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Issue ID : 120014
- 0 -

Wrong Input Claimed Reversed Through DRC03

Date 15 May 2025
Replies5 Answers
Views 489 Views

Respected Sir/Madam

One of my client wrongly availed input of Cess in FY 2021-22. The mistake came in to knowledge while filing Annual Return. In the business of my client Cess is not chargeable as output tax hence not utilised ever and this wrong credit availed was paid through DRC-03 after filing Annual Return.

I want to know that can department demand any interest / penalty on this un-utilised input. The client is based in Delhi. Please also give case laws of Hon'ble High Courts and/or Hon'ble Supreme Court, if any.

Regards

CA Sudesh Kumar Agarwal

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- 0
Replied on May 16, 2025
3.

No interest or penalty can be levied as the ITC though availed has not been utilised.

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Replied on May 16, 2025
4.

Provision of section 50(3) of the CGST Act also supports this, which is mutatis mutandis applicable to the Compensation Cess.

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Replied on May 16, 2025
5.

In the case where the client, based in Delhi, wrongly availed input of Compensation Cess in FY 2021-22 and the same was never utilised towards payment of any output tax liability due to inapplicability in their business, and subsequently reversed and paid through DRC-03 after filing of Annual Return, the department cannot demand interest or penalty on such unutilised credit. The Hon’ble Madras High Court in the case of TVL. Kumaran Filaments (P) Ltd. v. Commr. of CGST & C. Ex., Madurai [2022 (3) TMI 442] held that mere availment without utilisation does not attract interest liability. Further, the Hon’ble Supreme Court in Union of India v. Ind-Swift Laboratories Ltd. [2011 (2) TMI 6] related to CENVAT regime was distinguished in subsequent GST jurisprudence as the GST law, particularly Section 50(3) of the CGST Act (applicable mutatis mutandis to Compensation Cess), mandates interest only on “wrongly availed and utilised” input tax credit. Since there was no utilisation of such wrong credit, no interest or penalty is legally sustainable.

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