Facts of the Case

The petitioner, M/S Eureka Forbes Limited, challenged a notice dated 07.02.2020 (Order No. 04/DRC07/SD3) and consequent recovery in Form GST DRC-07, demanding Rs. 42,68,333/- towards interest on delayed payment of tax. The petitioner had responded on 18.02.2020 explaining that the tax for the periods in question had already been paid, on or before the due date, through both the Electronic Cash Ledger and the Electronic Credit Ledger, so that delayed filing of returns should not attract interest on tax already discharged. Despite this reply, the impugned order and recovery notice were passed.

Issues Involved

  1. Whether interest under Section 50 of the CGST/KGST Act, 2017 could be levied where the tax was deposited through both the Electronic Cash Ledger and Electronic Credit Ledger on or before the due date, but the return was filed after the due date.

Petitioner's Arguments

  • The petitioner had already paid the tax on or before the due date, through both the cash and credit ledgers, as evidenced in the reply at Annexure D dated 18.02.2020.
  • The demand for interest on delayed tax, on the ground that returns were filed after the due date, was contrary to the proviso to Section 50 and the ratio in M/s. Bangalore International Airport Limited vs. Union of India (WP No. 6502/2020, decided 13.11.2025).

Respondent's Arguments

  • The respondents contested the petition through counsel, maintaining the impugned order and recovery notice notwithstanding the petitioner's detailed reply demonstrating timely deposit of tax.

Court Order / Findings

  • Applying the reasoning of its own coordinate bench in Bangalore International Airport Limited vs. Union of India, the Court reiterated that interest under the proviso to Section 50(1) is confined to the portion of tax paid by debiting the electronic cash ledger, and does not extend to tax covered by Input Tax Credit already available in the Electronic Credit Ledger.
  • Since, for the tax periods 2017-18 and 2018-19, the petitioner had paid tax through both the Electronic Cash Ledger and Electronic Credit Ledger on or before the due date, as detailed in its reply, the demand for interest treating the entire amount as delayed was unsustainable.
  • The impugned order dated 18.02.2020 and the consequent recovery notice in Form GST DRC-07 were quashed.

Important Clarification

  • Interest under Section 50 for delayed filing of returns cannot be levied on the portion of tax deposited on or before the due date through the Electronic Cash Ledger and Electronic Credit Ledger, even if the return itself is filed after the due date.
  • This affirms and applies the ratio of Bangalore International Airport Limited, Eicher Motors, and Arya Cotton Industries: interest is compensatory for delayed availability of funds to the Government, not a penalty for delayed paperwork where funds were already available.

Sections Involved

  • Section 50, CGST Act, 2017 — interest on delayed payment of tax, including the proviso restricting interest to the cash-ledger component.
  • Section 49, CGST Act, 2017 — payment of tax through the electronic cash and credit ledgers.

Decision – In Favour of

Assessee. The interest demand and recovery notice were quashed in their entirety.

Case Details

Court: High Court of Karnataka at Bengaluru
Case No.: Writ Petition No. 6869 of 2020 (T-RES)
Neutral Citation: NC: 2025:KHC:46564
Coram: Hon'ble Mr. Justice S.R. Krishna Kumar
Date of Order: 13.11.2025

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