Penalty inspite of reversal of excess claimed ITC

[SUSHIL BANSAL]

Dear friends,

One of my client claimed excess ITC of Rs. 40 Lacs in the month of Jan.2018 (due to typo error). ITC reversed in 3B of Oct, 2018. The fact of reversal was also mentioned in GSTR-9 table No 12.

After assessment order Int u/s 50 for the utilisation out of this excess ITC availed Rs.15000 deposited through DRC-03.

Penalty of Rs. 4 Lacs imposed u/s 122(2)(a) (10% of Rs. 40 Lacs)

My point is that Section 73 (9) says...' The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent. of tax or ten thousand rupees, whichever is higher, due from such person and issue an order. [See Rule 142(4)]'

in my case tax determined should be treated as Nil as the tax was paid in 3B itself & GSTR-9 also filed & that is well before issuing the SCN, however in the assessment order it was mentioned that “as the amount of Rs. 40 Lacs has already been reversed in 3B,I appropriate the same in to the government account” that means whether tax determined to be treated as 40 Lacs?

Plz guide whether penalty of Rs. 4 Lacs u/s 122(2)(a) is valid?

[Shilpi Jain]

In this case, have you reversed the credit after department intervention or by own ascertainment.

If it is on own ascertainment and reversal along with interest (on any ITC which is utilised) is already paid before issuance of SCN, no notice to be issued and no penalty should be liable.

[KASTURI SETHI]

Sh.Sushil Bansal Ji,

Your client deposited interest via Form GST- DRC-03after the Order was passed by the Proper Officer. If it is so, penalty of 10 % of tax has been levied correctly de jure.

[Padmanathan KV]

Sir, pls clarify:-

Whether SCN u/s 73 & DRC-01 was issued for levying interest?

if so, was payment of interest in DRC-03 made within 30 days of SCN?

if not, then officer can levy penalty u/s 73 r.w.s 122(2)(a). The ITC wrongly self-assessed by you in Jan 2018 will be sought to be demanded and reversal done by you in Sept in Oct 2018 will be appropriated.

Further, if feel that CCE Vs Bombay Dying2007 (8) TMI 2 - SUPREME COURT may not be applicable here as you have utilized the credit (since you have paid interest of 15,000/-, ITC must have been utilized). Had you versed the credit before utilization, you could have built up an argument that based on Supreme Court's ratio in above case, ITC will be deemed to have never been availed.

AI Summary

Penalty Dispute Over Reversed ITC Claim: Client Challenges Rs. 4 Lakh Fine Under Section 122(2)(a) of GST Act A client mistakenly claimed an excess Input Tax Credit (ITC) of Rs. 40 lakhs in January 2018, which was reversed in October 2018 and reported in GSTR-9. Despite this reversal, a penalty of Rs. 4 lakhs was imposed under Section 122(2)(a) of the GST Act. The client argues that since the ITC was reversed before the issuance of the Show Cause Notice (SCN), the penalty should not apply. Responses suggest that if the reversal was done voluntarily and interest paid before the SCN, no penalty should be imposed. However, if interest was paid post-SCN, the penalty may be justified.