2024 (5) TMI 119 - HC - GST

Levy of interest and penalty - transition of amount wrongly claimed as input tax credit under the CENVAT Credit Rules, 2004 - HELD THAT - Admittedly, the petitioner was not entitled to avail input tax credit on the Basic Customs Duty paid under the Customs Act, 1962, under the provisions of the CENVAT Credit Rules, 2004. Under Section 140 of the CGST Act, 2017, only input tax credit lying un-utilised under the CENVAT Credit Rules, 2004 and TNVAT Act, 2006 in Tamil Nadu could be transitioned - Sub- Section (2) to Section 140 of the CGST Act, 2017 also makes it clear that the registered person shall not be allowed to take credit unless the said credit was admissible as CENVAT credit under the existing law i.e., CENVAT Credit Rules, 2004 and is also admissible as input tax credit under the CGST Act, 2017 - Therefore, the question of the petitioner transitioning the amount that was wrongly claimed as input tax credit under the CENVAT Credit Rules, 2004 did not arise. The Department however committed a mistake by sanctioning the refund to the petitioner on 17.07.2018 pursuant to refund claim filed by the petitioner. There has to be restitution of the unjust benefit gained by a dealer/person. These provisions have been framed to ensure that there is proper restitution. Thus, no case is made out to interfere with the impugned order. Therefore, the impugned order is sustainable and this Writ Petition is liable to be dismissed. Petition dismissed.

Summary

Issues Involved:
1. Legality of invoking Section 74 of the CGST Act, 2017.
2. Imposition of penalty u/s 74 of the CGST Act, 2017.
3. Levy of interest u/s 50 of the CGST Act, 2017.

Summary:

1. Legality of invoking Section 74 of the CGST Act, 2017:
The court examined whether Section 74 of the CGST Act, 2017 was applicable in this case. The impugned order noted that "None of the above ingredients are present in this case so as to invoke section 74 of the CGST Act, 2017." The court concluded that the appellant did not suppress any facts, misstate, or commit fraud, making the invocation of Section 74 improper.

2. Imposition of penalty u/s 74 of the CGST Act, 2017:
The court addressed the issue of penalty imposition under Section 74. It was noted that since the invocation of demand under Section 74 was not legal, "the demand for penalty is not sustainable." Consequently, the penalty of Rs. 21,44,097/- imposed in the order was set aside.

3. Levy of interest u/s 50 of the CGST Act, 2017:
The court upheld the demand for interest at 18% u/s 50(1), stating, "Further demand of interest is Automatic when the tax due is confirmed." The petitioner had accepted and paid the tax dues of Rs. 42,88,194/- and was liable to pay interest on the erroneous refund. The court also noted that "there is a delay in the payment of the amount after the amount was wrongly sanctioned," justifying the interest demand.

Conclusion:
The appeal was partly allowed, setting aside the penalty but upholding the interest demand. The writ petition was dismissed, and the impugned order was deemed sustainable.