No Liability of interest would arise if credit was reversed by petitioner before its utilization: HC

Grundfos Pumps India (P.) Ltd. v. Joint Commissioner of GST & Central Excise (Mad.)

The petitioner had been an assessee under the erstwhile Central Excise regime and migrated into the regime of GST. The unutilized credit was taken forward as transitional credit on introduction of GST by the petitioner. However, the said credit was not reflected in Electronic Credit Ledger (ECL), and petitioner reflected same as available ITC in Form GSTR-3B return. The audit wing of GST department during audit demanded interest on ITC which was claimed in GSTR-3B.

The petitioner submitted that when ITC without explanation, came to be reflected in ECL, such credit was reversed without set off/utilization against output tax liability at any point of time. However, the department passed demand order ed levying interest. It filed writ petition against the levy of interest.

The Hon'ble High Court noted that the liability to interest arises only in case of actual utilization of credit by assessee. By virtue of amendment in 2022 of with retrospective effect from 2017, interest liability was attracted only when ITC wrongly availed and utilized with revenue impact. However, in present case, original error of non-maintenance of ECL was admittedly attributable to department. Moreover, the petitioner did not utilize credit and reversed the same.

Thus, it was held that there was no liability to interest and the impugned order to extent to which it levied interest under section 50(3) was to be set aside.

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Regards

CA Rahul Gupta

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