wrongly availed ITC

[SRIHARI CHILLA]

Dear Experts,

My client is the Registered supplier to ITC Ltd, paper mill bhadrachalam.

He is supplying the D-Barked eucalyptus wood to the paper mill.

the issue is in the first month of GST implementation i.e July 2017

We are purchasing the eucalyptus trees from the Farmers and cutting them in diff sizes and sending them to ITC. Farmers are unregistered Dealers.

While filing the GSTR-1 the showing the liability of IGST correctly and filed within the due date.

But While filing the GSTR-3B the assesee was paid the IGST within the due date of 20-08-2017

but he was confused about the RCM mechanism while filing the GSTR-3B by utilizing the ITC and filed the return. but the paid tax remained in the cash ledger.

This was noticed later and adjusted while filing the Annual returns GSTR-9 and 9C by reversing the wrongly availed the ITC and and adjusted to tax liability was set off with the available balance in the cash ledger which was paid earlier.

now The Department asking to pay interest on wrongly availed the ITC and late payment of tax. kindly suggest it to us please with case laws or any circulars etc..

[Shilpi Jain]

There is one case which went up to the HC for the issue where tax was paid in cash ledger but missed to utilise for tax payment. However, that case was remanded back to the adjudicating authority.

In such cases, it can be argued that GST was a new law and these kind of errors have happened. Leeway should be given more so when the tax was paid in the cash ledger.

[KASTURI SETHI]

Relief is possible only through litigation.The department will issue SCN. You cannot avoid SCN in the facts & circumstances mentioned by you. Better option for you is to pay Govt. dues under protest and fight the case. You may get the benefit of unintentional first bona fide error when GST was in its infancy as already opined by Madam Shilpi Jain.

Now you require time-lag. Meanwhile you may get some case law in your favour.So consume maximum time provided in GST laws.

AI Summary

Supplier Faces Interest Demand Over Early GST Input Tax Credit Error; Litigation Considered for Relief A client, a registered supplier to a paper mill, faced issues with wrongly availed Input Tax Credit (ITC) during the initial GST implementation in July 2017. The client purchased eucalyptus trees from unregistered farmers and paid Integrated GST (IGST) on time but was confused about the Reverse Charge Mechanism (RCM) while filing GSTR-3B. This resulted in a misallocation of funds, later corrected in the annual returns. The tax department is now demanding interest on the wrongly availed ITC and late tax payment. Experts suggest litigation as a possible relief, emphasizing the errors were unintentional during GST's early phase.