2026-VIL-173-GSTAT-BLR
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SGST Tribunal

GST - Interest under Section 50 of CGST Act, 2017 on differential tax paid through debit notes issued under Section 142(2)(a) on upward price revision of pre-GST clearances - Respondent cleared goods under the erstwhile regime and, pursuant to contractual price escalation, issued debit notes and supplementary invoices after the GST regime came into effect and voluntarily discharged the differential tax. The adjudicating authority demanded interest under Section 50 - FAA set aside the demand holding that the due date for discharging tax on supplementary invoices is the 20th of the month following their issuance - Whether interest under Section 50 is payable on differential tax paid through debit notes issued under Section 142(2)(a) for a retrospective upward price revision - HELD - The Supreme Court in Steel Authority case held that where a price escalation has retrospective operation, the later finalised price becomes the true value of the goods even at the time of original removal - The deeming fiction in Section 142(2)(a) serves a purely procedural and administrative purpose and provides the gateway for the taxpayer to report the differential transaction, issue a GST-compliant debit note and discharge tax through the portal. It is merely a transitional bridge and not a fresh charging event or a legal time-machine that erases the time-value of money enjoyed by the assessee in the interim period, so the enhanced value relates back to the original clearance period and mandatory interest under Section 50 attaches automatically - Just as Rule 8 of Central Excise could not shift the accrual date, Section 39(7) and Section 34(4) are purely procedural and administrative reporting mechanisms for the electronic portal. They provide the gateway to report transactions and file GSTR-3B, but they do not rewrite economic history or alter the original time when the value accrued - Whether a price is subject to a contractual escalation clause or formal provisional assessment, an upward price revision is retrospective, and the tax was legally due from inception - The findings of the FAA on non-sustainability of interest are set aside and the demand of interest under Section 50 is restored and upheld – The appeal is partly allowed - Penalty under Section 122 of CGST Act, 2017 - Bona fide belief in transitional provisions - Differential tax voluntarily paid on price revision - The adjudicating authority imposed penalty under Section 122 on the Respondent in respect of differential tax paid through debit notes issued under Section 142(2)(a), and the first Appellate Authority dropped the penalty. The Revenue contended that the penalty was dropped solely because no tax was deemed due, which is flawed as tax was due from the date of actual supplies - Whether penalty under Section 122 is imposable on the Respondent - HELD - The differential tax liability did not arise from any suppression of facts, fraud, wilful misstatement or evasion of tax, but purely out of a contractual price escalation clause during the legislative transition from the Central Excise regime to GST. The applicability of Section 142(2)(a) and the effect of supplementary invoices on pre-existing contracts involved intricate questions of statutory interpretation, and the Respondent acted under a bona fide belief regarding the transitional mechanism. Penalties under fiscal statutes are designed to punish deliberate infractions or contumacious conduct, and in the absence of suppression or deliberate non-compliance, and given that the differential tax was voluntarily discharged upon finalisation of prices, imposition of penalty under Section 122 is unwarranted - The quashing of penalty by the first Appellate Authority is upheld and the appeal of the Revenue is partly allowed only to the extent of restoring the interest demand
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