penalty inspite of reversal of ITC

[SUSHIL BANSAL]

Dear experts,

one of my client claimed excess ITC in the month of January 2018 (due to feeding error). some amount of it was utilised also in subsequent months . In the month of Oct., 2018 3B the excess claimed ITC was reversed and tax paid. 90% of this paid tax was lying in cash ledger. the fact of reversal was also mentioned in GSTR-9 table No 12.

SCN issued. we replied as above. Interest u/s 50 was paid after DRC-07.in DRC-07 department imposed penalty u/s 122(2)(a) @ 10% of wrong ITC availed.

My query is :

when ITC has been revered voluntarily & informed through 3B & GSTR-9.is it justified to impose penalty because section 73(8) waives penalty but I think 73(8) covers cases of payment through DRC-03.

if my case is covered by section 73(8), then whether it makes any difference if only tax is paid, as Interest was paid after DRC-07

AI Summary

Client Challenges Penalty for Excess ITC Reversal Citing Voluntary Compliance and Section 73(8) of CGST Act A client mistakenly claimed excess Input Tax Credit (ITC) in January 2018, which was partially utilized in subsequent months. The excess ITC was reversed and the tax was paid in October 2018, with the reversal noted in GSTR-9. Despite this, a penalty under Section 122(2)(a) of the CGST Act was imposed. The client argues that since the ITC was voluntarily reversed and informed, the penalty is unjustified, especially as Section 73(8) waives penalties if taxes are paid via DRC-03. However, since the interest was paid post-SCN, experts suggest the penalty is mandatory, though harsh. The client seeks clarification on the penalty's correctness.