Kjv Alloys Conductors Pvt. Ltd. vs Union Of India

Headnote:(A) Central Goods and Services Tax Act, 2017 - Sections 42(10), 49, 50(3), and 79(1), 79(12) - Wrongful availment of input tax credit - Interest liability - It is provided that a taxable person who makes an undue or excess claim of input tax credit shall pay interest on such claim (Para 14) - Interest under Section 50(3) read with Section 42(10) is mandatory when input tax credit is wrongly availed and the balance in the electronic credit ledger falls below the wrongly availed amount (Para 15).

(B) Recovery of Interest - Show Cause Notice (SCN) - Where interest on self-assessed liability arises due to reversal of input tax credit, such interest is a confirmed demand and is treated as an arrear - Under Section 79(12), such arrears can be recovered without the issuance of a separate show cause notice (Para 14).

(C) Electronic Credit Ledger vs. Electronic Cash Ledger - Section 49 - While the electronic credit ledger can be used for making payments towards output tax, any liability towards interest, penalty, or any other amount under the Act must be discharged from the electronic cash ledger (Para 14).

Facts of the case:
A company claimed transitional credit via the prescribed form, but due to technical glitches, the credit did not reflect in its electronic credit ledger. The company then reflected the same amount as input tax credit in its GSTR-3B return. Upon realizing an excess claim, the company reversed the amount after approximately 630 days. The authorities demanded interest on this wrongful availment and subsequently adjusted a refund claim of the company, lying in the electronic cash ledger, against this interest liability.

Findings of Court:
The court found that the company wrongly availed excess credit for a period of 630 days. The contention that the credit was not utilized was not supported by evidence demonstrating that the balance in the electronic credit ledger never fell below the wrongly availed amount. The court upheld that interest on self-assessed reversal constitutes an arrear recoverable without a separate SCN and must be paid via the electronic cash ledger.

Issues: (i) Whether interest is leviable on wrongly availed input tax credit that was subsequently reversed, particularly regarding the requirement of "utilization". (ii) Whether a separate show cause notice is necessary for the recovery of interest on self-assessed liabilities. (iii) Whether interest liability can be discharged using the electronic credit ledger.

Ratio Decidendi: Interest is mandatory under Section 50(3) and 42(10) when input tax credit is wrongly availed and the credit ledger balance is insufficient to cover the amount, establishing utilization. Interest on self-assessed ITC reversal is a confirmed demand (arrear), allowing recovery under Section 79 without a fresh SCN. Pursuant to Section 49, interest liabilities cannot be offset via the electronic credit ledger and must be paid through the electronic cash ledger.

Result: Petition dismissed.

Legal Category Hierarchy

1. Dispute over interest levy on reversal of wrongly availed transitional input tax credit under GST. (Para 1 , 2 , 3 , 4 , 5 , 6 )

2. Petitioner argued no interest without utilisation; respondent argued interest arises on wrongful availment and utilisation is established. (Para 7 , 8 , 9 , 10 , 11 , 12 )

3. Writ petition dismissed; interest confirmed and refund adjustment upheld. (Para 15 , 16 , 17 )

4. Does interest under Section 50(3) of the CGST Act arise on mere wrongful availment of input tax credit or only on utilisation?

Interest under Section 50(3) of the CGST Act arises on the claim of excess ITC and is payable even without utilisation once the wrongful availment is established. (Para 14 , 15 )

5. Can recovery of interest on self-assessed excess ITC be made without a separate show cause notice?

Yes, no separate SCN is required as interest on a self-assessed reversal of ITC is a confirmed arrear recoverable under Section 79 of the CGST Act. (Para 14 )

6. Can interest liability under GST be discharged from the electronic credit ledger?

No, interest liability can only be discharged from the electronic cash ledger, not the electronic credit ledger. (Para 14 )

7. Is the amendment to Section 50(3) of the CGST Act, making interest leviable only on utilised credit, applicable retrospectively?

The court did not accept this argument; it held that utilisation of credit was established as the credit was retained for 630 days and the credit ledger balance was not shown to be below the wrongly availed amount. (Para 14 , 15 )

8. Can a refund from the electronic cash ledger be adjusted against outstanding interest on excess ITC?

Yes, the refund was lawfully adjusted against the outstanding interest liability under Section 79 of the CGST Act. (Para 11 , 14 )

ORDER :

Vivek Rusia, J.

The petitioner has filed the present petition under Article 226/227 of the Constitution of India against the order dated 10.02.2020 passed by the Respondent No.3 - Commissioner, Central GST Custom & Central Excise Office, Jabalpur and order dated 21.04.2021 passed by the Respondent No.4 - Joint Commissioner (Appeals) Central GST, Bhopal (M.P.), whereby interest amounting to Rs.54,29,792/- was confirmed on reversal of input tax credit and refund of Rs.32,00,000/- available in the electronic cash ledger was adjusted towards such interest liability.

Facts of the case, in short, are as under:-

2. The petitioner is a private limited company engaged in the business of manufacturing transmission line equipment such as aluminium conductors, cables and wire rods, and is registered under the Goods and Services Tax regime.

3. Upon introduction of the Goods and Services Tax with effect from 01.07.2017, the petitioner became entitled to carry forward eligible CENVAT credit under Section 140(1) of the Central Goods and Services Tax Act, 2017. Accordingly, the petitioner filed Form TRAN-1 on 10.07.2017 claiming a transitional credit amounting to Rs. 1,31,07,632/-. It is the case of the petitioner that due to technical glitches in the GST portal during the initial phase of implementation, the said transitional credit did not reflect in its Electronic Credit Ledger (ECL). Apprehending loss of substantial credit, the petitioner reflected the said amount as Input Tax Credit in its GSTR-3B return for the month of July 2017.

4. Subsequently, the petitioner realised that they had taken wrong excess credit of transitional credit amounting to Rs.3,48,523.00 and the petitioner was entitled to claim only Rs.1,28,21,441/-, accordingly, the petitioner rectified the mistake and reversed by submmiting Trans form on 26.12.2017. The petitioner asserts that the credit so reflected in GSTR-3B was never utilised for discharge of its outward tax liability and remained unutilized in the electronic credit ledger. The petitioner made attempts to reverse the wrongly reflected credit but encountered technical difficulties in doing so through the portal. Ultimately, in April 2019, the petitioner reversed the entire amount of Rs.1,31,07,632/- through available balance in the electronic credit ledger. Thereafter, the departmental authorities issued notices demanding an interest amounting to Rs.54,29,792/- under Section 50(3) read with Section 42(10) of the CGST Act, 2017 on the ground that the petitioner had wrongly availed input tax credit.

5. During the pendency of the aforesaid dispute, the petitioner filed an application dated 12.11.2019 seeking a refund of Rs.32,00,000/- lying in its electronic cash ledger. However, the Assistant Commissioner, CGST & Central Excise Division, Chhindwara, adjusted the said refund against the alleged interest liability and intimated the same to the petitioner vide order dated 10.02.2020.

6. Being aggrieved by the order dated 10.02.2020 passed by the Assistant Commissioner, CGST & Central Excise Division, Chhindwara, the petitioner preferred an appeal before the Joint Commissioner (Appeals), CGST, Bhopal, which came to be dismissed vide order dated 21.04.2021 confirming levy of interest and adjustment of refund. Hence, being aggrieved by both the aforesaid orders dated 10.02.2020 and 21.04.2021, the petitioner approached this Court by way of the present writ petition.

Submissions made by the learned counsel for the petitioner.

7. Learned counsel appearing for the petitioner submits that the impugned order dated 10.02.2020, passed by the Assistant Commissioner, CGST & Central Excise Division, Chhindwara, and the order dated 21.04.2021, passed by the Joint Commissioner (Appeals), CGST, Bhopal, are wholly illegal, arbitrary and contrary to the provisions of the Central Goods and Services Tax Act, 2017. He also submits that though the petitioner reflected transitional credit of Rs.1,31,07,632/- in GSTR-3B due to non-reflectio

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2026 Supreme(MP) 619

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR
VIVEK RUSIA, PRADEEP MITTAL, JJ.
M/s Kjv Alloys Conductors Pvt. Ltd. – Petitioner
Versus
Union Of India And Others – Respondents
Writ Petition No. 16440 Of 2022
Decided On : 12-02-2026

Interest is mandatory on wrongly availed ITC if the electronic credit ledger balance falls below the availed amount. Interest on self-assessed liabilities is an arrear recoverable without a separate SCN and must be paid via the electronic cash ledger, not the credit ledger.

Legal Category Hierarchy

Table of Contents

4. Does interest under Section 50(3) of the CGST Act arise on mere wrongful availment of input tax credit or only on utilisation?

5. Can recovery of interest on self-assessed excess ITC be made without a separate show cause notice?

6. Can interest liability under GST be discharged from the electronic credit ledger?

7. Is the amendment to Section 50(3) of the CGST Act, making interest leviable only on utilised credit, applicable retrospectively?

8. Can a refund from the electronic cash ledger be adjusted against outstanding interest on excess ITC?

Judicial Analysis

2026 Supreme(MP) 619

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPURVIVEK RUSIA, PRADEEP MITTAL, JJ.M/s Kjv Alloys Conductors Pvt. Ltd. – Petitioner VersusUnion Of India And Others – Respondents Writ Petition No. 16440 Of 2022Decided On : 12-02-2026

Interest is mandatory on wrongly availed ITC if the electronic credit ledger balance falls below the availed amount. Interest on self-assessed liabilities is an arrear recoverable without a separate SCN and must be paid via the electronic cash ledger, not the credit ledger.

Legal Category Hierarchy

Table of Contents

4. Does interest under Section 50(3) of the CGST Act arise on mere wrongful availment of input tax credit or only on utilisation?

5. Can recovery of interest on self-assessed excess ITC be made without a separate show cause notice?

6. Can interest liability under GST be discharged from the electronic credit ledger?

7. Is the amendment to Section 50(3) of the CGST Act, making interest leviable only on utilised credit, applicable retrospectively?

8. Can a refund from the electronic cash ledger be adjusted against outstanding interest on excess ITC?

Judicial Analysis

IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR
VIVEK RUSIA, PRADEEP MITTAL, JJ.
M/s Kjv Alloys Conductors Pvt. Ltd. – Petitioner
Versus
Union Of India And Others – Respondents
Writ Petition No. 16440 Of 2022
Decided On : 12-02-2026