2026-VIL-751-GUJ
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SGST High Court Cases

GST - Interest on Delayed Filing of Returns - Liability when tax already deposited in Electronic Cash Ledger - Scope of Section 50 of CGST Act, 2017 and Proviso to Rule 88B of CGST Rules, 2017 - Petitioner filed belated returns for certain months and deposited the full amount of tax in the Electronic Cash Ledger before the due date for filing returns. Subsequently, an audit objection was raised regarding the interest computed and a notice was issued demanding interest on the basis of belated filing of returns - Rejection of refund application by claiming prospective application of proviso to Rule 88B - Whether interest can be levied on tax already deposited in the Electronic Cash Ledger for the period between the date of deposit and the date of filing of belated return – HELD - The interest on delayed payment of tax can only be levied from the due date of payment of tax till the deposit of such tax in the electronic cash ledger. When an amount has been deposited in the Electronic Cash Ledger on or before the due date for filing of the return and is later debited for payment of tax while filing the return after the due date, the deposited amount shall not be taken into consideration while calculating interest for the delayed period. The principle laid down in the judgment of this Court in Arya Cotton Industries case established that the amount lying in the electronic cash ledger represents advance tax already paid and cannot be subject to interest for the period after deposit – Secondly, the Proviso to Rule 88B of the CGST Rules was introduced by the GST Council in its 53rd meeting dated 22.06.2024 specifically to implement the ratio of this Court's judgment in Arya Cotton Industries. The respondent authority acted arbitrarily and with total non-application of mind by denying the refund application on the sole ground of prospective application of the Rule amendment, while ignoring the Court's decision which had already decided the issue in favor of the taxpayer - The impugned order rejecting the refund application is arbitrary and suffers from non-application of mind – The impugned order and the recovery notice is quashed and set aside. The respondent is directed to grant refund of excess amount of interest in terms of the refund application filed by the petitioner along with statutory interest – The petition is allowed
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