Satyadevi Alamuri Vs Office of Assistant Commissioner of GST and Central Excise

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The petitioner is before this Court challenging the impugned Order-in-Original No.36/2024-GST dated 30.08.2024, passed by the respondent herein. The impugned order was preceded by a notice in Form GST ASMT-10 dated 15.02.2024, intimating discrepancies in the return after scrutiny, a notice in Form GSTR DRC-01A dated 19.03.2024, and Show Cause Notice No.11/2024-GST dated 29.05.2024.

2. The petitioner has responded to the notice dated 15.02.2024 on 09.03.2024, the notice dated 19.03.2024 on 01.04.2024, and the Show Cause Notice dated 29.05.2024 on 27.06.2024 and 28.08.2024. By the impugned order, the respondent has ordered as follows:

ORDER

a. I confirm the demand of short paid GST liability of Rs. 1,02,57,338/- (Rupees One crore two lakh fifty seven thousand three hundred and thirty eight only) (IGST: Rs. 2,150/- CGST: Rs.51,27,594/- SGST: Rs. 51,27,594/-) under Section 73(1) of the  CGST/TNGST Act, 2017 read with the provisions of Section 20 of the IGST Act, 2017

b. I order that interest at applicable rate is liable to be recovered against the amount demanded at (a) above in terms of Section 50(1) of the CGST Act, 2017 /Tamil Nadu GST Act, 2017 read with Rule 88B of the CGST/TNGST Rules 2017 read with the provisions of Section 20 of the IGST Act, 2017.

c. I impose a penalty of 10,35,518/- (Rupees Ten lakh thirty five thousand five hundred and eighteen only) (IGST Rs. 10,000/-CGST Rs. 5,12,759/- + SGST-Rs. 5,12,759/-) under Section 73(9) read with Section 122 of the CGST Act, 2017/ Tamil Nadu GST Act, 2017 read with the provisions of Section 20 of the IGST Act, 2017 on the amount demanded in S.No. (a) above.

3. The petitioner is now represented by its liquidator, who was appointed by an order of the NCLT dated 06.08.2018, pursuant to the voluntary liquidation of the subject company, namely M/s.GB Engineering Enterprises Private Limited, in MA/285/2018 in CP/64/IB/CB/2018.

4. The impugned order covers the tax liability for the period from April 2019 to December 2019. The GST registration of the petitioner company was earlier cancelled on 30.12.2019. Therefore, a fresh registration was obtained on 14.08.2020. During the interregnum, payments were made in cash on the following dates:

5. By the impugned order, the respondent has, however, failed to recognize the payments made in cash and has thus come to the above conclusion. The relevant paragraph from the impugned order reads as under:

11.6. The averment of the tax payer that tax payable is available in their Electronic Cash Ledger and that the department may appropriate the same from the cash ledger is not found to be legal and proper. Payment of GST under the system of Electronic Cash Ledger and Electronic Credit has two distinct aspects. They are Deposit and Payment. Section 49 (1) of the CGST Act, 2017, talks about credits /deposits to the electronic cash ledger, which is reproduced as below:

49.(1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed.

Rule 87 of the CGST Rules, 2017 prescribes the maintenance of ledgers and procedures for payment of tax, interest etc from the Electronic Cash Ledger, the portion relevant is reproduced below:

(1) The electronic cash ledger under sub-section (1) of section 49 shall be maintained in FORM GST PMT-05 for each person, liable to pay tax, interest, penalty, late fee or any other amount, on the common portal for crediting the amount deposited and debiting the payment therefrom  towards tax, interest, penalty, fee or any other amount.

In simple terms, the Electronic Cash Ledger is akin to a e-wallet from wherein payments can be made. Accordingly, in terms of the CGST Act and the Rules made thereunder, payment of tax is construed to have been made only when the Electronic Cash Ledger or the Electronic Credit Ledger is debited. It is also pertinent to note that there is no provision in GST law or the Rules made thereunder enabling the department to directly appropriate the amounts from the Electronic Cash Ledger of the tax payer.

6. This view has also been reiterated in the counter affidavit filed filed by the respondent.

7. The learned counsel for the petitioner has drawn attention to the FAQs issued by the Central Board of Indirect Taxes and Customs in Circular No. 134/04/2020-GST, bearing reference CBEC-20/16/12/2020-GST, dated 23.03.2020. Specifically, reference is made to Sl.Nos.3 and 8, which are extracted below to summarise the submissions made by the learned counsel for the petitioner:

8. The learned counsel for the petitioner submits that the default arose because Form GSTR-3B, under Rule 61(5) of the Central Goods and Services Tax Rules, 2017, could not be filed as the registration had been cancelled on 30.12.2019. It is submitted that although the petitioner had taken steps to file the return in Form GSTR-1 under Rule 59(1) of the Central Goods and Services Tax Rules, 2017, relating to the outward supplies of goods during the period of liquidation, there were certain defects on the part of the supplier in uploading Form GSTR-1. As a result, Form GSTR-2A under Rule 60(1) of the Central Goods and Services Tax Rules, 2017, was not auto-populated with respect to the supplies made to the petitioner.

9. Specifically, the learned counsel for the petitioner has drawn to Section 82 of the Central Goods and Service Tax Act, 2017 and Section 238 of the Insolvency and Bankruptcy Code, 2016. They are reproduced below:

10. It is submitted that the liability to file returns for the period prior to the commencement of the corporate insolvency resolution process does not rest with the petitioner’s liquidator, as per Circular No.134/04/2020-GST, bearing reference CBEC-20/16/12/2020-GST, dated 23.03.2020. Therefore, the liquidator is not liable to furnish returns for the period prior to the commencement of the corporate insolvency resolution process.

11. That apart, it is submitted that the deposit in the Electronic Cash Ledger, which is recognised under Section 49(6) of the Central Goods and Services Tax Act, 2017 and Explanation (a) to Section 49(11) of the Act, is nothing but a deposit in the Government Account. It is further submitted that, since the tax has been paid, it cannot be held that the liquidator has not discharged the tax liability.

12. It is submitted that once the amount is paid by generating GST PMT-06, the said amount will be initially credited to the account of the Government immediately upon deposit, at which point the tax liability of the registered person stands discharged to the extent of the deposit made to the Government.

Thereafter, for accounting purposes only, it shall be deemed to be credited to the Electronic Cash Ledger, as stated in Explanation (a) to Section 49(11) of the Act.

13. The learned counsel for the petitioner drew attention to a decision of the Gujarat High Court in Vishnu Aroma Pouching Private Limited vs. Union of India, reported in 2020 (38) GSTL 289 (Guj), wherein the Court held that the petitioner therein had duly discharged the tax liability for August 2017 within the period prescribed therefor. However, it was only on account of technical glitches in the system that the amount of tax paid by the said petitioner for August 2017 had not been credited to the Government Account. Therefore, it was held that the interests of justice would best be served if the declaration submitted by the said petitioner in October 2019 was accepted.

14. It is submitted that the respondent had approached the NCLT by way of I.A. No.506 of 2021 and I.A. No.731 of 2021, and that the NCLT, vide order dated 31.03.2022, directed the GST Department to submit the department’s claim as calculated as on 06.08.2018. The NCLT had already rejected the contention of the GST authority to impose charges for the aforesaid period. It is submitted that the respondent has agitated the very same claim before the NCLT, which was rightly rejected.

15. That apart, it is submitted that, as per Section 61 of the Insolvency and Bankruptcy Code, 2016, any person who is aggrieved by an order of the NCLT can file an appeal against the said order within a period of 45 days. However, the respondent has not preferred any such appeal and has instead proceeded to pass the impugned order. It is further submitted that, since the respondent did not challenge the order of the NCLT, the said order has attained finality and is binding on all parties. Therefore, the respondent cannot pass any order independently without the intervention of the NCLT. It is also submitted that the impugned order is barred by the principle of res judicata under Section 11 of the Code of Civil Procedure, 1908.

16. That apart, it is submitted that in the 53rd Meeting of the GST Council held on 22nd June 2024, a proposal was made to amend Rule 88B of the CGST Rules in respect of interest under Section 50 of the CGST Act on delayed filing of returns in cases where credit is available in the Electronic Cash Ledger on the date of filing of the return.

17. It is submitted that the GST Council recommended an amendment to Rule 88B of the CGST Rules to provide that any amount available in the Electronic Cash Ledger on the date of filing of the return in Form GSTR-3B, which is debited while filing the said return, shall not be included while calculating interest under Section 50 of the CGST Act in respect of the delayed filing of such return.

18. The learned counsel for the petitioner has drawn attention to the order of this Court in M/s. Eicher Motor Limited vs. The Superintendent of GST and Central Excise, Range II, Tiruvottiyur Division and another, dated 23.01.2024, rendered in W.P.Nos.16866 and 22013 of 2023.

19. The learned counsel for the petitioner also drew attention to Section 60 of the Insolvency and Bankruptcy Code, 2016. It is submitted that the respondent is duty-bound to approach only the adjudicating authority under the Insolvency and Bankruptcy Code, 2016, where an application relating to insolvency resolution or liquidation is pending before the NCLT. A specific reference is made to Section 60(2) and Section 60(5) of the Insolvency and Bankruptcy Code, 2016, which are reproduced below:

(1) ….

(2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor shall be filed before such National Company Law Tribunal.

(1) ….

(2) Notwithstanding anything contained in the Limitation Act, 1963 (36 of 1963) or in any other law for the time being in force, in computing the period of limitation specified for any suit or application by or against a corporate debtor for which an order of moratorium has been made under this Part, the period during which such moratorium is in place shall be excluded.

20. Finally, the learned counsel for the petitioner submits that, pursuant to the order of liquidation, claim statements were called for from all the creditors, including the respondent.

21. The learned counsel for the respondent, on the other hand, would draw attention to the paragraph Nos.9 and 10 of the counter.

22. Specifically, it is submitted that the amount that has been deposited by the petitioner on various dates cannot be appropriated towards the tax liability of the petitioner for the period between April 2019 and December 2019, as the system does not permit such appropriation.

23. It is further submitted that the amount lying in the Electronic Cash Ledger is not to be treated as discharge of tax liability of the petitioner for the aforesaid period.

24. I have considered the arguments advanced by the learned counsel for the petitioner and the learned counsel for the respondent.

25. There is no dispute that the petitioner has deposited the amounts as mentioned above towards the tax liability of the petitioner for the period between April 2019 and December 2019.

26. The only defect is on account of the Liquidator of the petitioner, who was appointed as Official Liquidator by the NCLT as Adjudicating Authority under the Insolvency Bankruptcy Code, 2016 on 06.08.2018. The petitioner could not upload the Return in GSTR 01 and GSTR 3B, as the company, namely, G.B. Engineering Enterprises Private Limited, under liquidation, had failed to file the Return for the earlier period.

27. The fact remains that there is no dispute that the amount has been transferred as and when the tax liability arose into the Electronic Cash Ledger as is required to be maintained under Section 49 of the respective GST enactments. The Board has also post facto issued a Clarification, dated 23.03.2020 in Circular No.134/04/2020-GST, bearing reference No.CBEC-20/16/12/2020-GST, wherein in serial No.8, it has been clarified, the content of which has been extracted in para 7 of this order.

28. A reading of the above clarification indicates that under similar circumstances, the liquidator of the interim resolution provisional or resolution provisional or the liquidator, as the case may be, is required to obtain a fresh registration and apply for a refund, implying a fresh payment of amount and thereafter, the refund of the aforesaid amount paid earlier. These are only trade facilitation intended to reduce the rigours of the strict application of the provisions of the Act and Rules. Therefore, there can not impediment on appropriate the amounts already paid by the petitioner on the dates mentioned in the Electronic Cash Register to square off the tax liability of the petitioner. Therefore, the impugned order is quashed with the consequential relief to the respondent.

29. This Writ Petition is thus allowed, with the above observations. No costs. Consequently, connected miscellaneous petition is closed.