2023 (4) TMI 585 - HC - GST

Carrying forward of unutilized Credit - migration to GST regime from Service Tax regime - though the credit had been transitioned, it had not found place in the Electronic Credit Ledger (ECL) - Liability of interest - allegation of undue or excess claim of ITC - HELD THAT - The ECL is an electronic document which reflects the credit available to a particular assessee and this document falls within the domain of the GST department. There is no explanation for why the transitioned credit did not find place in the ECL. Be that as it may and seeing as the credit was unavailable in the ECL, the petitioner reflected the same as available ITC in its retention and in Form GSTR-3B return - the petitioner cannot be faulted for the same, since transition has been sought in line with the procedures set out under the Act and Rules. The flaw had been occasioned in the maintenance of the ECL by the revenue. Thus, it was quite justified for the petitioner to ensure, by all legitimate methods possible, that the credit available was presumed for utilization, as and when required. Disallowance relating to slow moving stock - HELD THAT - The petitioner does not pursue the challenge in this writ petition and seeks liberty to challenge the same by way of statutory appeal. Seeing as this writ petition has been instituted on 11.12.2020 within 30 days from the date of receipt of the impugned order, there is no bar qua limitation and hence, the petitioner is permitted to challenge that portion of the impugned order within a period of 30 days from today without reference to the limitation, but subject to compliance with all other statutory conditions. Liability of interest - allegation of undue or excess claim of ITC - Reversal of ITC - HELD THAT - By virtue of the Amendment in 2022 that has retrospective effect from 2017, it is only when ITC has been wrongly availed and utilized with a revenue impact, that interest liability is attracted. In the present case, the original error of non-maintenance of ECL is admittedly attributable to the department. Moreover, the petitioner has not utilized the credit. There is no liability to interest, the impugned order to the extent to which it levies interest under Section 50(3) of the CGST, on ITC, Education Cess and Higher Education Cess, is not in conformity with law and is set aside - Petition allowed.

Summary

Issues involved:
The issues involved in the judgment are the challenge to an order passed under The Central Goods and Services Act, 2017 (CGST Act) regarding the availability and utilization of transitional credit, liability for interest under Section 50(3) of the CGST Act, and disallowance of credit on slow-moving stock.

Transitional Credit and Electronic Credit Ledger (ECL):
The petitioner, a dealer under the CGST Act, transitioned unutilized credit from the erstwhile Central Excise regime into GST. Despite the transition, the credit did not reflect in the Electronic Credit Ledger (ECL), which is maintained by the GST department. The petitioner, in good faith, reflected the credit in its returns for utilization. However, upon realizing the error, the credit was reversed without set off against output tax liability. The petitioner's actions were in line with prescribed procedures, and the fault lay in the maintenance of the ECL by the revenue department.

Liability for Interest under Section 50(3) of the CGST Act:
The audit wing of the GST department raised objections regarding the reversal of credit, asserting that the petitioner was liable for interest at 24%, even though the credit had not been utilized. The show cause notice invoked Section 50(3) of the CGST Act to recover interest on the unutilized credit. However, the court noted that liability for interest arises only when there is actual utilization of credit by the assessee, as clarified by the language post substitution in the Act. The amendment with retrospective effect from 2017 specifies that interest is attracted only when there is a revenue impact due to wrongly availed and utilized credit. Since the petitioner did not utilize the credit and the original error in non-maintenance of ECL was departmental, the court held that there was no liability for interest under Section 50(3).

Disallowance of Credit on Slow-Moving Stock:
The petitioner did not challenge the disallowance of credit on slow-moving stock in the writ petition and sought liberty to challenge it through statutory appeal. The court allowed the petitioner to challenge this portion of the order within 30 days from the date of the judgment without limitation, provided all other statutory conditions were met. The petitioner's challenge to this aspect was not pursued in the writ petition.

Conclusion:
The court set aside the impugned order to the extent that it levied interest under Section 50(3) of the CGST Act, ruling that there was no liability for interest as the credit was not utilized and the error in non-maintenance of ECL was attributable to the department. The judgment allowed the writ petition in favor of the petitioner on this issue, with no costs incurred. The connected Miscellaneous Petitions were closed as a consequence of the judgment.