M/S Rsb Transmissions (India) Limited vs Union Of India Through The Secretary on 18 October, 2022

Outcome
The writ petition filed by M/s RSB Transmissions (India) Limited was dismissed**. The Court upheld the levy of interest under Section 50 of the CGST Act, 2017, for delayed filing of GSTR-3B returns, even where amounts were deposited in the Electronic Cash Ledger (ECL) prior to the due date. The claim for refund of the collected interest was also rejected.

2. Core Issue
The core issue was whether the amount deposited as tax through valid challans in the Government Exchequer (reflecting in the Electronic Cash Ledger) by a registered person prior to the filing of the GSTR-3B returns could be treated as a discharge of tax liability for the period in question, and whether interest could be levied under Section 50 of the CGST Act for delayed filing of GSTR-3B in such circumstances.

3. Key Facts
* Petitioner: M/s RSB Transmissions (India) Limited, a company registered under the Companies Act, 2013, and a GST taxpayer.
* Dispute: Interest of Rs. 13,23,783/- was levied on the petitioner for delayed filing of GSTR-3B returns for various periods between July 2017 to December 2019.
* Petitioner's actions: Out of a total net tax liability of Rs. 32,16,64,014/-, the petitioner had deposited Rs. 29,83,86,479/- in its Electronic Cash Ledger much prior to the due date of filing GSTR-3B returns. The balance amount of Rs. 2,32,77,535/- was deposited belatedly, for which the petitioner accepted interest liability of Rs. 1,53,260/- and paid it.
* Revenue's demand: The Revenue demanded the remaining interest of Rs. 11,70,523/-.
* Specific delays: GSTR-3B returns for July 2017, October 2017, November 2017, and March 2018 were filed with delays of 5 days, 25 days, 1 day, and 1 day, respectively.
* Petitioner's contention: Argued that since the tax amount was already in the Electronic Cash Ledger (and thus, in the Government's virtual possession) before the GSTR-3B due date, interest should not be levied for delayed filing of the return itself, but only on the portion of tax actually paid after the due date (i.e., the belated deposit).
* Impugned actions: The petitioner challenged the Revenue's letters dated 22nd July 2021 and 13th August 2021 demanding the remaining interest, and the rejection of their refund claim dated 9th December 2021.

4. Arguments

• Taxpayer (M/s RSB Transmissions (India) Limited):

  • Interest under Section 50(1) is leviable only on "delayed payment of tax," not merely delayed filing of returns. Late fees (Section 47) are prescribed for delayed filing.
  • The tax amount, once deposited into the Electronic Cash Ledger via challans, is already in the Government Exchequer, even if the GSTR-3B return is filed later.
  • The debiting of the Electronic Cash Ledger upon filing GSTR-3B is a "fictional entry" as the money has already been received by the government.
  • Section 39(7) states tax is payable "not later than the last date on which he is required to furnish such return," implying it can be paid earlier by depositing in ECL.
  • The proviso to Section 50(1) (inserted retrospectively), which states interest is levied on the portion of tax paid by debiting the Electronic Cash Ledger, should be interpreted to mean interest is only on the net cash tax liability that was not in the ECL by the due date.
  • Interest is compensatory, not penal. The government was not deprived of funds if the money was already in the ECL.
  • Relied on Prannoy Roy (Income Tax Act) to argue against interest on tax already deposited, and other precedents to emphasize the compensatory nature of interest and rules of statutory interpretation.

• Revenue (Union of India, Commissioner of CGST & CE):

  • A deposit in the Electronic Cash Ledger is merely an amount available for payment; it does not constitute actual "payment of tax" to the Government.
  • Tax liability is legally discharged only upon the filing of the GSTR-3B return and the subsequent debiting of the Electronic Cash Ledger or Electronic Credit Ledger (as per Section 39(7) read with Section 49 and Rules 86/87).
  • If the GSTR-3B return is filed after the due date, the actual payment/appropriation of tax from the ECL is also delayed, thus attracting interest under Section 50.
  • The proviso to Section 50(1), which became retrospective from 01.07.2017, clarifies that interest is calculated on the portion of tax paid by debiting the Electronic Cash Ledger. This debiting occurs at the time of filing the return, supporting the Revenue's stance.
  • Amounts in the ECL can be refunded to the taxpayer, indicating they are not irrevocably paid to the government until appropriated.
  • The Prannoy Roy judgment (Income Tax Act) is not applicable due to the distinct statutory scheme of the GST Act.

5. Court’s Reasoning
The High Court meticulously analyzed the relevant provisions of the CGST Act, 2017, and CGST Rules, 2017:
* Distinction between 'Deposit' and 'Payment': The Court held that merely depositing an amount in the Electronic Cash Ledger (ECL) under Section 49(1) and Rule 87 does not amount to "payment of tax" to the Government. The term "deposit" implies making funds available, while "may be used" in Section 49(3) indicates that these funds are merely at the disposal of the taxpayer within the GST system.
* Discharge of Tax Liability: The Court emphasized that tax liability is legally discharged only when the GSTR-3B return is filed, and the amount is debited from the Electronic Cash Ledger or Electronic Credit Ledger. This is explicitly stated in Section 39(7) (tax due "as per such return not later than the last date on which he is required to furnish such return") and reinforced by Rule 61(2) (liability discharged "by debiting the Electronic Cash Ledger or Credit Ledger and include the details in the return in the form GSTR 3B").
* Role of Proviso to Section 50(1): The Court interpreted the proviso to Section 50(1) (which was made retrospectively effective from 01.07.2017) as confirming its stance. The proviso states that interest shall be levied on "that portion of the tax that is paid by debiting the electronic cash ledger." Since the debiting of the ECL occurs only at the time of filing the GSTR-3B return, any delay in filing the return naturally leads to a delay in the actual "payment" or appropriation of the tax amount, even if the funds were lying in the ECL previously.
* Refundability of ECL Balance: The Court noted that amounts in the ECL can be claimed as a refund under Section 54, which further supports that these are not irrevocably paid tax amounts until appropriated via a return.
* Harmonious Interpretation: The Court found that this interpretation harmonizes the various provisions (Section 39(7), Section 49(1), 49(3), Section 50(1) proviso, Rule 61(2), Rule 87(6) & (7)) and aligns with the scheme of the GST Act, which is designed for seamless flow of goods, services, and tax payments through a digital platform.
* Precedent Distinction: The Court distinguished the Prannoy Roy case (Income Tax Act) cited by the petitioner, stating that it dealt with different statutory provisions and cannot be applied to the unique mechanism of the CGST Act. While acknowledging the compensatory nature of interest, the Court concluded that the government was deprived of tax revenue for the period the return was delayed, as the tax was not legally "paid" until the return was filed.

6. Statutory References
* Central Goods and Services Tax Act, 2017 (CGST Act):
* Section 39 (Furnishing of returns) - specifically 39(1), 39(7)
* Section 47 (Levy of late fee)
* Section 49 (Payment of tax, interest, penalty and other amounts) - specifically 49(1), 49(3), 49(11) (Explanation (a))
* Section 50 (Interest on delayed payment of tax) - specifically 50(1) and its Proviso
* Section 54 (Refund of tax)
* Central Goods and Services Tax Rules, 2017 (CGST Rules):
* Rule 61(2) (Form and manner of furnishing details of outward and inward supplies)
* Rule 87 (Electronic Cash Ledger) - specifically 87(6), 87(7)
* Other Statutes/Provisions:
* Finance Act (No. 02 of 2019)
* Notification No. 63/2020 dated 25.08.2020 (making Proviso to Section 50 retrospective)
* Constitution of India: Article 14, Article 19(1)(g), Article 246A
* Income Tax Act (referred in precedent discussion)

7. Precedents Cited
* By Taxpayer:
* Prannoy Roy & Another versus Commissioner of Income Tax and Another [2001 SCC Online Del 1362]
* Magadh Sugar & Energy Ltd versus State of Bihar and others [2021 SCC online SC 801]
* Dwarka Prasad versus Dwarka Das Saraf [(1976) 1 SCC 128]
* Pratibha Processors and others versus Union of India and others [(1996) 11 SCC 101]
* J.K. Synthetics Limited versus Commercial Taxes Officer [(1994) 4 SCC 276]
* Grasim Industries Ltd. Versus Collector of Customs, Bombay [(2002) 4 SCC 297]
* By Revenue:
* M/s Vishnu Aroma Pouching Private Limited (Gujarat High Court judgment dated 14th November 2019) - distinguished on facts.
* Cited/Referred by Court in Reasoning:
* Magadh Sugar & Energy Ltd (Supra) - accepted for maintainability of writ petition on pure questions of law.
* J.K. Synthetics Limited (supra) and Dwarka Prasad (Supra) - principles of interpretation applied.
* Prannoy Roy (Supra) - distinguished due to different statutory context.