M/S Kjv Alloys Conductors PVT. LTD. vs. Union Of INDIA

Held

The Court held that the interest amount arising on the self-assessed reversal of ITC is an arrear and recoverable without the issuance of a separate Show Cause Notice (SCN). The Court noted that the ITC under dispute was self-assessed and accepted by the appellant. It further clarified that liabilities towards interest can only be discharged from the electronic cash ledger, not the electronic credit ledger, as per Section 49 of the CGST Act, 2017. The Court found that the petitioner's submission that they were not required to discharge liability in cash due to sufficient balance in the credit ledger was not tenable. The Court dismissed the petitioner's reliance on the Bombay High Court judgment in "Soorajmull Bajinath (P.) Ltd. Vs. Union of India," stating that no material was produced to justify that the balance in the electronic credit ledger was below the wrongly availed ITC amount. The Court concluded that interest is mandatory under Section 50(3) read with Section 42(10) of the CGST Act, 2017, given the admitted wrongful availment and retention of ITC for 630 days. Therefore, the impugned orders were not interfered with. The writ petition was dismissed.

Facts

The petitioner, M/s KJV Alloys Conductors Pvt. Ltd., filed a writ petition challenging two orders: one dated 10.02.2020 by the Commissioner, Central GST, and another dated 21.04.2021 by the Joint Commissioner (Appeals). These orders confirmed an interest liability of Rs. 54,29,792/- on the reversal of input tax credit (ITC) and adjusted a refund of Rs. 32,00,000/- from the electronic cash ledger towards this interest. The petitioner had initially claimed transitional credit of Rs. 1,31,07,632/- via Form TRAN-1, which due to portal glitches, was reflected in its GSTR-3B. Subsequently, the petitioner identified an excess credit of Rs. 3,48,523/- and reversed the entire amount in April 2019. The department then demanded interest under Section 50(3) read with Section 42(10) of the CGST Act, 2017.

Key Issues

1. Whether interest under Section 50(3) of the CGST Act, 2017, is leviable on input tax credit that was wrongly availed but not utilised, especially in light of the retrospective amendment to Section 50(3) with effect from 01.07.2017? The petitioner argued that interest is only leviable when ITC is wrongly availed and utilised, and since the credit was reversed without utilisation, no interest liability arises. They relied on the legislative intent clarified by the amendment. The respondents contended that the petitioner availed transitional credit twice, and the delay in reversal (630 days) established utilisation, thus attracting interest liability under Sections 50(3) and 42(10). They argued the amendment does not assist the petitioner as utilisation is established. 2. Whether the adjustment of the petitioner's refund of Rs. 32,00,000/- towards alleged interest liability was lawful and in accordance with principles of natural justice? The petitioner argued this adjustment was arbitrary and violated natural justice principles, as it was done without proper adjudication and without establishing actual utilisation. The respondents asserted that the refund was lawfully adjusted against outstanding interest liability under Section 79 of the CGST Act, 2017, and the appellate order upheld this action.