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IN THE HIGH COURT AT CALCUTTA
RAJA BASU CHOWDHURY, J.
Utpal Das – Petitioner
Versus
The State of West Bengal and Others – Respondents
WPA No. 18241 of 2022
Decided On : 18-07-2024
Taxation - Goods and Services Tax - Section 73, Section 107, Section 50 - The court interpreted provisions regarding interest on Input Tax Credit, concluding that interest cannot be levied unless the ITC is both availed and utilized, impacting the decision to quash the demand for interest and penalty.
Fact of the Case:
The petitioner, a registered taxpayer, challenged orders under the GST Act regarding interest and penalty for excess Input Tax Credit claimed due to a clerical error. The petitioner reversed the excess credit before the issuance of a show cause notice.
Finding of the Court:
The court found that the proper officer acted with material irregularity in imposing interest, as the petitioner had sufficient credit and had reversed the excess ITC before the notice was issued, thus interest was not applicable.
Issues: Whether the petitioner can be required to pay interest on Input Tax Credit when the ITC was not utilized and was reversed prior to the issuance of a show cause notice.
Ratio Decidendi: Interest under Section 50(3) of the GST Act is only leviable if the Input Tax Credit is both availed and utilized; since the petitioner had sufficient credit and reversed the ITC, interest could not be imposed.
Result: The court quashed the demand for interest and penalty against the petitioner.
JUDGMENT :
RAJA BASU CHOWDHURY, J.
1. Although, the affidavit in opposition has been filed belatedly at the time of hearing, however, for ends of justice the same is taken on record.
2. The present writ petition has been filed, inter alia, challenging the order dated 8th April, 2021, passed under Section 73 of the Central/West Bengal Goods and Services Tax Act, 2017 (hereinafter referred to as the “said Act”), as well as the order dated 13th May, 2022, passed by the appellate authority under Section 107 of the said Act.
3. Shorn of unnecessary details, the facts are that the petitioner is a registered tax payer under the provisions of the said Act. The petitioner was served with a notice dated 22nd February, 2021, in From GST DRC-01A, identifying the liability inclusive of interest payable by the petitioner for the tax period April, 2018 to March, 2019, the relevant penalty which may be applied in the case of the petitioner was also included in the said Form GST DRC-01A.
4. Upon receipt of such notice, the petitioner had by a response in writing which is appearing at page 37 of the writ petition admitted that by reasons of a clerical mistake in filing GSTR-09 the petitioner had availed excess Input Tax Credit (ITC). Since, according to the petitioner, the ITC was not utilized, by filing a Form GSTDRC-03 on th March, 2021 the petitioner had reversed such entry by debiting its electronic credit ledger.
5. Notwithstanding the aforesaid a show cause notice was issued under Section 73 read with Section 50(1) of the said Act on 23rd March, 2021, identifying therein the interest and the penalty leviable on the petitioner in respect of the tax period April, 2018 to March, 2019. The aforesaid ultimately culminated in the order dated 8th April, 2021 passed under Section 73 of the said Act whereby the petitioner was saddled with interest and penalty as appearing in the said order. Being aggrieved, the petitioner had preferred an appeal under Section 107 of the said Act. The appellate authority by its order dated 13th May, 2022 having found that the proper officer acted as per the provisions of law in imposing interest and penalty did not interfere with the order passed by the proper officer.
6. Mr. Mazumder, learned advocate appearing on behalf of the petitioner at the very outset submits that immediately upon receipt of the notice in Form GST DRC-01A, the petitioner had acted on the basis thereof and had voluntarily debited its electronic credit ledger by filing Form GST DRC-03. According to the petitioner there had been mistake in filling up of GSTR-09, which resulted in wrongful availment of ITC. The aforesaid debit of its electronic credit ledger by filing Form GST DRC-03 was in addition to the tax paid by the petitioner in terms of Section 39 of the said Act, while filing the regular returns which according to the petitioner had been filed in October, 2019 itself.
7. It is submitted that once, the petitioner’s electronic credit ledger was debited by filing Form GST DRC-03, the matter ought to have rested. Unfortunately, the respondents had proceeded further by issuing a show cause notice. Although, the petitioner duly responded to the same, the order impugned under Section 73 of the said Act dated 8th April, 2021 had been passed.
8. By drawing attention of this Court to the electronic credit ledger of the petitioner for the period 1st April, 2018 to 31st March, 2019 which forms part of the writ petition, it is submitted that at no point of time the petitioner’s credit balance in the said credit ledger had gone below the amount of Rs.5 lakhs which was claimed by the respondents on account of reversal of ITC on which interest was claimed.
9. By placing reliance on Section 50(3) of the said Act, it is submitted that unless the registered tax payer had both availed and utilized the ITC, the interest could not have been levied upon the petitioner. Admittedly, in this case, the petitioner had enough electronic credit available, as such, there is no
Interest on Input Tax Credit cannot be levied unless the credit is both availed and utilized, as per the provisions of the GST Act.
Show-cause notices under Sections 73 and 74 of the WBGST/CGST Act can coexist for the same tax period if based on distinct grounds, and petitioners must pursue available appellate remedies before see....
The main legal point established in the judgment is the emphasis on the availability of appeal under Section 107 of the CGST Act as the appropriate remedy to address issues related to the applicabili....
Tax authorities must provide substantial evidence of fraud or suppression of facts before imposing penalties under Sections 74 and 50, especially when input tax credit has already been reversed volun....
The liability of interest under Section 50 of the JGST Act cannot be raised without initiating adjudication proceedings under Section 73 or 74 if the taxpayer disputes the liability of interest.
The court ruled that inadvertent misclassification of IGST as CGST and SGST does not constitute excess credit utilization, especially when no revenue loss occurs.
Interest for delayed tax payments under the CGST Act applies only to cash payments, as payments from input tax credits do not incur interest liabilities.
Interest on delayed tax payment under Section 50 of the CGST Act only applies to cash transactions. Payments made via Electronic Credit Ledger cannot incur interest, as funds were available and utili....
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