The Jharkhand High Court bench has recently cancelled a Form GST DRC-07 summary notice issued by the GST department for not being issued in compliance with the law.
The petition was filed in response to a CBIC notice dated 10.02.2020, which says that interest paid on late payment of taxes is recoverable under Section 79 and Section 75(12) of the CGST Act. The petitioner requested to cancel the demand letters issued by the department on Form GST DRC-01 for different tax periods. In favour of the petitioner’s case, the counsel highlighted that the department had issued no show cause notice before passing the order in question, therefore failed to follow the law. He further urged that interest is only applicable for delay in payment of taxes and not for the delay in filing of monthly return Form GSTR-3B.
The petitioner’s counsel further added that Section 50(1) only deals with failed payment of taxes or unpaid taxes. It doesn’t mention anything about paying from the electronic credit ledger. Also, the provision to Section clearly mentions that the ITC under GST can be treated equally to the tax paid. Therefore, the best the department can ask for is a late fee if the petitioner fails to file their return on time. But since they had already submitted a late fee and the same was credited in the electronic ledger, which means the government exchequer received the payment of tax on time, which means no interest can be levied for the period after that.
If the government has already received the amount in its exchequer by the due date, there is no question of levying interest on the ground of late payment. Interest can only be levied on the unpaid amount. Counsel also pointed out that the government has to pay interest if it fails to refund the amount in the electronic ledger within the specified time, which also means the money is in the control of the government, so there should be no question of compensatory interest on delay in filing a return. Only a late fee can be charged in this case.
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