In a significant legal development, the Hon’ble Kerala High Court, in the matter of M/s. Hilton Garden Inn v. Commissioner of Kerala Goods and Service Tax Department and Others [WP (C) No.25069 of 2023 dated November 23, 2023], delivered a noteworthy judgment on November 23, 2023. The court allowed the writ petition, taking the stance that it is grossly unjust to impose interest when an Assessee faces hindrances in remitting tax due to technical glitches on the Goods and Services Tax Information Network (GSTIN).
Background: M/s. Hilton Garden Inn, the petitioner, obtained registration as a dealer under the Central Goods and Services Tax Act, 2017 (CGST Act) from July 1, 2017. The petitioner had multiple business verticals, each with a separate GST registration, although sharing the same GSTIN with Muthoot Skychef, a different company. Due to a technical issue in the GST network, the petitioner’s remitted GST amount did not reflect in the cash ledger on the GSTR-3B return module.
Despite the petitioner’s communication with the help desk and assurance that the remitted amount would be reflected, the GST registration was eventually canceled. Subsequently, the petitioner sought reactivation, but the Respondent directed them to approach tax authorities for grievance redressal.
When the petitioner could not file the return for July 2017, they approached the Kerala High Court through a writ petition, resulting in an interim order directing the Respondent to restore the petitioner’s registration or provide an alternative GST registration. Following this order, the petitioner filed the delayed return. While no penalty was imposed, interest was levied for the delayed tax remittance through the Impugned Order dated June 12, 2023.
Legal Issue: The primary legal question addressed by the Kerala High Court was whether interest could be imposed when a delay in tax remittance is caused by technical issues on the GST portal.
Court’s Decision: The Hon’ble Kerala High Court, in WP(C) No. 25069 of 2023, issued the following key determinations:
- Inequity of Interest Imposition: The court opined that it is inherently unfair to impose interest when the Assessee faces technical issues preventing the remittance of tax without a valid GSTIN. Recognizing the impossibility of remitting tax without a functional GSTIN, the court deemed the imposition of interest under such circumstances highly inequitable.
- Setting Aside the Impugned Order: The court set aside the Impugned Order, thereby relieving the petitioner from the burden of interest for the period of delay caused by technical issues on the GST portal.
- Granting Liberty for Penalty Imposition: The court granted the liberty to impose a penalty for the delay in payment of GST after the 20th day from December 26, 2017, the date when the petitioner regained access to the portal. However, for subsequent months, the petitioner was held liable to pay interest for any delays in tax remittance.
Conclusion: The Kerala High Court’s judgment in the case of M/s. Hilton Garden Inn establishes a crucial precedent, emphasizing the need for fairness and practicality in tax assessments, particularly when technical glitches hinder compliance. This decision strikes a balance between taxpayer rights and regulatory requirements, ensuring that undue hardships are not imposed on Assessees facing genuine obstacles in the GST remittance process.
