In the case involving M/s. Eicher Motors Limited versus the Superintendent of GST and Central Excise, the Madras High Court has ruled that no interest should be imposed if the Goods and Services Tax (GST) is deposited within the stipulated due date, even if the GSTR-3B filing is delayed.
The petitioner, a well-known manufacturer specializing in mid-sized motorcycles (250-750CC) identified by the HS Code 8711, operates under the prestigious brand Royal Enfield. The company’s manufacturing unit is located in Tamil Nadu, with its global headquarters situated in Chennai. Eicher Motors Limited manages three manufacturing facilities at Oragadam, Vallam, and Tiruvottiyur.
The petitioner conducts its business through dealers, distributors, and an extensive network of over 1000 large stores and 900 studio stores in major cities. Additionally, they have more than 800 authorized dealers in India alone.
For the period spanning from the fiscal year 2017-18 to 2023, the petitioner has diligently contributed a total of Rs.15,033 Crores in GST. Out of this amount, Rs.10,871 Crores were remitted using Input Tax Credit, while Rs.4,162 Crores were paid in cash.
On the GST introduction date, i.e., 01.07.2017, the petitioner possessed an accumulated balance of Rs.33,87,10,445 as CENVAT credit, awaiting transition into the GST regime. However, due to system readiness issues and technical glitches in the GST Common Portal during the initial GST implementation stages, the Department extended the due dates for filing Form GST TRAN-1 multiple times.
Consequently, the petitioner submitted their Form GST TRAN 1 on 16.10.2017 under Sections 140(1) and 140(3) of the Goods and Services Tax Act, 2017 (referred to as the “GST Act”).
For reasons unknown, the entire credit intended for transition was not promptly made available as Input Tax Credit (ITC) upon the submission of Form GST TRAN-1 on 16.10.2017. Additionally, as the complete amount of Rs.33,87,10,445 was not reflected in the Electronic Credit Ledger, the petitioner was unable to file the monthly return in Form GSTR-3B for July 2017 by the due date, i.e., 28.08.2023.
This failure to file Form GSTR-3B for July 2017 had a cascading effect, preventing the petitioner from submitting GSTR-3B for subsequent months spanning August 2017 to December 2017. Section 39(10) of the CGST Act further exacerbated the situation, prohibiting an assessee from filing returns for the subsequent period if the returns for the previous tax period were not furnished.
Despite this filing restriction, the petitioner ensured timely payment of tax dues, diligently discharging the GST liability for the period from July 2017 to December 2017. The tax amounts were deposited into the Electronic Cash Ledger under the appropriate heads, namely CGST, SGST, and IGST, into the Government account within the due date for each respective month.
The petitioner faced a challenge when the entire accumulated credit amount was not transitioned initially, prompting them to submit a revised GST TRAN-1 on 27.12.2017. Following this filing, the transitioned credit amount appeared in the petitioner’s Electronic Credit Ledger, enabling the filing of Form GSTR 3B for July 2017.
With the successful submission of the July 2017 return, the GST portal allowed the petitioner to file returns for the subsequent months. Consequently, the petitioner completed the filing of all returns from July 2017 to December 2017 on 24.01.2018.
Six years later, the petitioner received a Recovery notice dated 16.05.2023, demanding an interest payment of Rs.23,76,26,657 for the alleged belated GST payment from July 2017 to December 2017. The recovery proceedings were initiated without issuing a show cause notice.
Despite the petitioner’s detailed response on 29.05.2023, the Department did not withdraw the recovery proceedings. In response, the petitioner challenged the Recovery notice in W.P.No.16866 of 2023. On 07.06.2023, the Court granted a stay on the recovery proceedings, contingent upon the petitioner paying 30% of the interest amount mentioned in the letter dated 16.05.2023.
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Aggrieved from the interim order dated 07.06.2023, the petitioner appealed in W.A.No.1263 of 2023 before the Hon’ble Division Bench of this Court. On 20.06.2023, the Division Bench directed the 1st respondent to review the petitioner’s representation dated 29.05.2023 and make a decision within three weeks.
Considering the findings and aligning with the legal precedent established by the Gujarat High Court in the aforementioned Vishnu Aroma case, the present case, where the tax amount has been credited to the Government before the stipulated due date, eliminates the necessity for interest payment. In light of this, the Court issues the following directives:
- The crediting of funds to the Government account will invariably take place no later than the final date for submitting monthly returns, as outlined in Section 39(7) of the Act.
- Upon payment through the generation of GST PMT-06, the amount will be promptly credited to the Government account upon deposit, satisfying the tax liability of a registered person up to the deposited amount. Subsequently, for accounting purposes only, it will be deemed credited to the Electronic Credit Ledger (ECL), as specified in Explanation (a) to Section 49(11) of the Act.
- As long as the GST collected by a registered person is credited to the Government account by the last date for filing monthly returns, the tax liability of that registered person will be considered discharged from the date of crediting. Any default in GST payment occurring after the due date for filing monthly returns, i.e., on or before the 20th of each subsequent month, will result in the registered person being liable to pay interest solely for the delayed period, by Section 50(1) of the Act.
In the perspective of the aforesaid, the impugned letter on 16.05.2023 bearing DIN 20230559TK00020650 issued by the 1st respondent and impugned order OC.No.77/2023 bearing DIN 20230759TK000000E36E dated 12.07.2023 passed by the 1st respondent are liable to be quashed. Accordingly, cancelled.
As a result, these writ petitions are granted and no costs are imposed. Accordingly, the associated miscellaneous petitions are hereby closed.
| Case Title | M/s.Eicher Motors Limited Vs The Superintendent of GST and Central Excise |
| Citation | W.P.Nos.16866 & 22013 of 2023 |
| Date | 23.01.2024 |
| Appellant | Mr Vijay Narayan, Mr Raghavan Ramabadran, Lakshmi Kumaran Sridharan |
| Respondent | Mr.V.Sundareswaran |
| Madras High Court | Read Order |
