Madras High Court Upholds Levy of Interest On Belated Cash Remittance
The Court concluded that it was not the case of a mismatch but one of a wrongful claim of the Input Tax Credit
The Madras High Court upheld the levy of interest on belated cash remittance as it is compensatory and mandatory.
The matter titled M/s F1 Auto Components P Ltd v The State Tax Officer was placed before a single-judge Court of Justice Dr Anita Sumanth in the High Court of Madras.
There was no factual matrix involved in the matter and the challenge involved was only a legal issue. The Petitioner challenged the order dated 27 January 2021, which levied interest under Section 50 of the Central Goods and Services Tax Act, 2017 (CGST Act) relating to both interest on cash remittances as well as remittances by way of adjustment of electronic credit register.
The Court with regards to the second limb of the challenge, considered the judgment of Maansarovar Motors Private Limited v The Assistant Commissioner, Poonamallee Division, Chennai (W.P.Nos.28437 of 2019) and thus, accordingly set aside levy to the extent of interest on remittances by way of adjustment of electronic credit register.
The Petitioner with regards to the interest on cash remittance relied on the provisions of Section 42 of the CGST Act which provides for a notice to be issued by the Assessing Authority in the case of mismatch of particulars at the end of the assessee, vis-a-vis, particulars/details furnished in the returns of the selling/purchasing dealer.
However, the Court observed that the provisions of Section 42 were not relevant, as the order itself recorded that the assessee had, on receipt of intimation of the wrongful claim of Input Tax Credit (ITC), accepted the error in the claim and had reversed ITC, both attributable to CGST and SGST through voluntary payment of tax.
The Court concluded that where the claim of ITC by an assessee is erroneous, as was in this case, then the question of Section 42 does not arise at all, since it was not the case of a mismatch but one of a wrongful claim of ITC. It made the following observation about Section 42 of the CGST:
"The provisions of Section 42 can only be invoked in a situation where the mismatch is on account of the error in the database of the revenue or a mistake that has been occasioned at the end of the revenue"
Therefore, the Court modified the order concerning the second limb of the challenge but upheld the levy of interest on belated cash remittance as it is compensatory and mandatory.