Excess GST Already Paid Must Be Adjusted Before Reworking Interest: Madras High Court in Tvl. Sai Cashew Processors

Background of the Dispute

The matter in Tvl. Sai Cashew Processors Vs Deputy State Tax Officer (Madras High Court) arose out of a fresh assessment order dated 13.03.2025, which had been passed by the GST authority pursuant to a prior remand direction of the Madras High Court dated 16.08.2024 in WP.Nos.13066, 13068 & 13071 of 2024.

In the earlier round of litigation, the assessee had questioned three separate orders all dated 31.07.2023, 14.12.2023, and 22.12.2023. While disposing of those writ petitions, the High Court had:

  • Set aside the earlier orders, and
  • Directed the authority to pass a fresh speaking order,
  • Subject to the assessee depositing 10% of the disputed tax.

Complying with these directions, the assessee subsequently deposited amounts towards the tax demand. However, in the order now challenged, the department:

  • Acknowledged certain tax payments,
  • Noted an excess tax payment of ₹1,73,365, yet
  • Also proceeded to compute and demand interest under Section 50(1) and impose penalty under Section 73 of the GST Act, 2017,
  • Without properly giving effect to the excess payment while working out the final liability.

The assessee therefore again approached the High Court by filing the present writ petition.

Payments Made by the Assessee

Pursuant to the remand order dated 16.08.2024, the assessee made the following payments:

  1. ₹2,88,181 paid on 21.11.2024, purportedly towards the 10% portion of the disputed tax and related amounts; and
  2. An earlier payment of ₹77,201 made on 16.10.2024, which was stated to have been made against the demand but was partially disregarded while working out the final liability in the impugned order.

The impugned order itself recorded that the assessee had, in aggregate, paid ₹3,65,382, and even acknowledged that this resulted in an excess payment of ₹1,73,365 in relation to the tax demand computed therein.

Basis of the Tax Demand

The tax liability in dispute originated from several defects or discrepancies identified by the departmental authority, including:

  • Defect 1 – GSTR-3B vs GSTR-1 mismatch (tax): Differences noticed between the outward supplies reported in GSTR‑1 and the tax declared in GSTR‑3B;
  • Defect 3 – Less turnover reported in GSTR-3B (tax): Under-reporting of turnover in GSTR‑3B when compared with other records/data;
  • Defect 5 – Non-payment of tax on loading and unloading charges / income and credit on capital goods (tax): Non-discharge of GST liability on certain taxable charges such as loading and unloading, and related issues involving credit on capital goods.

For these defects, the tabulation in the impugned order quantified tax, interest, and penalty component-wise.

Tax Amounts As Recorded in the Impugned Order

As reproduced in the judgment, the authority’s table indicated the following:

  • Total tax payable under the three defects (IGST + CGST + SGST) came to ₹1,92,017.
  • The assessee’s total payments recognized in the table were ₹3,65,382, broken up into:
    • Amount paid on 16.10.2024 (₹77,201), and
    • Amount paid on 21.11.2024 (₹2,88,181), treated as the 10% tax portion deposit.

After comparing the total tax liability with the payments, the authority itself worked out an excess tax payment of ₹1,73,365, split under IGST, CGST and SGST heads.

Interest and Penalty Components

Despite acknowledging that the assessee’s tax remittances exceeded the quantified tax dues, the impugned order went on to demand substantial interest and also levy penalty:

  • Interest: The assessing authority levied interest under Section 50(1) of the GST Act, 2017 on the tax amounts relating to Defects 1, 3, and 5.
    • The total interest demanded was recorded as ₹2,34,639, being a combination of IGST, CGST and SGST interest components.