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Article Dated 08th Febuary, 2024

No interest if credit is available in Eletronic Cash Ledger - Madras High Court`s Landmark Judgment on Eicher Motors Ltd.


CA Kushagra Mathur

In a significant legal development impacting the landscape of Goods and Services Tax (GST) in India, the Madras High Court recently delivered a landmark judgment in the case of Eicher Motors Ltd versus the Superintendent of GST and Central Excise. This ruling not only sheds light on the intricacies of GST law but also underscores the importance of judicial scrutiny in interpreting and applying statutory provisions.

As businesses continue to navigate the complexities of GST compliance, the judgment rendered by the Madras High Court carries profound implications for taxpayers, policymakers, and legal practitioners alike.

Eicher Motors is a renowned manufacturer of mid-sized motorcycles (250-750CC), led by the iconic brand Royal Enfield, with its manufacturing unit in Tamil Nadu. They have their Global Head Quarters in Chennai and three manufacturing facilities at Oragadam, Vallam and Tiruvottiyur. Eicher Motors is operating through their dealers and distributors and by means of more than 1000 large stores and 900 studio stores in major cities and also having more than 800 authorized dealers in India alone.

The petitioner(Eicher Motors) has paid GST of Rs 15,033 Crs from 2017 to 2023. On the date of Introduction of GST on 01/07/2017 the petitioner had a CENVAT credit of Rs 33.87 Crs which had to be carried forward to the GST regime by filling the GST TRAN-1 form. But due to the technical glitches in the GST Common portal the form could not be filed on time i.e. 01/07/2017 and was filled & submitted only on 27/12/2017.

Since the amount of 33.87 Crs did not reflect in the Electronic credit ledger,the petitioner was not able to file the GSTR-3B return for July`17. The non-filing of GSTR-3B return for July`17 had an adverse impact as the petitioner was unable to file the GSTR-3B for subsequent months from August, 2017 to December, 2017. This is because CGST Act disables an assessee from filing returns for the subsequent period if the returns for the previous Tax period are not furnished.Though the petitioner was disabled from filing the returns, the petitioner had ensured that the tax dues are fully paid within the due dates without any delay and accordingly, the petitioner had discharged GST liability for the period from July, 2017 to December, 2017 by depositing the tax amounts in the Electronic cash ledger under the appropriate heads as CGST, SGST, IGST into the Government account within the due date for each month.

However, the case of the Department is that the deposit of tax in Electronic cash ledger would not amount to payment of tax and would tantamount to failure to remit GST in time, for which interest liability would be attracted.After a lapse of around 6 years, the petitioner was visited with a Recovery notice dated 16.05.2023, demanding the payment of interest of a sum of Rs 23.76 Crs for alleged belated payment of GST from July, 2017 to December, 2017.The Department considered the petitioner`s representation and passed an order dated 12.07.2023 confirming the demand of interest against the petitioner.

It was held by the Honourable High Court that though there was a delay in filing the returns, the entire tax amount has been deposited in time to the Government without any delay by depositing the GST amount in the Electronic cash ledger.

The reason for the significance of this judgement is that filing GSTR-3B is not considered a discharge of tax liability for the period; instead, it is depositing the GST amount in Electronic cash ledger by way of Form GST PMT-06. As in the Form GST PMT-06 there is a column for the name of the beneficiary bank which in the case is Reserve Bank of India.Therefore, whatever the amount deposited by the petitioner, the same will go to the Reserve Bank of India under the name of GST, where the Government has been maintaining their account. Thus, the tax can be remitted to the Government well before the filing of Form GSTR-3B monthly returns by using GST PMT-06.Further, in the Form GSTR-3B there is a column for tax/cess paid in cash which makes it clear that tax should have been paid by using GST PMT-06 and subsequently the details needs to be furnished in Form GSTR-3B.

When the GST is paid by using Form GST PMT-06, it will be credited in the following manner:

1) First the GST amount will be credited to the account of the Government;

2) Secondly, the date, on which it is credited to the Government, is deemed to be the date of deposit in the Electronic cash ledger.

Therefore, it can be concluded that the non-filing of GSTR-3B cannot be the ground for levy of interest; rather, if the taxpayer has made the payment of GST by way of FORM GST PMT-06 to the account of the government,this serves as adequate evidence of the taxpayer`s discharge of their GST liability for the relevant period, and no interest under Section 50 would be attracted in that case. The exchequers cannot be deprived of its right to utilise the amount deposited into the Government account under the pretext of non-filing of GSTR-3B monthly returns.

The judgment delivered by the Madras High Court in the case of Eicher Motors Limited versus the Superintendent of GST & Central Excise has not only provided clarity on a contentious issue surrounding GST compliance but has also established a significant precedent for taxpayers across the country. With the court`s ruling that GSTR-3B is not the sole determinant of tax liability discharge, but rather the deposit of tax through GST PMT-06 form, a critical shift in interpretation has emerged.

This verdict reaffirms the principle that adherence to procedural formalities must not overshadow the substance of tax compliance. Eicher Motors Limited`s successful defense underscores the importance of substance over form in assessing tax obligations. By demonstrating the timely deposit of tax amounts, despite delays in filing GSTR-3B, the petitioner has highlighted the pragmatic approach needed in the realm of taxation.

Furthermore, the judgment serves as a reminder to tax authorities and policymakers to adopt a nuanced understanding of GST laws, recognizing the practical challenges faced by taxpayers in meeting compliance deadlines. It encourages a more holistic assessment of tax compliance, taking into account the overarching goal of revenue collection and ensuring equitable treatment for taxpayers.

In conclusion, the Madras High Court`s ruling in this case marks a significant milestone in GST jurisprudence, emphasizing the primacy of substance in tax compliance and providing much-needed clarity on the interplay between various GST provisions. As businesses navigate the complexities of GST compliance, this judgment offers valuable guidance and sets a precedent for future disputes, fostering a more balanced and pragmatic approach to tax administration in India.

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