.

Step 3 — Risk of erroneous credits:

The court pointed out that ITC credits could have been availed erroneously or based on a wrong interpretation of law. It would be dangerous to assume, as a general rule, that available credits automatically offset tax liability.

Step 4 — Rewriting the proviso is impermissible:

Accepting Yamaha’s argument would effectively mean rewriting the proviso to Section 50 to say that even “mere availability of credit” would protect an assessee from interest. The court held this was impermissible.

Step 5 — Cited cases don’t help Yamaha:

After carefully reviewing all the judgments cited by Yamaha, the court found that none of them specifically addressed the issue of interest levy under Section 50 where returns were not filed but credit balances existed.

Orders Made:

• The Writ Petition is partly allowed.
• The interest demand of ₹1,19,02,178/- as per the order dated 18.01.2021 stands confirmed.
• No costs awarded.
• The connected Miscellaneous Petition (WMP.No.18404 of 2019) is closed.

FAQs

Q1: Why was the original interest demand of ₹5 crore reduced to ₹1.19 crore?The reduction happened because the tax authorities accepted that Yamaha had made cash payments into the Electronic Cash Ledger before the due dates. Following the amendment to Section 50 (proviso inserted by Act No. 23 of 2019) and the Madras High Court’s ruling in Refex Industries Limited, interest was recalculated only on the net cash liability (i.e., after giving credit for cash already deposited).

Q2: Why didn’t the ITC credit balance help Yamaha avoid interest?

Because under GST law, having money in your credit ledger is not the same as paying tax. Tax is only considered “paid” when you file your return AND the ledger is actually debited. The court strictly followed the language of Section 50 of the TNGST Act, which protects only against interest on tax “paid by debiting the electronic cash ledger.”

Q3: Was Yamaha’s error in filing the return a valid excuse?

The court acknowledged the error (wrong plant data uploaded) but did not treat it as a complete excuse. While the error explained the situation, it did not override the statutory obligation to pay tax on time and file returns. The interest liability for the period of delay was still upheld.

Q4: What does this mean for other GST taxpayers?

This case sends a clear message: Don’t assume that having ITC credit in your ledger protects you from interest on delayed tax payments. You must actually file your returns and debit your ledgers on time. If you delay filing, interest will accrue even if you have sufficient credit sitting in your account.

Q5: Was the original order (10.04.2019) legally proper?

Interestingly, the court noted that the original order dated 10.04.2019 was passed without a pre-intimation notice or show cause notice — which is a procedural lapse. However, instead of quashing it outright, the court directed the Commissioner to hear Yamaha’s representation, which led to the revised order of 18.01.2021.

Q6: What is the significance of the Reverse Charge Mechanism (RCM) in this case?

The interest calculation in the final order specifically focused on cash payments under the Reverse Charge Mechanism (RCM), because under RCM, tax is payable only in cash (ITC cannot be used to pay RCM liability). The largest chunk of the interest — ₹23,18,465/- — related to an RCM payment of ₹67,84,030/- that was delayed by a whopping 693 days (paid on 19.07.2019 against a due date of 25.08.2017).

Q7: Can Yamaha appeal this decision?

Yes, Yamaha can potentially appeal to a Division Bench of the Madras High Court or approach the Supreme Court of India. However, given the clear statutory language of Section 50 and the court’s detailed reasoning, overturning this decision would be challenging. (Note: This is general information, not legal advice.)

The petitioner is an assessee under the provisions of the Tamil Nadu

Goods and Service Tax Act, 2017, (‘TNGST Act’/‘Act’) and has challenged an

order dated 10.04.2019 wherein the respondent calls upon it to remit interest of a sum of Rs.5,00,00,000/- (approx.) for belated remittance of Goods and Service Tax (‘GST’) for the period from July, 2017 to October, 2017.

2.When the matter had come up before me on 16.12.2020, I had passed

the following order:

“Heard Mr. Prasad, learned counsel for the petitioner and

Mr. Santhanaraman, learned Standing Counsel for the respondents.

2. Impugned order dated 10.04.2019 calling upon the petitioner to remit

interest for the belated payment of GST has, admittedly, been passed without a pre-intimation notice/show cause notice. However, without having to set aside the impugned order, it would suffice that a direction be issued to R2, who is the jurisdictional Commissioner, to consider representation dated 28.09.2017 wherein the factual matrix of the matter has been set out in detail.

3. It appears that while seeking to file a return for the month of July,

2017, an error was discovered therein, as a result that the return was merely 'filed' and not 'submitted' and the process was aborted at that stage. According to the petitioner, the output tax liability has been remitted in full into the cash ledger even prior to the 'filing' of the return. The petitioner has been making efforts to correct the error and to obtain opening of the GST portal in order that the corrected return could be filed, to no avail. According to the petitioner, the cascading effect of the aforesaid events have led to the subsequent monthly returns being delayed well as, till such time the error in the July return is rectified, the proper determination of output tax liability for the subsequent months cannot be made.

4. The petitioner will appear before R2 on 23.12.2020 at 10.30 a.m.

without expecting any further notice in this regard. The Commissioner/R2 will hear the petitioner, either over video conference or physical hearing, consider the representation of the petitioner dated 28.09.2017 along with any other material that may be supplied and pass orders thereupon within a period of four (4) weeks from today.

5. List this on 25.01.2021 for production of orders.”

3.Consequent upon the direction as aforesaid, the petitioner has appeared

before the respondent and advanced submissions, pursuant to which, an order

has been passed on 18.01.2021 accepting one portion of the submissions made.

The petitioner has sought and has been granted permission to raise additional grounds addressing what remained of the grievance under order dated 10.04.2019, as covered under order dated 18.01.2021 and the respondent has also filed an additional counter. Pleadings are thus complete.

4. What follows in the succeeding paragraphs of this order addresses the

contents of order dated 18.01.2021 alone, and the prayer in this writ petition thus stands moulded, to this extent. The levy of interest u/s 50 of the Act, arises from the fact that when the petitioner filed a GSTR 3B return for the month of July, 2017, there was an inadvertent error whereby the data pertaining to its plant at Faridabad was included instead of data pertaining to the Chennai plant.

5. This swap resulted in a short disclosure of liability for the period July

to October 2017 leading to the levy of interest. The petitioner had filed a

grievance petition seeking modification of the return for the month of July 2017 that had not been immediately disposed/addressed by the authorities.

6. Thus, the petitioner has admittedly not filed monthly returns for the

months August to October 2017, on the premise that the proper ascertainment

of tax liability for the aforesaid months would be dependent upon the

adjudication of its grievance petition as above. According to the petitioner, it was for this reason that the petitioner did not file returns for the later periods, as a measure of containing the cascading effect of the error that had transpired in the return for July 2017.

7. The remittance of taxes for the subsequent periods are admittedly

belated, and the period of delay and consequent levy of interest, are as tabulated below:

8.The specific argument of the petitioner is that it had sufficient ITC

credit in both the electronic cash ledger (‘ECR’) as well as the electronic credit register (‘ECrC’). Thus, there had been no loss caused to the revenue and hence no justification to levy interest since the interest is only compensatory in nature.

9. Taking note of the amendments to Section 50 of the Act, the

respondent has recomputed the interest payable reducing the same from

Rs.5,00,00,000/- (approx.) to an amount of Rs.1,19,00,000/-. Thus, credit to the extent of cash payments effected by the petitioner has been granted to the petitioner. The submission of the assessee is that the same logic that has merited acceptance by GST authorities in relation to the cash balance, should apply in the context of credit balance as well.

10. It may be recalled that there was substantial litigation in the context

of levy of interest under Section 50 of the Act in cases where the assessee

concerned had sufficient cash credit. This Court, in Refex Industries Limited vs The Assistant Commissioner of CGST and Central Excise, (order dated 06.01.2020 in W.P.Nos.23360 & 23361 of 2019) took note of the amendment to Section 50 that had been inserted by Act No.23 of 2019. The conclusion was that the proviso should operate retrospectively and thus, in a case where an assessee had sufficient cash credit, there is no question of the Department requiring to be compensated, since funds were available with it, to the credit of that assessee.

11. While it is the above reasoning that is found favour with the

respondents qua cash credits, a distinction is sought to be made qua cash credits and credits available in the ECR and ECrR. While payments in cash denotes the actual availability of cash to the credit of the assessee concerned/petitioner, deposits standing to the credit of an assessee/petitioner, do not necessarily, and in all circumstances, imply that the resources to back such credit up, are within reach of the Department. This is all the more in a case such as the present where

the petitioner has not actually filed the returns and effected a debit to the ECR and EcrR to the extent of the tax payable. Thus, credit cannot be equated with cash remittances.

12. The reasoning in the impugned order is as follows:

‘4.2.Sufficient Balance in Electronic Credit and

Cash ledger:

4.2.1. The GST Registrant stated that in their case,

eligible ITC in the Electronic Credit Ledger and sufficient cash

balance in the Electronic Cash Ledger were available, in the

common portal operated by the GST Network. The actual net

tax liability was deposited in Electronic Cash Ledger before

the due date of filing returns for the period from July 2017 to

October 2017. The contention of the GST Registrant that they

had sufficient closing balance in ITC and net tax liability was

deposited in Electronic Cash ledger before due date of filing

returns is not legally sustainable, because under the Goods

and Service Tax, having sufficient balance of ITC in the

Electronic Credit Ledger is immaterial unless the Return is

filed and the same is debited towards payment of GST. To be

precise, the system of Electronic Credit and Cash ledgers is

maintained electronically in the Common portal operated by

the GST Network. The tax payment happens only when the

statutory Returns are filed and the two ledgers are debited

towards the tax liability. Hence any kind of tax payment is final

only when the Returns are electronically filed in the Common

portal and the actual tax liability is debited in the ‘Electronic

Credit/ Cash Ledgers’ and the GST Registrant cannot claim

that the tax was debited in their books of accounts, when as

admitted, the filing of proper Return was delayed.

4.2.2.The GST Registrant stated that they

generated e-challans for payment of tax. It is submitted that

when the GST Registrant generates e-challan, the amount will

be credited to the ‘Electronic Cash Ledger’. Whatever the

balance available in the ‘Electronic Cash Ledger’, the same is

the property of the GST Registrant and it is apposite to

mention that they can claim refund of the balance in

‘Electronic Cash Ledger’ at any point of time as per the GST

provisions. Whereas the amount will go to the Government

Exchequer only when the Return is filed and amount is debited

from the ‘Electronic Cash Ledger’ towards tax liability. Hence

mere generation of e-challans is inconsequential unless the

Return I filed and a ‘debit’ towards actual tax liability arising

from the Return, is made electronically in the ‘Electronic Cash

Ledger’. The date of debit of tax payable in the Ledger

operated by the common portal is the date of payment of tax.

Such debit of tax would arise only in the event of filing of

statutory Return.

4.2.3.From the foregoing discussions, it is evident that unless

the GST Registrant files the Returns and a debit entry towards

tax liability is made in the Electronic Credit and Cash ledgers,

in respect of the tax liability for the relevant tax period, it

cannot be considered as tax payment made. In this regard, the

observations of the Honorable Telangana High Court, in the

Writ Petition No.44517 of 2018 filed M/s.Megha Engineering

& Infrastructures Ltd, are relatable to the discussions made

above.’

13. The contention of the petitioner has been rejected to this extent, and

liability computed as follows:

4.9. Calculation of interest on delayed 'cash payments

under the Reverse Charge Mechanism (RCM):

4.9.1. Now, after the above-mentioned amendments in

law, interest on delayed payment of GST is chargeable only on

net tax liability (cash portion). As per the verification report

submitted by the Jurisdictional Deputy Commissioner,

Sriperumbudur Division, the GST Registrant is liable to pay

amount of Rs.67,84,030/ [under the Reverse Charge

Mechanism (RCM), payable in cash, for the month of July

2017], which the GST Registrant had deposited on 19.08.2017

and adjusted the said amount at the time of filing GSTR 3B for

the month of June 2019, Le, on 19.07.2019. Here, interest

liability arises on the delayed payment of tax (under RCM, tax

payable only in cash). Table B, gives a detailed account of

calculation of interest liability.

4.9.2 In view of the discussions in above paragraphs,

M/s. India Yamaha, the GST Registrant, is liable to pay the

interest on cash payments towards RCM, in as much as the

Goods and Services Tax, for the months of July, August,

September and October, 2017, were paid belatedly as worked

out in Table B below. Since the payment was not made on or

before the due date, the GST Registrant shall be liable for

payment of interest on delayed payment of tax starting from

26th day of August, 2017 till the date of debit in the electronic

cash ledger on filing of Return.

Table-B

4.9.3. Further to the judicial precedents discussed

above, it is an established principle of law that interest is

compensatory in nature. Hon'ble Supreme Court in the case of

Pratibha Processors Union of India - 1996 (88) E.L.T. 12

(S.C.) held, that "Interest is compensatory in character and is

imposed on an assessee who has withheld payment of tax as

and when it is due and payable. The levy of interest is geared

to actual amount of tax withheld and the extent of the delay in

paying the tax on the due date. Essentially, it is compensatory

and different from penalty - which is penal in character".

4.9.4 In view of the above discussion and findings, as the

law on payment of interest on delayed payment of GST stands

today, in the light of the representation dated 28.09.2017 made

by the GST registrant, the interest on delayed payment of tax

(cash under RCM), worked out as per Table B above, payable

by the GST registrant, works out to Rs.1,19,02,178/- (Rupees

One Crore, Nineteen Lakh, Two Thousand, One Hundred and

Seventy Eight).

14. In deciding this issue, what must weigh with the Court is the pointed

and specific language of Section 50 of the Act and I have extracted Section 50 of the Act below. I find that the language used is categoric to the effect that it is only when a remittance is effected by way of debit, that an assessee would be protected from the levy of interest. Acceding to the stand of the petitioner would result in rewriting the proviso, to the effect that, even mere availability of credit would insulate the petitioner from interest, which, in my view, is impermissible.

15. The provisions of Section 50 are extracted below:

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.’

16. That apart, there is some force to the submissions of the respondents

that credit cannot, prior to availment be taken to construe the payment . There are any number of situations where credit may be found to have been availed erroneously or on a mistaken interpretation of law. Thus, it would be risky, from the view-point of the revenue, to state as a general proposition that the mere availability of electronic credit should be assumed to be utilization that would insulate the petitioner from the levy of interest. Thus, unless an assessee actually files a return and debits the respective registers, the authorities cannot be expected to assume that available credits will be set-off against tax liability.

17. Learned counsel for the petitioner relies upon a judgment of the

Hon’ble Supreme Court in the case of Union of India Vs Bharti Airtel Limited

& Ors (2021 (11) TMI 109- SC). The aforesaid judgment had been rendered in

the context of rectification of Form GSTR-3B by that assessee. The challenge

before the High Court had related to the timelines for filing of GSTR-3B and

revision thereof and the relief sought for, by way of extension of such

timelines. The request had been acceded to by the High Court that had

permitted the rectification of GSTR-3B form as sought.

18. In appeal, the decision was reversed by the Supreme Court and the

appeal filed by the Union, allowed. Though this judgment does not specifically bear upon this issue, the attempt of the petitioner is to refer to paragraph Nos.33 to 36 where the Court refers to the scheme of the TNGST Act. The Court observes that a registered person is obliged to self-assess its turnover after reckoning its eligibility to ITC and Outward Tax Liability (OTL) taking note of the balances lying in its cash or credit ledgers.

19. These observations, though rendered in the context of rectification of

GSTR-3B, are relied upon by the petitioner to suggest that availability of credit would suffice to exonerate it from both non-filing of return as well as tax liability. The Nagpur Bench of the Bombay High Court, in the case of Mahavir Manakchand Bhansali Vs Commissioner of Income Tax, has held that while the normal rule of interpreting the physical statute is the literal rule of interpretation, when Parliament enacts a law, it proceeds, the Bench states, on the basis that the State will act fairly and not place an unjustified burden upon the subject. This decision has been rendered in the context of the Income Tax Act, 1961, and application of the ratio of this decision will depend on whether or not the impugned action is found to be proper and legally sound.

20. Though a slew of judgments have been cited and relied upon by the

petitioner and I have perused the same carefully, Eicher Motors Ltd. And

Another Vs. Union of India and Others, [(1999) 2 SCC 361], Commissioner of

C.Ex., S.T. & Cus., Cochin Vs. Fact Ltd., [(2017) 355 ELT 55], N.C.Mukherjee

and Co. V.s Union of India and Another, [68 ITR 500], Vijaya oil Mills Vs.

State of Kerala, [(1979( Tax. L.R. 1799] and Mahant Bhagwan Bhagar Vs.

G.N.Bhagat and Others, [(1972) 1 SCC 486], I find that none of the decisions

touch upon the specific points agitated in this writ petition.

21.The specific issue raised relates to the levy of interest u/s 50 of the

Act in a situation where the petitioner has not filed its returns of turnover for a particular period and the remittance of taxes for the aforesaid periods is admittedly belated. The petitioner argues that no interest need be levied on the strength of the balances lying to its credit in the ECR and ECrR. This peculiar issue has not been decided in any of the decisions cited, and on the basis of the detailed discussion as above, I hold this issue, adverse to the petitioner.

22. This Writ Petition is partly allowed, to the extent of the relief granted under order dated 18.01.2021 and the demand, as per aforesaid order, stands confirmed. No costs. Consequently, connected Miscellaneous Petition is closed.

29.08.2022

Index:Yes

Speaking order