Brief summary of the case
Court: IN THE HIGH COURT OF ORISSA AT CUTTACK
Number: W.P.(C) Nos.23508 of 2021
Petitioner: Jyoti Construction
Respondent: Deputy Commissioner of CT GST
Date of decision: 07.10.2021
Judges: The Chief Justice and Justice B.p. Routray
Petitioners had made payment of the pre-deposit (for filing of appeal) being 10% of the disputed amount (Section 107(6) of the OGST Act,) from the electronic credit ledger (ECRL) and not from electronic cash ledger (ECL).
It was noticed that the Petitioner sought to make payment of the pre-deposit by debiting the ECRL and not by electronic cash ledger. Considering this to be defective and liable for rejection of the appeal,
Petitioners Argument in High Court.
- Under Section 49(4) of the OGST Act, the amount available in the ECRL could be used for making “any payment towards output tax” under the OGST Act or the IGST Act “in such manner and subject to such conditions and within such time as may be prescribed”.
- The definition of “Output Tax” under Section 2(82) of the OGST Act which means “tax chargeable’’ under this Act on taxable supply of goods or services or both” made by the taxable person or his agent but excludes tax payable on reverse charge basis.
- On this basis, it is contended that since what in effect be the Petitioner was paying was a percentage of the output tax as defined under Section 2(82) of the OGST Act, the amount could well be paid by debiting the ECRL.
- He refers to the decision of Supreme Court of India in J.K. Synthetics Ltd. v. Commercial Taxes Officer (1994) where certain observations were made in the context of payment of interest.
- The provisions that permit the levy and collection of interest, even if construed as forming part of the machinery provision, “is substantive law for the simple reason that in the absence of contract or usage, interest can be levied under law and it cannot be recovered by way of damages for wrongful detention of the amount.”
- Section 107(6) of the OGST Act was merely a machinery provision and that it must be interpreted purposively to subserve the purpose of collecting the pre-deposit amount which could be done even by debiting the ECRL.
- He also refers to the dissenting view of Justice P.N. Bhagwati (as the learned Chief Justice of India then was) in Associated Cement Company Limited v. Commercial Tax Officer, Kota (1981) that a provision made in a statute for charging interest on delayed payment of tax must be construed as a substantive law and not a procedural provision.
- Respondent refers to Section 49(3) of the OGST Act which requires payment to be made from the ECL and Section 49(4) which refers to the ECRL
- It is submitted that the pre-deposit cannot be equated to the output tax.
- The provision to Section 41(2) of the OGST Act sets out the purposes for which the input tax credit (ITC) can be utilized. It can be utilized for payment of “self-assessed output tax as per the return”
- He also refers to Rule 85 (3) of the OGST Rules which states that “subject to the provision of Section 49 payment of every liability by a registered person as per his return shall be made by debiting the electronic credit ledger maintained as per Rule 86”.
- The appellate authority has, in the impugned order, referred to the decision in Shukhdev Singh v. Bhagatram Sardar Singh (1975), which mandates that “If Statute provides a thing to be done in a particular manner, then it has to be done only in that manner.”
- He refers to the decision of the Supreme Court of India in M/s. Jayam & Co. v. State of Tamil Nadu (2016) which held that the ITC itself is a concession and has to be utilized as per the provisions in the GST statute and not otherwise.
- When the tax payer files a return under Section 39 of the OGST Act and the Form GSTR-3B, the tax is deemed to be self-assessed. In no other cases, can ITC be utilized to discharge any liability.
- The Section 41(2) of the OGST Act limits the usage to which the ECRL could be utilised.
- It is not possible to accept the plea of the Petitioner that “Output Tax”, as defined under Section 2(82) of the OGST Act could be equated to the pre-deposit required to be made in terms of Section 107 (6) of the OGST Act, due to provision to Section 41(2) of the OGST Act.
- It cannot be debited for making payment of pre-deposit at the time of filing of the appeal in terms of Section 107 (6) of the OGST Act. It is not therefore possible to accept the plea Section 107 (6) of the OGST Act is merely a “machinery provision”.
- The judgment of the Gujarat High Court in Vinayak Trexim v. State of Gujarat is also not helpful to the Court as referred by petitioner.
- There a sum of Rs.20,00,000/- was to be refunded to the Assessee and it was directed by the High Court that this amount could be used for the purposes of pre-deposit.
- There is world of difference between an amount which is refundable and an amount which is liable to be paid as output tax.
- The petitioner was required to make payment equivalent to 10% of the disputed amount of tax arising from the order against which the appeal was filed.
- The credit ledger cannot be debited for making payment of pre-deposit at the time of filing of the appeal.
- The Court is of the view that the prayer of the Petitioner that the debiting of the ECRL made by it should be reversed is a separate.
- The Court found no merits and writ petition was liable to be dismissed.
Section 41 is now substituted by new section 41 and effective from 01.10.2022.
|Claim of input tax credit and provisional acceptance thereof |
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to [take] the credit of eligible input tax, as self-assessed, in his return GSTR 3B and such amount shall be credited [on a provisional basis] to his electronic credit ledger PMT-02|
(2) The credit referred to in sub-section (1) shall be utilised only for payment of self-assessed output tax as per the return referred to in the said sub-section
|Availment of input tax credit|
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to [avail] the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his electronic credit ledger.
(2) The credit of input tax availed by a registered person under sub-section (1) in respect of such supplies of goods or services or both, the tax payable whereon has not been paid by the supplier, shall be reversed along with applicable interest, by the said person in such manner as may be prescribed: Provided that where the said supplier makes payment of the tax payable in respect of the aforesaid supplies, the said registered person may re-avail the amount of credit reversed by him in such manner as may be prescribed.