2025 (2) TMI 788 - HC - GST

Condonation of delay of 94 days in filing the appeal - penalty for wrong utilization of input tax credit - HELD THAT - The issue decided in M/S. GREENSTAR FERTILIZERS LIMITED REP. BY ITS CHIEF OPERATING OFFICER E. BALU VERSUS THE JOINT COMMISSIONER (APPEALS) THE ASSISTANT COMMISSIONER OF GST AND CENTRAL EXCISE TUTICORIN 2024 (6) TMI 667 - MADRAS HIGH COURT where it was held that considering the fact that the petitioner has availed input tax credit which was not eligible to be availed but could have resulted in wrong utilization of input tax credit a token penalty of Rs.10, 000/- is imposed on the petitioner. The observation of the first respondent by placing reliance on the decisions of the Hon ble Supreme Court referred to supra is also not relevant as Section 74 of the CGST Act deals with a situation where the credit is availed or utilized by reason of fraud or any wilful misstatement or suppression of facts. The impugned order dated is set aside and the matter is remitted back to the second respondent to consider the matter afresh and pass appropriate orders on merits and in accordance with law - Petition disposed off by way of remand.

Summary

The writ petition in the Madras High Court sought to quash an order dated 14/9/2023 passed by the second respondent in ZD3309230821621. The petitioner had received notices related to input tax credit and penalties, leading to the impugned order imposing interest and penalties. The petitioner argued that the delay in filing an appeal was due to a staff error and that since the input tax credit was not utilized, penalties should not apply. The government advocate defended the impugned order as well-reasoned.The petitioner's counsel cited a previous judgment where it was held that penalties cannot be imposed if the input tax credit was neither availed nor utilized. The government advocate maintained that the impugned order was justified. The court examined the relevant legal framework and precedents, including the interpretation of the CGST Act and relevant case law.In a crucial paragraph from a prior judgment, the court noted that while penalties may not be warranted in certain cases, a token penalty was imposed in that specific case due to potential misuse of input tax credit. The court referenced similar decisions from other courts to support its reasoning.Ultimately, the court set aside the impugned order and remitted the matter back to the second respondent for reconsideration, emphasizing the need for a fresh decision in accordance with the law and after providing the petitioner with an opportunity to be heard. The court's decision was influenced by the earlier judgment cited by the petitioner's counsel, indicating a consistent approach to cases involving input tax credit issues.The significant holdings include the court's determination that penalties may not be justified if input tax credit is not utilized, but a token penalty could be imposed in certain circumstances. The court's decision to set aside the impugned order and remand the matter for further consideration underscores the importance of procedural fairness and adherence to legal principles in tax matters.