Page 81 - GSTL_26th March 2020_Vol 34_Part 4

2020 ] REFEX INDUSTRIES LIMITED v. ASSTT. COMMR. OF CGST & C. EX., CHENNAI 591
(2) The interest under sub-section (1) shall be calculated, in such manner
as may be prescribed, from the day succeeding the day on which such tax
was due to be paid.
(3) A taxable person who makes an undue or excess claim of input tax
credit under sub-section (10) of section 42 or undue or excess reduction in
output tax liability under sub-section (10) of section 43, shall pay interest on
such undue or excess claim or on such undue or excess reduction, as the
case may be, at such rate not exceeding twenty-four per cent. as may be no-
tified by the Government on the recommendations of the Council.”
11. The Section provides for interest on belated payment of tax and as
held by the third Judge, such levy is ‘automatic’, and is intended to compensate
the revenue for the remittance of tax belatedly and beyond the time frames per-
mitted under law. Though in the context of the Income-tax Act, 1961, the ques-
tion of whether remittance of interest under Sections 234A, 234B and 234C of the
Income-tax Act, 1961 for belated filing of return, belated remittances of advance
tax and deferment of advance tax are mandatory came to be considered by the
Supreme Court in the case of Commissioner of Income Tax, Mumbai v. Anjum M.H.
Ghaswala & Ors. (252 ITR 1), and held to be compensatory and hence mandatory.
The principle of the said judgment applies on all fours to the present case.
12. The specific question for resolution before me is as to whether in a
case such as the present, where credit is due to an assessee, payment by way of
adjustment can still be termed ‘belated’ or ‘delayed’. The use of the word ‘de-
layed’ connotes a situation of deprival, where the State has been deprived of the
funds representing tax component till such time the Return is filed accompanied
by the remittance of tax. The availability of ITC runs counter to this, as it con-
notes the enrichment of the State, to this extent. Thus, Section 50 which is specifi-
cally intended to apply to a state of deprival cannot apply in a situation where
the State is possessed of sufficient funds to the credit of the assessee. In my con-
sidered view, the proper application of Section 50 is one where interest is levied
on a belated cash payment but not on ITC available all the while with the De-
partment to the credit of the assessee. The latter being available with the De-
partment is, in my view, neither belated nor delayed.
13. The argument that ITC is liable to be reversed if it is found to have
been erroneously claimed, and that it may be invalidated in some situations,
does not militate with my conclusion as aforesaid. The availment and utilization
of ITC are two separate events. Both are subject to the satisfaction of statutory
conditions and it is always possible for an Officer to reverse the claim (of avail-
ment or utilization) if they are found untenable or not in line with the statutory
prescription. Credit will be valid till such time it is invalidated by recourse to the
mechanisms provided under the Statute and Rules.
14. I am supported in my view by a recently inserted proviso to Section
50(1) reading as below :
Provided that the interest on tax payable in respect of supplies made
during a tax period and declared in the return for the said period furnished
after the due date in accordance with the provisions of section 39, except
where such return is furnished after commencement of any proceedings
under section 73 or section 74 in respect of the said period, shall be levied
on that portion of the tax that is paid by debiting the electronic cash ledger.
15. The above proviso, as per which interest shall be levied only on that
part of the tax which is paid in cash, has been inserted with effect from 1-8-2019,
but clearly seeks to correct an anomaly in the provision as it existed prior to such
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