Mere availability of balance in electronic cash ledger will not insulate from interest

1. The petitioner has challenged an order, levying interest for delay in payment of GST for the period July, 2017 to October, 2017. Subsequently the process was aborted at that stage and the petitioner has to remit the payment in full into the cash ledger even prior to the filling of return. Such events have led to the subsequent monthly returns being delayed as well, 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.

2. The petitioner pleaded that sufficient credit available in both the electronic credit 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. Thus, credit to the extent of cash payments effected by the petitioner has been granted to the petitioner. 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. Thus, credit cannot be equated with cash remittances.

3. The balance available in the ‘Electronic Cash Ledger’, the same is the property of the GST Registrant and it is apposite to 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. 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. Interest liability arises on the delayed payment of tax (under RCM, tax payable only in cash). In this case M/s. India Yamaha, the GST Registrant, is liable to pay the interest on cash payments towards RCM, 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.

5. Hon’ble High court has held that the language used under section 50 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, it would result in rewriting the proviso, to the effect that, even mere availability of credit would insulate the petitioner from interest, which, view, is impermissible. Proviso to section 50 shall not be attracted on that portion of the tax that is paid by debiting the electronic cash ledger.

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. Further, 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. whether or not the impugned action is found to be proper and legally sound.

Refer India Yamaha Motor Private Limited Versus Assistant Commissioner, Deputy commissioner, Commissioner of CGST & Central Excise. [WP.No.1944of 2019 and WMP.No.18404 of 2019] dated 29-8-2022.