Input tax credit adjustment defeats interest and penalty when no tax evasion or avoidance is shown.

Interest and penalty were not sustainable where the assessee had sufficient input tax credit to adjust the reassessed tax demand and no intention to evade or avoid tax was established. The Tribunal's factual finding that the additional liability stood covered by available credit justified deletion of interest, and the penalty provision could not be invoked without proof of evasion or avoidance. The High Court found no substantial question of law against that deletion and upheld the relief granted to the assessee, causing the Revenue's challenge to fail.

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Issues: Whether interest and penalty could be sustained where the assessee had available input tax credit for adjustment against the reassessed tax demand and there was no intention to evade or avoid payment of tax.

Analysis: The Tribunal had found that the assessee possessed sufficient input tax credit to meet the additional tax liability and, on that factual basis, the levy of interest was not justified. For penalty, the governing provision required satisfaction that the dealer acted in order to evade or avoid payment of tax. In the absence of any element of evasion or avoidance, and where the reassessment demand stood adjusted through available credit, no substantial question of law arose against deletion of interest and penalty.

Conclusion: The deletion of interest and penalty was upheld and the challenge by the Revenue failed.

Ratio Decidendi: Where reassessed tax liability is capable of adjustment through available input tax credit and no intention to evade or avoid tax is established, interest and penalty cannot be imposed.

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