Court Dismissed the Recovery Proceedings and Quashed the Interest Recovery Notice
Interest Should not be Charged for Late Filing of Return if GST is Paid on Time: In a recent ruling, the Madras High Court has clarified that tax assessees who pay their Goods and Services Tax (GST) dues into the electronic credit ledger (ECL) before the due date for filing returns will not be liable for interest on late filings. The judgment came as the court quashed a recovery notice issued to Eicher Motors Limited, the renowned manufacturer of Royal Enfield motorcycles, by the Superintendent of GST and Central Excises in Chennai.
The legal dispute arose when Eicher Motors faced challenges in transitioning an accumulated balance of Rs 33.87 crore as CENVAT credit to the GST regime due to technical glitches during the switchover phase. Despite depositing GST amounts into the ECL within the specified due dates, the company encountered difficulties in filing returns for the period from July to December 2017. After resolving issues with the GST TRAN-1 and settling the transitioned credit, Eicher Motors filed all returns by January 2018.
Six years later, on May 16, 2023, the company received a recovery notice demanding interest for alleged ‘belated GST payments.’ In response, Eicher Motors filed a writ petition challenging the order of GST officials confirming the demand for interest.
Justice Krishnan Ramasamy, in his ruling, dismissed the GST’s recovery proceedings and quashed the interest recovery notice. The judge emphasized that since the tax amount had been credited to the government within the prescribed time limit, there was no basis for claiming interest on the delayed filing of returns.
The judge stated, “As long as the GST, collected by a registered person, is credited to the account of the government not later than the last date for filing the monthly returns, the tax liability of such registered person will be discharged from the date when the amount was credited to the account of the government.” He further clarified that interest would only apply if there was a default in GST payment after the due date for filing monthly returns.
This ruling provides clarity for businesses, reaffirming that timely payment of GST dues into the ECL before the filing deadline exempts taxpayers from interest charges on delayed return submissions. The decision aims to protect businesses facing technical challenges during the transition period to the GST regime, promoting a fair and equitable taxation system.
To Access the CBIC Instructions to Officers to Avoid Issuing reckless Notices CLICK HERE
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