Decided 7 October 2026. The Bengaluru Bench of GSTAT has held that where goods cleared in April to June 2017 later attracted retrospective price escalation, and the differential tax was paid through debit notes under section 142(2)(a) in 2018, interest under section 50 runs from the original clearance. Following the Supreme Court in Steel Authority of India, the Tribunal restored interest of Rs 13,85,623 but upheld the deletion of penalty.
Case at a glance
| Case | Revenue v. Mukand Limited |
| Forum | GSTAT, Bengaluru Bench, Division Bench Court II |
| Appeal No. | APL/258/BUR/2026 |
| Date of order | 7 October 2026 |
| Differential tax | Rs 54,44,190 paid via debit notes dated 29.09.2018 and 15.10.2018 |
| Result | Revenue appeal partly allowed: interest Rs 13,85,623 restored; penalty quashed |
Facts of the case
The respondent cleared goods between April and June 2017 under contracts with price escalation clauses. After prices were revised, it issued debit notes and supplementary invoices under section 142(2)(a) and paid differential tax of Rs 54,44,190 in September and October 2018.
The original authority demanded interest of Rs 13,85,623 and penalty under section 122. The first appellate authority (Belagavi) set aside both on 30.06.2023, accepting that tax paid in the month of the debit note was timely.
Issue before the Tribunal
Does interest run from the original clearance date when differential tax on a retrospective price escalation is paid through a debit note under section 142(2)(a)?
What the Tribunal held
- The Supreme Court in Steel Authority of India v. CCE (paragraph 63), reaffirming SKF India and International Auto, held that a retrospective price escalation makes the final price the true value at the time of original removal.
- Sections 142(2)(a), 39(7) and 34(4) are procedural gateways for reporting and paying the differential tax; they do not create a fresh tax point or erase the time value of money.
- Whether the price was finalised under a provisional assessment or a contractual escalation clause makes no difference. Interest of Rs 13,85,623 under section 50 was restored.
- As the liability arose from a bona fide interpretation of complex transitional provisions, without suppression or deliberate default, penalty under section 122 was not warranted.
Practical takeaways for taxpayers
- Suppliers with price escalation clauses should pay differential tax promptly and budget for interest from the original supply date.
- Penalty can be resisted where the delay arose from genuine interpretation issues and tax was paid voluntarily.
- This ruling concerns transitional debit notes; analyse post-GST escalation cases separately with reference to time of supply rules.
Frequently asked questions
Is interest payable on tax paid through debit notes for price escalation?
GSTAT Bengaluru held yes, from the original clearance date, following Steel Authority of India.
Was penalty upheld?
No. Penalty under section 122 was set aside because there was no suppression or deliberate default.
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This summary is based on the order of the GST Appellate Tribunal, Bengaluru Bench (Court II) in Appeal No. APL/258/BUR/2026. It is general information, not legal advice; the outcome of any case depends on its own facts and the full text of the order.