Availability of balance in cash ledger can’t be assumed as payment of tax unless it is debited: HC

Case Details: India Yamaha Motor (P.) Ltd. v. Assistant Commissioner - [2022] 142 taxmann.com 369 (Madras)

Judiciary and Counsel Details

• • Dr. Anita Sumanth, J.
  • N. Prasad for the Petitioner.
  • N. Santhanaraman, Sr. Standing Counsel for the Respondent.

Facts of the Case

The petitioner failed to file GST returns on time and the department calculated interest on net GST liability after adjusting input tax credit (ITC) available in electronic credit ledger as per section 50 of CGST Act, 2017. It contended that interest could not be levied on tax paid by cash as it had sufficient balance in cash ledger and there was no revenue loss to government. It filed writ petition to quash order demanding interest on net cash liability.

 High Court Held

The Honorable High Court observed that mere availability of credit could not be assumed for payment of tax liability unless it was debited for discharging liability. The petitioner argued that no interest need be levied on the strength of the balances lying to its credit in the Electronic Cash Ledger. However, this argument shall not be sustainable as deposits standing to credit do not necessarily imply that resources to back credit up are within reach of Department. Therefore, the Court held that interest would be payable on tax paid by debiting electronic cash ledger in respect of delayed filing of returns and availability of balance in cash ledger could not be assumed as payment of tax.