2022 (3) TMI 442 - HC - GST

Seeking to call for the records pertaining to the impugned order - reversal of CENVAT Credit - filed returns were rejected due to technical glitches - wilful suppression of facts or not - Demand of interest - levy of penalty under Section 122 (2) (a) of CGST Act - HELD THAT - Since the petitioner has given up his challenge regarding reversal of CENVAT Credit, we need not take up the issue and Central Excise traverse on these issues. However, insofar as the third and fourth clause of the interim order, where, interest was demanded or penalty was imposed are concerned, since there has been a case and counter case projected by the learned counsel for the parties, those issues alone are dealt with. Penalty - Demand of Interest - reason for imposing penalty is that the petitioner has wrongly availed or utilised the Input Tax Credit - HELD THAT - The fact remains that, the petitioner has never utilised or availed the ITC wrongly. The entire amount has been in the credit till the impugned order is passed, that is the reason, why, the Central Excise respondent revenue was able to appropriate the amount from the credit, that is, the electronic credit ledger of the petitioner. Therefore, since at no point of time, the ITC was either availed or utilised by the petitioner, that is, one of the pre-requisite under which only penalty can be imposed under Section 122(2)(a), such situation, since is not available in the present case, such kind of penalty cannot be imposed against the petitioner - thus, insofar as the demand of interest as well as the imposition of penalty is concerned, which is form part of the impugned order under Clause 3 and 4 of the operative portion, those demand made by the respondents or imposing penalty against the petitioner are untenable and therefore, that are liable to be interfered with. This writ petition is partly allowed.

Summary

Issues Involved:
1. Disallowance of CENVAT credit carried forward through GST TRAN-1.
2. Demand of interest on the disallowed CENVAT credit.
3. Imposition of penalty for wrong availment of Input Tax Credit (ITC).

Detailed Analysis:

1. Disallowance of CENVAT Credit:
The petitioner, registered under the GST regime, claimed unavailed CENVAT credit of ?50,21,080/- from the previous tax regime through TRAN-1. The respondent objected, stating that the ER-1 returns for April, May, and June 2017 were not filed, thus the petitioner was asked to reverse the CENVAT credit. Despite attempts to file the returns online, technical glitches prevented successful submission. Consequently, the petitioner reversed the credit in May 2019. The respondent disallowed the credit and demanded it back under Section 73(1) of the CGST Act, appropriating the credit reversed on 20.06.2019. The petitioner did not challenge this disallowance.

2. Demand of Interest:
The respondent demanded interest under Section 50(3) of the CGST Act for taking ineligible transitional credit. The petitioner contended that since the entire tax demand was appropriated from the credit available in the electronic ledger, no interest should be due. The court referred to previous judgments, including M/s. Maansarovar Motors Pvt. Ltd. vs. the Assistant Commissioner, which held that no interest is due if the credit was available and not utilized. The court concluded that since the amount was always available in the petitioner's credit, interest demand was unjustified.

3. Imposition of Penalty:
The respondent imposed a penalty of ?5,02,108/- under Section 122(2)(a) of the CGST Act for wrong availment of ITC. The petitioner argued that the ITC was never utilized or availed wrongly, as it remained in the electronic ledger and was appropriated by the respondent. The court agreed, stating that the penalty under Section 122(2)(a) requires the ITC to be wrongly availed or utilized, which was not the case here. Thus, the imposition of the penalty was deemed unjustifiable.

Conclusion:
The court upheld the disallowance and appropriation of the CENVAT credit but set aside the demands for interest and the imposition of the penalty. The writ petition was partly allowed, with the court declaring the interest and penalty demands as unjustifiable and unlawful. No costs were ordered, and the connected miscellaneous petition was closed.