Petition dismissed over wrongly transitioned input tax credit on Basic Customs Duty under Section 140 CGST Act

The HC dismissed the petition challenging levy of interest and penalty on wrongly transitioned input tax credit. Petitioner had claimed input tax credit on Basic Customs Duty under CENVAT Credit Rules, 2004, which was inadmissible. Under Section 140 of CGST Act, 2017, only unutilized credit admissible under existing law and CGST Act could be transitioned. Department erroneously sanctioned refund but later demanded restitution. Court held provisions ensure proper restitution of unjust benefit, making the impugned order sustainable.

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Issues Involved:
1. Legality of invoking Section 74 of the CGST Act, 2017.
2. Imposition of penalty u/s 74 of the CGST Act, 2017.
3. Levy of interest u/s 50 of the CGST Act, 2017.

Summary:

1. Legality of invoking Section 74 of the CGST Act, 2017:
The court examined whether Section 74 of the CGST Act, 2017 was applicable in this case. The impugned order noted that "None of the above ingredients are present in this case so as to invoke section 74 of the CGST Act, 2017." The court concluded that the appellant did not suppress any facts, misstate, or commit fraud, making the invocation of Section 74 improper.

2. Imposition of penalty u/s 74 of the CGST Act, 2017:
The court addressed the issue of penalty imposition under Section 74. It was noted that since the invocation of demand under Section 74 was not legal, "the demand for penalty is not sustainable." Consequently, the penalty of Rs. 21,44,097/- imposed in the order was set aside.

3. Levy of interest u/s 50 of the CGST Act, 2017:
The court upheld the demand for interest at 18% u/s 50(1), stating, "Further demand of interest is Automatic when the tax due is confirmed." The petitioner had accepted and paid the tax dues of Rs. 42,88,194/- and was liable to pay interest on the erroneous refund. The court also noted that "there is a delay in the payment of the amount after the amount was wrongly sanctioned," justifying the interest demand.

Conclusion:
The appeal was partly allowed, setting aside the penalty but upholding the interest demand. The writ petition was dismissed, and the impugned order was deemed sustainable.

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