Introduction
In a pivotal decision by the Madras High Court (‘MHC’) in Angel Label Division & Angel Zippel (HUF) v. Assistant Commissioner[i], the judiciary delved into the repercussions of non-compliance with GST filing requirements and the subsequent cancellation of GST registration. This judgment addresses the challenges faced by taxpayers in reconciling statutory obligations with financial difficulties, setting a significant precedent in the landscape of GST law enforcement.
Facts
Angel Label Division & Angel Zippel (HUF) ('petitioner') faced cancellation of their GST registration due to non-filing of returns. Subsequently, the petitioner rectified the non-compliance by updating their returns and settling the tax liabilities up to the date of cancellation. However, this settlement was delayed, leading to an accumulated interest liability of Rs. 75.84 lakhs. Of this, the petitioner initially managed to pay Rs. 7.20 lakhs, leaving a substantial outstanding balance. Faced with severe financial difficulties, the petitioner sought judicial relief to allow the payment of the remaining interest in manageable instalments.
Held
MHC allowed the petitioner to pay the remaining interest liability in instalments. It ordered that the petitioner must pay Rs. 10 lakhs towards the outstanding interest in the next twenty days. Upon receipt of this payment, the impugned bank attachment and garnishee notices for recovery would be withdrawn. The MHC ordered that the remaining balance would be paid in 11 equal monthly instalments thereafter. Any default in these payments could prompt the respondent to issue new recovery orders.
Our Analysis
Under s. 80 of the Central Goods and Services Tax Act, 2017, or the respective State GST legislations, the Commissioner of GST is empowered to allow the payment of GST in instalments. For this purpose, the taxpayer has to file an application before the Commissioner and as the section reads, it is the Commissioner’s discretion to allow the payment in instalments. However, the section clearly carves out an exception to this – GST due on a self-assessed basis (i.e., tax liability which has been computed and incurred by the taxpayer himself, and not by the GST authorities or because of some other circumstance) cannot be allowed to be paid in instalments.
The decision under analysis has created a benevolent exception to this provision. The judicial source of this exception can certainly be traced to the inherent powers of the High Court, but the application of such inherent powers to a tax law where the levy, collection, as well as recovery, are provided for in granular detail (e.g., s. 80 mentioned above) is heartening and commands value of a precedent. The decision underscores a pragmatic approach to the enforcement of tax laws, especially considering the financial hardships faced by the taxpayer.
End Note
[i] [2024] 161 taxmann.com 88 (Madras)
Authored by Rosy Gupta, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.