S. 49 CGST Act | Once Penalty Deposited In Electronic Cash Ledger Is Credited To Govt, Tax Liability Gets Discharged: Gujarat High Court

The Gujarat High Court has reiterated that once a penalty, interest, fee etc., deposited by a registered person in his electronic ledger is credited to the government's account, the tax liability is discharged to the extent of the deposit made to the Government. Referring to Section 49 (Payment of tax, interest, penalty and other amounts) of the CGST Act and a decision of the division bench Justice Divyesh A Joshi said:"Therefore, considering the Section 49 of the Central Goods and Services Tax Act, 2017 and para-24 of Arya Cotton Industries (supra) which clearly go onto show that the amount once debited from the person concerned and credited into the Government account, in that event, the tax liability of such registered person stands discharged on the said date". Section 49(12) of the CGST Act states that notwithstanding anything contained in the Act, the Government may, on the recommendations of the Council, subject to such conditions and restrictions, specify such maximum proportion of output tax liability under this Act or under the Integrated Goods and Services Tax Act, 2017 which may be discharged through the electronic credit ledger by a registered person or a class of registered persons, as may be prescribed. Explanation (a) states that the date of credit to the account of the Government in the authorised bank shall be deemed to be the date of deposit in the electronic cash ledger. The Superintendent (AE) of Central GST & Central Excise had moved the high court seeking setting aside of an October 25, 2024 high court order granting bail to a man causing profiting money through allegedly illegal activities thereby causing loss to government exchequer. The petitioner argued that in the bail matter, the accused had deposited Rs. 60 Lakh and had given an undertaking to deposit Rs 90 Lakh in 7 days. Based on this undertaking the high court had granted bail. The petitioner argued that the accused-respondent had not strictly adhered with the terms and conditions.It was submitted that accused had deposited Rs. 90 Lakh in his own company's electronic cash ledger, but did not get it debited from its Electronic Cash Ledger through Form GST DRC-03, and thus, such credit amount in Electronic Cash Ledger of the accused cannot be considered as the amount credited to the Government Exchequer.It was argued that merely depositing the amount in the Electronic Cash Ledger would not infer that the amount has been automatically credited to the CGST Department.The accused argued that the Rs. 90 Lakhs was withdrawn on 01.11.2024 through cheque, and it was debited from the account of the petitioner and credited in the account of the Government out of which Rs.45 Lakhs had gone into the CGST portal and rest Rs.45 lakhs had gone into the SGST portal. Reliance was placed on Arya Cotton Industries Vs. Union of India (2024) where a division bench had held that amount deposited by the party by generating challan will get credited into the account of the Government immediately upon deposit. Later on the same shall be adjusted against tax payable as per the Return filed by debiting the Electronic Cash Ledger, and therefore, the tax liability of the registered person will be discharged to the extent of the deposit made to the Government. "As per the Scheme of the Government, it is only for the purpose of accounting that the debit in electronic cash ledger will be made at the time of filing of the return otherwise the amounts get credited to the account of the Government immediately upon the deposit. Therefore, once the amount deposited by the petitioner is credited to the account of the Government, the tax liability of such registered person stands discharged on the said date subject to setting off by debit in electronic cash ledger...therefore, the petitioner cannot be made liable to pay the interest from the date of deposit in the account of the electronic cash ledger till the date of filing of the return," the division bench had said.Considering the judgment the court held that in the present case order granting bail to the accused, he was asked to deposit the stated amount on or before November 2, 2024. The court said that it transpired from the Electronic Cash Ledger that the accused had deposited the amount in the respective departments of the Government on November 1, 2024 observing that the data could be tallied with the copy of the ledger for the period between 01.04.2024 to 29.11.2024. The court observed that there was no breach of the terms and conditions by the accused-respondent. "Further, the apprehension with regard to the said amount lying in a particular place in a portal and the respondent no.1 herein is in a position to use and utilize the said amount at any given point of time cannot be considered as the respondent no.1 is ready to file undertaking to the effect that he will not use the said amount and/or will not claim refund for the same. Further, it is well within the knowledge of one and...

S. 49 CGST Act | Once Penalty Deposited In Electronic Cash Ledger Is Credited To Govt, Tax Liability Gets Discharged: Gujarat High Court

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