No Penalty if ineligible ITC was availed and not utilised

 

The Issue :
Greenstar Fertilizers Ltd. faced a dispute related to the eligibility of input tax credit (ITC) under the Central Goods and Services Tax (CGST) Act. The authorities alleged that certain ITC claimed during the GST rollout was ineligible, leading to a demand for reversal, interest, and penalties.

Facts :
1. ITC Transition: Greenstar Fertilizers transitioned ITC during the GST implementation.
2. Show-Cause Notice: The authorities issued a show-cause notice questioning the eligibility of the claimed ITC.
3. Penalty Concerns: The petitioner argued that penalties should not apply, as it was an inadvertent mistake, and there was no actual revenue loss to the government.

Court Judgment:
The Madras High Court ruled in favor of Greenstar Fertilizers, emphasizing the following points:

1 Penalty Applicability: Penalties under Section 74 of the CGST Act apply only when the ITC is “availed and utilized.” Since Greenstar Fertilizers did not utilize the disputed ITC, a token penalty of Rs. 10,000/- was imposed.
2 Genuine Mistake: The court recognized that the petitioner’s claim was a genuine error, not deliberate misuse of ITC.
3 No Revenue Loss: As there was no actual revenue loss, the penalty was minimal.

Key Takeaways:
Unused ITC: Penalties apply when ineligible ITC is utilized, not merely claimed.
Judicial Prudence: Courts consider genuine mistakes and revenue impact while imposing penalties.
Compliance Reminder: Businesses should exercise due diligence in ITC claims.

𝘔𝘈𝘋𝘙𝘈𝘚 𝘏𝘊 – 𝘔/𝘴 𝘎𝘙𝘌𝘌𝘕𝘚𝘛𝘈𝘙 𝘍𝘌𝘙𝘛𝘐𝘓𝘐𝘡𝘌𝘙𝘚 𝘓𝘐𝘔𝘐𝘛𝘌𝘋 𝘷. 𝘛𝘏𝘌 𝘑𝘖𝘐𝘕𝘛 𝘊𝘖𝘔𝘔𝘐𝘚𝘚𝘐𝘖𝘕𝘌𝘙 (𝘈𝘗𝘗𝘌𝘈𝘓𝘚) [𝘞.𝘗.(𝘔𝘋)𝘕𝘰.26254 𝘰𝘧 2022]

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The Copy Of the Order as Under:

 1718939751816