Court :
Supreme Court of India
Brief :
The Hon'ble Supreme Court in the case of M/s Grapes Digital Private Limited v. Principal Commissioner, CGST, Delhi & Ors. [Special Leave Petition (Civil) Diary No (s.) 35601/2024 dated September 06, 2024] granted leave and admitted SLP against Delhi High Court Judgment wherein it was held that the department can adjust interest on the tax amount paid by the Assessee which had had already been sanctioned for refund.
Citation :
Special Leave Petition (Civil) Diary No (s.) 35601/2024 dated September 06, 2024
The Hon'ble Supreme Court in the case of M/s Grapes Digital Private Limited v. Principal Commissioner, CGST, Delhi & Ors. [Special Leave Petition (Civil) Diary No (s.) 35601/2024 dated September 06, 2024] granted leave and admitted SLP against Delhi High Court Judgment wherein it was held that the department can adjust interest on the tax amount paid by the Assessee which had had already been sanctioned for refund.
Facts:
M/s Grapes Digital Private Limited ("the Petitioner") was engaged in the business of providing services of digital media management, online advertisement, management of advertisement project, sale and procurement of space and slots for advertisement on social media, planning and management of advertisement campaign and other business support services.
During the period the period of July, 2017 till March, 2018, the Petitioner exported its services under the Letter of Undertaking ("LUT") without payment of the Integrated Goods and Service Tax. In order to avoid the blocking of its funds by payment of IGST on Reverse Charge Mechanism ("RCM"), the Petitioner refrained from depositing such tax, which it was liable to be paid under the Integrated Goods and Services Tax Act, 2017 ("the IGST Act").
The Petitioner claimed that in the month of August, 2018 it deposited IGST for its input supplies on RCM basis and export of services by utilizing the Input Tax Credit ("ITC") that was accumulated on account of payment of IGST on input supplies. Subsequently, it filed for IGST refund.
The refund claim was accepted however, it was held that the interest due on delayed payment of IGST on RCM, on inputs as well as on the interest liability on delayed payment of IGST, was required to be adjusted under Section 73 of the Central Goods and Services Tax Act, 2017 ("the CGST Act") read with Rule 50 of the Central Goods and Service Tax Rules, 2017 ("the CGST Rules").
The Petitioner filed a refund application to obtain a refund of the IGST paid on exports, which was accepted by the Adjudicating Authority. However, the Adjudicating Authority adjusted the interest due on the delayed payment of IGST on imports and exports against the refund claim. Hence, aggrieved by the said order, the Petitioner filed the writ petition before, the Hon'ble Delhi High Court.
The Hon'ble Delhi High Court inW.P. (C) No. 2918/2021 ("the Impugned Order") held as under:
High Court directed payment of refund with applicable interest and rejected the challenge to adjustment of interest.
Hence, aggrieved by the Impugned Order, the Petitioner filed Special Leave Application before the Hon'ble Supreme Court.
Issue:
Whether adjustment of interest permissible against the claim for an IGST refund?
Held:
The Hon'ble Supreme Court in Special Leave Petition (Civil) Diary No (s.) 35601/2024 granted leave and admitted SLP against the Impugned Order.
Our Comments:
Relevant Provisions:
Section 75 of the CGST Act discusses the "General provisions relating to determination of tax". Section 75(12) of the CGST Act states that anything contained in Section 73 of the CGST Act or Section 74 of the CGST Act , where any amount of self-assessed tax in accordance with a return furnished under Section 39 of the CGST Act remains unpaid, either wholly or partly, or any amount of interest payable on such tax remains unpaid, the same shall be recovered under the provisions of Section 79 of the CGST Act.
Section 79 discusses 'Recovery of Tax'. Section 71(1)(a) states that where any amount is payable by a person to the Government under any of the provisions of the CGST Act or the CGST Rules made thereunder is not paid, the proper officer shall proceed to recover the amount by deducting or may require any other specified officer to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other specified officer.
The key takeaways from the Supra judgment are as follows:
Further, it has been established through various judgments by the Hon'ble Supreme Court that in cases where the outcome is revenue-neutral, neither tax nor interest is payable:
One was in the CESTAT Mumbai in the case Jet Airways (I) Ltd Vs Commissioner of Service Tax [2016 (44) S.T.R. 465 (Tri. - Mumbai)] affirmed by the Supreme Court in 2017 (7) G.S.T.L. J35 (S.C.): The case was with respect to demand of service tax under RCM on online information and database access or retrieval services. It was observed that service tax payable under RCM, being available as credit for discharging tax on its output service, the entire issue is revenue neutral and the demand, interest and penalty is not sustainable.
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