Penalty and interest cannot be levied when assessee has made payment of tax timely

Case Title: Bhole Baba Milk Food Industries Ltd. vs Union of India

Court: High Court of Allahabad

Petition No.: Writ Tax No. 1431 of 2023

Category of Dispute: Interest and Penalty – Delay in Filing GSTR-3B

Date of Judgment: April 16, 2024

Relevant Sections: Section 47 and Section 50 of the U.P. GST Act, 2017

Facts of the Case

[Para 2–5]

• The petitioner filed a writ seeking permission to file GSTR-3B for April 2023 within time and for a refund/adjustment of ₹1,07,710.51 (interest) and ₹100 (penalty) debited from its electronic cash ledger.
• The petitioner generated a corporate e-payment challan for ₹2,08,30,721 on 19.05.2023, which was authorized by the State Bank of India on 25.05.2023.
• There was a dispute regarding the date the bank remitted the amount to GSTN. The bank claimed it was done on 25.05.2023; GSTN asserted it was later.

Questions in Consideration

[Para 6–7]

1. Whether the petitioner can be held liable for interest and penalty when the payment was initiated within the due date, but remittance was delayed by the bank.
2. Whether Section 47 (late fee) and Section 50 (interest) can apply when there is no fault of the assessee in timely compliance.

Observation of the Court

[Para 6–8]

• The court acknowledged that the petitioner initiated the tax payment in time and the amount was debited from its bank account within the due date.
• The delay occurred solely due to the bank’s processing, not due to the petitioner’s conduct.
• Therefore, the levy of interest and penalty was unwarranted under Sections 47 and 50 of the U.P. GST Act.
• The court also noted that the petitioner should not suffer for errors attributable to the bank or GSTN.

Judgement of the Court

[Para 9]

• The writ petition was disposed of by allowing the petitioner to adjust the interest and penalty amount deposited under protest against future tax liability for April 2024 onwards.
• No further interest shall accrue on this adjusted amount.
• The court advised the GSTN and banks to improve real-time credit mechanisms to avoid such disputes.

Between Fine Lines

• Taxpayers cannot be penalized for technical or banking delays if the payment process is initiated within the statutory timeline.
• GSTN and banks must coordinate better to reflect real-time transactions.
• Section 47 and 50 impose liabilities only when the delay is attributable to the assessee.
• Courts uphold fairness where statutory compliance is made in time.
• Refunds may be permitted by way of adjustment where wrongful debits have occurred.

Summary of Referred Cases

No external cases were cited or referred in this judgment.

Takeaway

“No Penalty for Timely Compliance Marred by Bank Delay”