10.05.2023: Interest Can Be Charged On The Cash Component Of The Demand And Not On Credit Component – Madras High Court

MadrasThe Hon’ble High Court of Madras vide its order dated 07.02.2023 in the matter of M/s Voltech O And M Services Private Ltd.  Vs. Superintendent of GST And Central Excise, Assistant Commissioner (Central Tax), Branch Manager, State Bank Of India in W.P. Nos. 6097 and 6098 of 2020 and W.M.P. Nos. 7159, 7161 and 7167 of 2020, held that the assessee is liable to pay interest on the Cash component of demand and not on the credit component of the demand in case of belated payment of tax.

The Petitioner filed the writ petitions before the Hon’ble High Court challenging the impugned notices dated 22.01.2020 – O.C. No. 8 of 2020 & 15.07.2019 – O.C. No. 142 of 2019 issued by Respondent No. 1.  Further the challenge was also made to subsequent issuance of bank attachment notices dated 12.02.2020 under the provisions of Section 79(1) (C) of the CGST Act, 2017 have been issued by 2nd respondent.

It was submitted on the behalf of the Petitioner that it is liable to pay interest on the cash component of the impugned demand dated 22.01.2020 and not on the credit component. To support its stand, reliance was placed on M/s.Sri Priyanga Agencies, vs. The Assistant Commissioner of CGST & Central Excise and two others dated 08.12.2022 – W.P. No.6603 of 2020 & M/s.Refex Industries Limited vs. The Assistant Commissioner of CGST & Central Excise and two others dated 06.01.2020 – W.P. Nos. 23360 and 23361 of 2019.

Held: –

  • The Hon’ble Court after considering the submissions made and facts of the case, found that as per the impugned demand, dated 01.2020, the petitioner has been directed to pay interest amounting to Rs.55,16,274/-, within one week under intimation to the office of the 1st respondent through FORM GST DRC -03.
  • Referring to the judgments relied upon by the petitioner, it was found by the Hon’ble Court that the Learned Judges have held in clear terms that Section 50 of the GST Act can be applied demanding interest only in cases of belated cash payment towards GST, but not on input tax credit available all the while with the department to the credit of the assessee.

The Hon’ble Court with the above findings, disposed of the writ petition directing the petitioner to demonstrate to the satisfaction of Respondents 1 and 2 undisputed payments.  On demonstration to the satisfaction of respondents 1 and 2 (as above), the impugned notice will stand set aside.  However, if the aforesaid demonstration is not made on or before 28.02.2023, the writ petition will stand dismissed and the impugned notice will continue to operate without any reference to this Court.  Further, on demonstration in the aforesaid manner on or before 28.02.2023, the First & the Second Respondent would pass an order in accordance with law after considering the stand of the petitioner.  If the decision is in favour of the writ petitioner, it is the end of the matter and if it is not, the writ petitioner shall avail alternate remedy of Appeal under Section 107 of the CGST Act.  Consequential order of attachment dated 12.02.2020 is to be raised on payment of interest on cash component as estimated by the respondent pursuant to the aforementioned determination.

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