The Goods and Services Tax Appellate Tribunal (GSTAT), Raipur, has held that depositing sufficient money in the Electronic Cash Ledger before the due date did not, under the law applicable to the periods in dispute, amount to payment of the corresponding GST liability. 

The Bench of Pradeep Kumar Vyas (Judicial Member) and Chandra Bhushan Singh (Technical Member) has observed that the relief introduced through the July 10, 2024 amendment to Rule 88B(1), excluding qualifying cash ledger balances from interest computation, could not be applied retrospectively to the earlier tax periods involved in these appeals.

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The bench observed that interest continued until the ledger was debited against the liability while filing the delayed GSTR-3B returns.

The appellant, a registered manufacturer of iron and steel products, challenged interest demands relating to financial years 2017-18, 2018-19 and 2019-20. The third demand covered April to November 2019, although the appeal papers described the period as FY 2019-20.

Some monthly GSTR-3B returns had been filed after their prescribed due dates. However, for the disputed component of the demands, the company maintained that sufficient amounts had already been deposited in its Electronic Cash Ledger on or before the respective due dates and remained available until the returns were filed.

Following scrutiny under Section 61, the tax authorities issued ASMT-10 notices on January 14, 2020, followed by DRC-01 notices on February 7, 2020. The adjudicating authority confirmed the interest demands on March 7, 2020.

The Joint Commissioner (Appeals), State Tax, Bilaspur, subsequently dismissed the company’s first appeals through orders dated December 14, 2020.

The aggregate interest originally confirmed was ₹28,70,784. The company admitted and stated that it had paid ₹3,577, attributable to amounts deposited after the applicable due dates. The remaining ₹28,67,207 was disputed before the Tribunal.

The company argued that interest under Section 50 is compensatory and cannot continue for a period during which the Government already possesses the money required to discharge the tax liability.

It relied on challans, Challan Identification Numbers and cash ledger entries to establish that the funds had reached the Government’s authorised banking channel before the due dates.

According to the appellant, delayed filing of GSTR-3B could not make tax remain unpaid when the corresponding money was already with the Government. It also disputed the first appellate authority’s description of the Electronic Cash Ledger as an electronic wallet.

The company relied principally on the Madras High Court’s decision in Eicher Motors Ltd. and the Gujarat High Court’s decision in Arya Cotton Industries, which supported its position on the effect of timely cash ledger deposits.

It further argued that the 2024 amendment to Rule 88B(1) was clarificatory or curative and should therefore govern earlier periods as well.

At the final hearing, the department accepted that the disputed amounts remained continuously available under the relevant tax heads in the Electronic Cash Ledger from the respective due dates until their eventual debit.

The arithmetic was also undisputed, apart from the competing legal positions on whether an earlier deposit constituted payment.

The controversy therefore turned on a specific question: Does GST interest stop when money enters the Electronic Cash Ledger, or when that money is debited against the particular return liability?

The Tribunal held that the statutory scheme distinguishes between depositing money and using that money to discharge an identified liability.

It explained that Section 49(1) treats money credited to the Electronic Cash Ledger as a deposit. Section 49(3) separately permits the available balance to be used for making payments towards tax, interest, penalty, fees or other dues.

Rule 85(3), the Bench noted, identifies debit of the electronic cash or credit ledger as the mechanism through which liability declared in a return is paid, with a corresponding credit to the electronic liability register.

The Tribunal accepted that a Challan Identification Number establishes receipt of funds by the Government. However, it held that this does not, by itself, establish appropriation of those funds towards a particular self-assessed monthly liability.

Accordingly, for the periods before it, the Bench concluded that sufficient cash ledger credit did not terminate interest unless the amount was debited against the relevant tax liability.

The Tribunal placed particular emphasis on the retrospective proviso to Section 50(1), which describes the relevant tax component as the portion paid by debiting the Electronic Cash Ledger.

It also relied on Rule 88B(1), inserted in 2022 with deemed effect from July 1, 2017. That rule links interest on the cash ledger portion to the period of delay in filing the return beyond its due date.

The appellant argued that the Section 50 proviso principally resolved the dispute over charging interest on gross liability or only the net cash component. The Tribunal nevertheless held that this explanation did not sufficiently account for Rule 88B(1), which addressed both the interest base and the duration of interest.

The Bench confined its determination to the disputed cash component. It did not extend its ruling to a general proposition that interest must also be charged on the electronic credit ledger portion in an ordinary delayed-return case.

The Bench expressly recognised divergent High Court rulings on the issue.

It acknowledged that Eicher Motors Ltd. and Arya Cotton Industries supported the view that interest should not continue once the required money had reached the Government through timely cash ledger credit.

However, it preferred the reasoning concerning cash deposits in RSB Transmissions (India) Ltd. and Sincon Infrastructure (P) Ltd., finding that reasoning more consistent with the distinction between deposit and discharge under the statutory provisions. It also referred to India Yamaha Motor (P) Ltd. in discussing the return-payment mechanism.

The Tribunal recorded that no binding Supreme Court decision resolving the precise cash-ledger-credit-versus-debit controversy had been brought to its notice. It further noted that the Chhattisgarh High Court had not decided that precise question.

Although the jurisdictional High Court’s decision in Abis Export India Private Limited recognised the retrospective operation of the Section 50(1) proviso, the Tribunal clarified that it did not directly resolve the present deposit-versus-debit dispute.

The appellant sought the benefit of the proviso inserted in Rule 88B(1) through Notification No. 12/2024-Central Tax dated July 10, 2024.

That proviso excludes an amount from interest calculation where it was credited to the Electronic Cash Ledger on or before the due date and continued to remain there until debit when filing the delayed return.

The Tribunal held that the amendment contained no express retrospective or deemed commencement provision. It contrasted this with the 2022 notification introducing Rule 88B, which expressly gave that rule retrospective effect from July 1, 2017.

The Bench also considered the materials of the 53rd GST Council meeting. According to the Tribunal, those materials proceeded on the understanding that the existing provisions required interest despite an earlier cash ledger deposit, while proposing relief because charging interest in such circumstances did not appear fair.

The Tribunal therefore treated the 2024 proviso as substantive relief rather than merely a clarification of the earlier law, and declined to apply it to the periods in dispute.

The Tribunal found that the adjudicating authority had failed to comply with Section 75(4). The company had specifically requested a personal hearing in its DRC-06 replies, but no hearing was granted before the original orders were passed.

Nevertheless, the Bench declined to remand the matters in the particular circumstances of these appeals.

It noted that the relevant facts, continuous availability of cash ledger balances and computations were undisputed. The surviving legal controversy had been fully argued before the Tribunal, and no additional fact, document or defence had been identified that could be presented upon remand.

The Tribunal consequently held that remand would serve no substantive purpose.

It also rejected the challenge to the notice proceedings. Although the parties disputed whether the departmental communication dated February 7, 2020 formally accompanied DRC-01, the appellant had received that communication and submitted detailed replies addressing the basis and computation of the demands. The Bench found no resulting prejudice warranting interference.

The Tribunal rejected the contention that late fee under Section 47 was the exclusive consequence of delayed return filing.

It held that late fee concerns the procedural default in furnishing a return, whereas Section 50 interest concerns delayed statutory payment. The two provisions operate in distinct fields.

The company’s broader submissions about GST portal difficulties and delayed supplier filings also did not alter the result. The Tribunal recorded that no month-specific technical failure had been shown to change the statutory due dates or suspend the obligation in these appeals.

It clarified that its decision did not depend on any finding of wilful delay, since Section 50 interest is statutory and is not penal in character.

The Tribunal upheld disputed interest of ₹7,73,641 for FY 2017-18, ₹18,63,871 for FY 2018-19, and ₹2,29,695 for the period described as FY 2019-20.

It dismissed all three appeals and rejected the consequential refund claims founded on the argument that the interest demands were unlawful.

However, the department was directed to give proper appeal-wise and demand-wise credit for all amounts already paid, deposited, recovered or adjusted. These included the admitted interest, deposits made during the earlier High Court proceedings and departmental recoveries or adjustments reflected in the record.

The Tribunal expressly directed that there must be no double recovery. Any excess emerging solely from reconciliation must be dealt with under the applicable provisions of the GST law. No costs were awarded.

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