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

Penalty waiver under Section 73(8) hinges on payment of both tax and interest within thirty days of the show cause notice.
Voluntary reversal of wrongly availed input tax credit and disclosure in returns does not by itself preclude imposition of a mandatory penalty where interest was not paid within thirty days of the show cause notice; waiver of penalty requires payment of both tax and interest within that period, interest is treated as part of tax and arises automatically, and disputes arise over whether the penalty base is the originally claimed tax or the tax finally determined after appropriation.