Order dated:26 August 2022   

Facts

• The Petitioner, BALAJI ENAMIL INDUSTRY, is intended with GST and is on the rolls of first respondent doing business in MDF Boards and Writing Slates.  
• Revenue after inspecting the business premises of the petitioner issued a Show Cause notice dated 06.08.2021, proposing to restrict ITC for the tax period 2019-20 at Rs.9,41,624/- [as against Rs.18,82,220/-].
• On receiving the Show cause notice, the petitioner paid the amount as demanded in the Show cause notice of Rs.10,78,074/- by reversing the ITC claim as it has not utilized the ITC and the same is lying to its credit in the Electronic Credit Ledger. 
• Petitioner contended that since the Input Tax Credit claim was not utilized and was merely reversed in the ledger, there was no net cash liability for the petitioner. Therefore all issues related to the Show Cause notice shall be considered closed.
• However, revenue contended that Petitioner has paid on tax and not interest under Section 50 and penalty under Section 122(2) of the GST Act. 

Issue

• Whether the authorities were right in directing the petitioner for payment of interest on the disputed tax and the penalty thereof. ?

Order

• The High Court observed that reading of Section 50 of CGST Act coupled with the amendment would show that 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 percent, as recommended by the Government. 
• Further, prima facie, it appears that proviso to Section 50 of CGST Act was amended for payment of interest on ‘net tax liability’ in case of delay in payment of tax declaring monthly returns. As held by the Authority in the order impugned, interest will be levied on cash payments made for the return of taxes. The tax determined after initiation of proceedings under Section 73 of CGST Act, for determination of tax in pursuance of Audit conducted under Section 71 of the CGST Act, the benefit of payment of interest only on cash payment is not available, and interest is payable even if assessed tax is paid out of credit available to the petitioner.   
• In the instant case, it is also to be noticed against the order impugned an appeal lies under Section 107 of CGST Act.
• Hence, it would be just and proper, the petitioner avails the remedy of appeal where all the issues can be agitated.