2023 (10) TMI 336 - HC - GST

Tax Credit Transition Dispute: Authority Ordered to Refund Unwarranted Interest Deduction in Excise and GST Regulatory Framework

The HC examined a dispute over tax credit transitioning between excise and GST acts. The court found the tax authority's interest deduction unwarranted, ... Adjustment interest against Refund - Unutilized balance of ITC was not used for payment of GST by the assessee wrongly - Refund of amount that was lying unutilized in the Personal Ledger Account - utilization of Input Tax Credit availed on integrated tax, first towards integrated tax liability and the remaining amount, if any, towards Central Tax or State Tax liability - HELD THAT:- The petitioner could have paid the Central and State GST out of the Input Tax Credit availed on Integrated GST borne by the petitioner. The amount of Rs. 25,77,523/- was wrongly transitioned under Section 140 of the Central GST Act, 2017 and was utilized towards Central and / or State GST. It has been allowed to be re-paid post facto out of Integrated Input Tax Credit which was lying unutilized. Thus, the tax liability stands squared up. The amount of Rs. 25,77,523/- that was wrongly transitioned under Section 140 of the Central GST Act, 2017 and utilized towards tax liability has been also refunded. However, while refunding the amount, a sum of Rs. 9,25,366/- was deducted towards interest. Deduction of Rs. 9,25,366/- towards interest was unnecessary as there was really no loss to the revenue. It would have been different, if tax liability was adjusted earlier out of Input Tax credit availed on State GST borne and was utilized for payment of Central GST by the petitioner under the provisions of the Central Goods and Services Tax Act, 2017. The impugned order dated 31.01.2020 seeking to adjust a sum of Rs. 9,25,366/- towards interest cannot be sustained - the impugned order is liable to be modified - Petition allowed. Issues involved: Challenge to impugned Order-in-Original regarding refund adjustment, transitioning of amount under different Acts, utilization of Input Tax Credit, interest deduction, and revenue loss.Summary:The petitioner challenged the impugned Order-in-Original regarding the refund adjustment sanctioned by the respondent. The petitioner claimed that there was a mistake in transitioning the amount from the Personal Ledger Account under the Central Excise Act to the Input Tax credit account under the Central Goods and Services Tax Act. The petitioner argued that the transitioned amount could have been utilized differently, and there was no loss to the revenue according to the provisions of the Central Goods and Services Tax Act.The respondent, however, contended that the transitioning of the amount was not in accordance with the law, and interest was due on the excess claim of Input Tax credit. The respondent highlighted the provisions related to matching Input Tax credit with outward supplies and the entitlement of legacy credit for taxpayers migrating from previous Acts.After considering the arguments, the court found that the petitioner should have claimed the refund of the unutilized amount under the Central Excise Act and the Central Goods and Services Tax Act. The court noted the availability of Input Tax credit for the petitioner and the incorrect transitioning of the amount, leading to the adjustment of interest in the refund amount.Ultimately, the court held that the deduction of interest was unnecessary as there was no actual loss to the revenue. The impugned order was modified to exclude the interest adjustment, and the respondent was directed to refund the deducted amount to the petitioner within a specified timeframe. The Writ Petition was allowed with no costs imposed.