Facts of the Case

The petitioner, Bangalore International Airport Limited, challenged a notice dated 17.03.2020 (bearing DIN 20200357YW00005N4070) demanding interest of Rs. 1,33,21,214/- for delayed payment of tax for the periods July 2017, August 2017, September 2017, and February 2018. The petitioner had responded on 11.03.2020, explaining that the cash component of tax had been deposited on or before the due date, and the remaining portion was available in its Electronic Credit Ledger as unutilised Input Tax Credit, even though returns were filed after the due date. Despite this reply, the impugned interest notice was issued treating the entire tax, including the ITC portion, as delayed.

Issues Involved

  1. Whether interest under Section 50 of the CGST Act, 2017 is leviable on the portion of tax that was available, throughout, as Input Tax Credit in the Electronic Credit Ledger, merely because the return declaring it was filed belatedly.
  2. Whether interest applies only to the cash component of tax paid after the due date.

Petitioner's Arguments

  • The proviso to Section 50 makes a taxpayer liable to pay interest only for delayed tax payment made by debiting the electronic cash ledger, and this would not extend to utilisation of credit from the Electronic Credit Ledger.
  • Reliance was placed on Eicher Motors Ltd. vs. Superintendent of GST, Tamil Nadu State Transport Corporation, Arya Cotton Industries, Symphony Limited, and Refex Industries — a consistent line of authority holding interest liability stops accruing once the amount is deposited in the electronic cash ledger.

Respondent's Arguments

  • The respondents reiterated the objections filed, contending there was no merit in the petition and that it was liable to be dismissed, effectively supporting a literal reading of Section 50(1) that treats delayed filing itself, regardless of ITC availability, as attracting interest.

Court Order / Findings

  • The Court extensively analysed Sections 39, 49, and 50 of the CGST Act along with Rules 61 and 87 of the CGST Rules, holding that the date of credit to the Government's account in the authorised bank is deemed the date of deposit in the electronic cash ledger, and that ITC availed and lying in the credit ledger represents funds already with the Department.
  • Following Eicher Motors Ltd. and the Gujarat High Court's ruling in Arya Cotton Industries, the Court held that Section 50, being intended for a situation of 'deprival' of revenue, cannot apply where the ITC was available all along to the credit of the Department — such availability is neither belated nor delayed.
  • The retrospective proviso to Section 50(1), restricting interest to the cash-ledger-paid portion, was held clarificatory and applicable to the facts.
  • The Court declined to follow the contrary views of the Jharkhand High Court (RSB Transmission) and Telangana High Court (Megha Engineering).
  • The impugned interest notice dated 17.03.2020 was quashed as illegal, arbitrary, and contrary to Sections 49 and 50 of the CGST Act.

Important Clarification

  • Interest under Section 50 for delayed filing of returns applies only to the portion of tax discharged through the Electronic Cash Ledger after the due date, not to the portion covered by Input Tax Credit sitting in the Electronic Credit Ledger since before the due date.
  • The Electronic Credit Ledger functions as funds already available to the Department's credit; charging interest on it would convert a compensatory levy into a penalty.
  • ITC remains subject to reversal through the statutory mechanism if later found ineligible — availability of ITC does not itself immunise wrongly-availed credit, but that is a separate question from interest on genuinely available credit.

Sections Involved

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

Decision – In Favour of

Assessee. The interest demand notice was quashed in its entirety.

Case Details

Court: High Court of Karnataka at Bengaluru
Case No.: Writ Petition No. 6502 of 2020 (T-RES)
Neutral Citation: NC: 2025:KHC:46565
Coram: Hon'ble Mr. Justice S.R. Krishna Kumar
Date of Order: 13.11.2025

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