GST Update

 Desk of CA. Praveen Sharma – 939 Series (CAPS) 

In a significant ruling, the Bombay High Court decided the matter at the admission stage itself with the consent of both parties.

The case arose out of a lease granted on 25 March 2021 for Plot No. 777 at MIHAN, Nagpur, for ?40.37 crore. Later, at the request of the petitioners, the lease was transferred in November 2024 after payment of ?11.45 crore towards transfer charges and other dues. The payment was made under protest.

A major dispute concerned ?3.94 crore charged as interest on delayed payment of GST amounting to ?7.26 crore. The petitioners challenged this interest recovery and sought a refund.

The petitioners argued that the respondent, being the service provider, was legally obligated to issue a tax invoice within the prescribed time and pay GST accordingly. However, the invoice was issued only in July 2024. Without issuance of a valid tax invoice, the petitioners contended that they could not have discharged the GST liability earlier. Despite this, the respondent demanded GST along with interest through a letter dated 4 March 2024, calculating interest from March 2021 to March 2024.

The Court observed that the responsibility to issue the invoice and ensure timely GST compliance lay with the respondent. The failure of the respondent to fulfill this statutory obligation could not justify shifting the burden of interest onto the petitioners.

While examining the lease terms, the Court noted that although the lessee was required to bear applicable taxes, the agreement did not authorize recovery of GST or interest without proper issuance of a tax invoice.

Accordingly, the High Court allowed the petition and directed the respondent to refund ?3.94 crore within six weeks. In case of default, interest at 18% per annum would apply. The Court also clarified that the respondent is at liberty to recover the amount from the concerned official. No order as to costs.

LINK:CA. Praveen Sharma on Linkedin

Regards
CAPS