Reversal of Input Credit interest and penalty is applicable

[MUNIRAJ SRINIVASAN]

Dear sir,

My client is wrongly availed input credit of ₹ 130000 for the month of Oct 2015 but he is not utilized the credit amount but next month Nov 2015 he was reversed the said amount department of Commercial Taxes put penalty and interest for said amount is applicable ? if any provision/ Case law is there ?

AI Summary

Reversal of wrongly availed input credit attracts interest; penalty may be avoidable if credit reversed and interest paid before notice.
Reversal of wrongly availed input credit under VAT attracts interest; if the taxpayer reverses the credit and pays interest before any departmental notice, penalty is ordinarily not imposed. Treatment depends on state VAT law, with Karnataka VAT indicated as the likely applicable framework.