For the Petitioner : Mr. Rudra Prasad Kar,
(in both the cases) Senior Advocate
Assisted by
M/s. Aditya Narayan Ray,
Asit Kumar Dash and
Abhishek Dash, Advocates
For the Opposite parties : Mr. Sujan Kumar Roy Choudhury,
(in both the cases) Senior Standing Counsel,
Mr. Mukesh Agarwal,
Senior Standing Counsel,
Goods and Services Tax,
Central Excise and Customs
Assailing the Order-in-Original dated 03.02.2025 and
Order dated 04.02.2025 under Section 74 read with
Summary of the Order dated 04.02.2025 in Form DRC-
07, passed by the GST and Central Excise, Angul-I
Range (Annexures-5 and 6) for the Financial Year 2017-
18 covering tax periods July, 2017 to March, 2018,
whereby and whereunder not only tax equivalent to
input tax credit, which had already been reversed in the
subsequent returns, but also interest thereon under
Section 50 is levied and penalty imposed by way of
initiating proceeding under Section 74 of the Central
Goods and Services Tax Act, 2017 read with Section 20
of the Integrated Goods and Services Tax Act, 2017, in
connection with Summary Show Cause Notice and
Demand Show Cause Notice, both dated 26.07.2024
(Annexure-3), by way of filing petition being W.P.(C)
No.12682 of 2025, the petitioner craves indulgence of
this Court by exercising power under Articles 226 and
227 of the Constitution of India.
1.1. Assailing the Order-in-Original dated 04.02.2025 passed
under Section 74 read with Summary of the Order dated
05.02.2025 in Form DRC-07, passed by the GST and
Central Excise, Angul-I Range (Annexures-6 and 7) for
the Financial Year 2017-18 covering tax periods July,
2017 to March, 2018, whereby and whereunder not only
tax equivalent to input tax credit, which had already
been reversed in the subsequent returns, but also
interest thereon under Section 50 is levied and penalty
imposed by way of initiating proceeding under Section
74 of the Central Goods and Services Tax Act, 2017 read
with Section 20 of the Integrated Goods and Services Tax
Act, 2017, in connection with Summary Show Cause
Notice and Demand Show Cause Notice, both dated
26.07.2024 (Annexure-3), by way of filing petition being
W.P.(C) No.12686 of 2025, the petitioner craves
indulgence of this Court by exercising power under
Articles 226 and 227 of the Constitution of India.
Case of the petitioner:
2. At the outset, since it is submitted at the Bar that both
the cases are identical and arises out of similar orders
passed by the same authority by taking cognizance of
allegation contained in Alert Notice of the DGGI, Kolkata
Zonal Unit relating to self-same alleged non-existent
supplier vis-a-vis input tax credit availed by both the
petitioners, which was voluntarily reversed, the factual
narration contained in W.P.(C) No.12682 of 2025 is
taken as the lead case for convenience of adjudication of
issues flagged in the cases.
3. The petitioner, registered under the provisions of the
Central Goods and Services Tax Act, 2017/the Odisha
Goods and Services Tax Act, 2017 (collectively be called
"GST Act") and assigned GSTIN: 21AANPN1032G2Z6, is
engaged in the business of transportation and execution
of works contract.
3.1. The Superintendent (Anti-Evasion), CGST and Central
Excise, Rourkela Commissionerate issued a Letter dated
12.07.2024 requesting the petitioner-recipient to reverse
input tax credit to the tune of Rs.4,39,970/- along with
applicable interest and penalty, as M/s. Auxesia
Traders, Kolkata (GSTIN: 19APGPB1744M1ZS), the
supplier, was alleged to be non-existent entity which
issued fake/bogus invoices. The input tax credit so
availed by the petitioner was in contravention of Section
16(2) of the GST Act. Responding to said letter, the
petitioner submitted a reply dated 17.07.2024 that he
voluntarily reversed the input tax credit of Integrated
Goods and Services Tax to the tune of Rs.4,39,470/- in
the returns vide Form GSTR-3B for the month of April,
2023 for an amount of Rs.2,64,342/- and Form GSTR-
3B for the month of June, 2024 for an amount of
Rs.1,75,128/. Hence, the petitioner was not beneficiary
of the impugned transactions. It was also objected to
therein that since the Electronic Credit Ledger had more
credit balance than the alleged amount of input tax
credit availed or utilised, payment of interest under
Section 50 of the GST Act does not arise. In view of the
retrospective amendment made in Section 50 of the GST
Act with effect from 01.07.2017, interest is chargeable
only on ITC wrongly availed and utilised, not just on
wrongly availed.
3.2. The Superintendent (Anti-Evasion), GST and Central
Excise of Rourkela Commissionerate ("Adjudicating
Authority", for short) issued Summary of Show Cause
Notice dated 26.07.2024 in Form GST DRC-01 enclosing
therewith Demand-cum-Show Cause Notice dated
26.07.2024 (for convenience be referred to as "SCN")
indicating exercise of power under Section 74, Section
50 of the GST Act read with Section 20 of the Integrated
Goods and Services Tax Act, 2017. Raising objection
that no Show Cause Notice in Form GST DRC-01A (pre-
Show Cause Notice) required under Rule 142(1A) of the
Central Goods and Services Tax Rules, 2017 being
issued, interest under Section 50 would not be attracted
in the present case, the petitioner requested the
Adjudicating Authority to drop the proceeding by
furnishing written submission on 30.01.2025 in
response to said SCN. There was blatant omission of
adherence to the principles of natural justice in absence
of issue of Form GST DRC-01A, rendering the Order-in-
Original dated 03.02.2025 passed under Section 74
pertaining to the tax periods covering July, 2017 to
March, 2018 vitiated. Thereby, all other consequential
actions are liable to be nullified.
3.3. Aggrieved by non-consideration of reply and written
notes submitted to the Adjudicating Authority and the
Order-in-Original being passed upon initiation of
proceeding under Section 74 of the GST Act by issue of
SCN in contradiction to guidelines contained in
F.No.CBIC-20004/3/2023-GST, dated 13.12.2023
issued by the Central Board of Indirect Taxes and
Customs (GST Policy Wing), the petitioner has
approached this Court by way of filing the instant writ
petition.
Hearing:
4. As the initiation of proceeding under Section 74 of the
GST Act has been questioned and a question is flagged
by the petitioner as to whether interest under Section 50
and penalty under Section 74 would be attracted when
the input tax credit availed has been reversed voluntarily
by utilising Electronic Credit Ledger leaving excess
balance after such adjustment by reversing such input
tax credit, both the matters are taken up for final
hearing at the stage of "Fresh Admission".
4.1. Record reveals that the writ petition [W.P.(C) No.12682
of 2025] being filed on 03.05.2025, it got registered on
06.05.2025, and copy thereof was served on Senior
Standing Counsel (CGST) on 03.05.2025. Till the date of
hearing of this matter, i.e., 12.02.2025, no counter
affidavit has been filed on behalf of the opposite parties.
Yet, it is stated at the Bar that the authority concerned
has been persisting the petitioner to pay off the demand
comprising tax, interest as also the penalty. Since the
matter involves question of law emerging from
undisputed facts as referred to above, this Court heard
arguments advanced by the counsel for the respective
parties.
4.2. Heard Sri Rudra Prasad Kar, learned Senior Advocate
assisted by Sri Asit Kumar Dash, learned Advocate for
the petitioner and Sri Sujan Kumar Roy Choudhury,
learned Senior Standing Counsel and Sri Mukesh
Agarwal, learned Senior Standing Counsel for the
opposite parties.
4.3. Hearing being concluded, the matter stood reserved for
preparation and pronouncement of Judgment/Order.
Arguments and submissions:
5. Sri Rudra Prasad Kar, learned Senior Advocate
appearing along with Sri Asit Kumar Dash, learned
Advocate submitted that the Adjudicating Authority
exceeded jurisdiction in invoking provisions of Section
74 for levying tax equivalent to input tax credit stated to
have been voluntarily reversed in the subsequent
returns in Form GSTR-3B and interest under Section 50
and imposing penalty under Section 74. The provisions
of Section 74 for levying interest under Section 50 and
penalty under Section 74 cannot be invoked even for the
purpose of non-payment of Goods and Services Tax, in
absence of any material on record with respect to
specific element of fraud or wilful misstatement or
suppression of facts in order to evade tax. It is
emphatically submitted that only in the cases where the
investigation indicates that there is material evidence of
fraud or wilful misstatement or suppression of fact to
evade tax on the part of the taxpayer provisions of
Section 74 of GST Act could be invoked for issuance of
SCN, and such evidence should also be made a part of
the SCN. The Adjudicating Authority without
independent application of mind merely based on Alert
Notice dated 19.03.2024 received from the DGGI,
Kolkata Zonal Unit traversed his authority under Section
74 of the GST Act.
5.1. Advancing his argument further it is canvassed by the
learned Senior Counsel that as per Section 74(5) of the
GST Act, a person chargeable with tax may, before
service of notice under sub-section (1) i.e. SCN, pay the
amount of tax along with interest payable under Section
50 and a penalty equivalent to fifteen per cent of such
tax on the basis of his own ascertainment of such tax or
the tax as ascertained by the Proper Officer and inform
the Proper Officer in writing of such payment. In the
instant case, the alleged tax has been paid by the
petitioner voluntarily prior to issuance of the SCN.
Therefore, there being no occasion or scope available for
the Adjudicating Authority to invoke provisions of
Section 74 and proceed to demand interest and penalty
without verifying the records/returns available with him
and mechanically issue SCN and confirm the proposed
demand therein ignoring to take into consideration the
explanation proffered in response to such SCN. He, thus,
emphasised that not only the SCN (Annexure-3), but
also the Order-in-Original coupled with Summary Order
(Annexures-5 and 6 respectively) is vitiated.
5.2. Forcefully arguing that in view of amendment carried in
Section 50 of the GST Act giving retrospective effect from
01.07.2017, interest stands chargeable only on input tax
credit "wrongly availed and utilised", but not on its being
"wrongly availed", Sri Rudra Prasad Kar, learned Senior
Advocate has taken this Court to the uncontroverted fact
that the Electronic Credit Ledger had more credit
balance than the alleged input tax credit requested for
reversal vide Letter dated 12.07.2024 (Annexure-1). The
petitioner had already reversed such input tax credit to
the tune of Rs.4,39,970/- while filing returns in Form
GSTR-3B for the months of April, 2023 and June, 2024,
prior to issue of SCN. Such fact was also intimated to
the Proper Officer on 17.07.2024. The learned Senior
Counsel made suave submission that the availed input
tax credit being reversed suo motu leaving excess
balance in the Electronic Credit Ledger, the liability to
pay interest under Section 50 of the GST Act would not
arise on the facts and in the circumstances of the case.
Therefore, the ingredients for exercise of power to initiate
proceeding under Section 74 being absent, the
imposition of penalty therefor also would be uncalled for.
6. The learned Senior Standing Counsel(s) being present
did not dispute the facts as unfurled in the writ petition
that the petitioner had reversed the input tax credit to
the tune of Rs.4,39,970/- as requested in Letter dated
12.07.2024 of the Superintendent (Anti-Evasion), CGST
and Central Excise, Rourkela Commissionerate, but
vociferously submitted that the petitioner cannot be
allowed to circumvent efficacious remedy available under
GST Act and having approached this Court directly
beseeching to invoke extraordinary jurisdiction of this
Court under Articles 226 and 227 of the Constitution of
India, the writ petition deserves to be dismissed.
6.1. The learned Senior Standing Counsel emphasised on the
point that it is unknown whether the input tax credit
stated to have been reversed voluntarily is relatable to
the allegation made in Summary of Show Cause Notice
read with Demand Show Cause Notice dated 26.07.2024
(Annexure-3). Therefore, it is arduously contended by
the Revenue that such factual aspect is required to be
considered by the fact-finding authorities empowered to
do so under the GST Act.
Consideration of arguments and submissions:
7. No answer is available with the Senior Standing
Counsel(s) as to why no counter affidavit has been filed
nor was there any instruction received from the opposite
parties even though the copy of the writ petition was
served on them way back on 03.05.2025. Considering
the submission of the counsel for the petitioner that the
authorities concerned have been pursuing with recovery
of the demand, this Court has proceeded to hear the
matter.
8. Perusal of material on record reveals that against Serial
No.4 seeking to disclose "Eligible ITC" in the return for
the month of April, 2023 in Form GSTR-3B prescribed
under Rule 61(5) (filed on 19.05.2023), an amount of
Rs.2,64,342/- is shown to have been placed under the
heading "ITC reversed". Similarly, an amount of
Rs.1,75,128/- was reversed against the said heading
"Eligible ITC" and "ITC reversed" in the return for the
month of June, 2024 in Form GSTR-3B (filed on
13.07.2023). Such fact of self-assessment is also
intimated to the Superintendent (Anti-Evasion) by a
reply dated 17.07.2024 (Annexure-2) in response to a
Letter of request issued by said authority on 12.07.2024.
8.1. It is emanated from a conjoint reading of Letter dated
12.07.2024 and SCN dated 26.07.2024 that M/s.
Auxesia Traders (GSTIN: 19APGPB1744M1ZS), the
supplier, generating fake invoices in its name issued to
different business entities including the present
petitioner "in order to pass on fake input tax credit
without supply of underlying goods and/or services".
The allegation against the petitioner is transpired from
the Demand Show Cause Notice dated 26.07.2024 which
is as follows:
"Whereas it appears that the noticee have contravened
the provisions of Section 16 of the CGST Act, 2017
(hereinafter referred to as the Act) read with Rule 36 of
the Central Goods and Services Tax Rules, 2017
(hereinafter referred as the Rules), inasmuch as the
noticee has fraudulently availed input tax credit (ITC) to
the tune of Rs.4,39,970/- (IGST: Rs.4,39,970/-) [Rupees
four lakh thirty nine thousand nine hundred seventy only]
on the strength of fake/bogus invoices issued by M/s.
Auxesia Traders (herein referred to as M/s. AT (having
GSTIN: 19APGB1744M1ZS, who has been, upon
verification found to be non-existent and fictitious firm.
Therefore, it appears, that the noticee is required to pay/
reverse input tax credit equivalent to Rs.4,39,970/- (IGST:
Rs.4,39,970/-) availed and utilised on the strength of
paper tax invoices issued by the aforesaid non-existent
for the tax periods August, 2017 to December, 2017, in
terms of provision of Section 74(1) of CGST Act along with
interest payable thereon under Section 50 of CGST Act
and OGST Act and the said taxpayer is also liable for
penal action under Section 74 of the said Act read with
Section 20 of the Integrated Goods and Services Tax Act."
8.2. In Demand Show Cause Notice dated 26.07.2024,
following discussions find place:
"5.0 Discussions, findings and outcome of the
investigation:
5.1 From the facts, as mentioned at Para-2 supra, it
appears that M/s. AT is a fake/bogus firm, which
was registered under GST for the purpose of
availing and passing on fake/ineligible ITC
without any underlying supply of goods or
services or both. It also appears that a non-
existent firm cannot supply any goods/services
to any taxpayer as it is a fictitious entity
created for the sole purpose of passing on fake
ITC. Moreover, the noticee have claimed to have
reversed the demanded ITC, however the noticee
have not submitted any document that ascertains
that the ITC reversed by GSTR-3B, is the same as
availed by them from M/s AT.
5.2. In view of above discussion, it is appear that there is
no supply of goods or services or both were made by
M/s. AT to the Noticee against tax invoices issued
for the period from August-2017 to December-2017.
Therefore, the ITC amounting to Rs. 4,39,970/-
(IGST- Rs. 4,39,970/-) [Rupees four lakh thirty
nine thousand nine hundred seventy only]
availed by the Noticee on the strength of
invoices issued by M/s AT for the period August-
2017 to December-2017, is not admissible to
them. It also appears that this is a case of purely
paper transaction without supply of any goods or
services, thus ITC availed or utilized in respect of
such fictitious transactions, is illegal, irregular and
contravention of provision of Section 16 of the Act
and Rule 36 of the Rules and not admissible to the
Noticee.
***
8.0 Now, therefore, M/s. Manoja Kumar Nayak having
GSTIN: 21AANPN1032G2Z6 and principal place of
business At:- Nalco Nagar, Nalco, Angul, Odisha,
759145, are hereby called upon to show cause to
the Superintendent, CGST & Central Excise, Angul-l
Range of Angul Division, within 30 (thirty) days of
the receipt of this Show Cause Notice as to why:
(i) an amount of Rs.4,39,970/- (IGST- Rs. 4,39,970/-)
[Rupees four lakh thirty nine thousand nine hundred
seventy only] should not be demanded and
recovered from them in terms of the provision of
Section 74(1) of the CGST Act, 2017 read with
Section 20 of the IGST Act, 2017 for availment and
utilization of inadmissible/illegal ITC;
(ii) Interest as applicable under the provisions of Section
50 of the CGST Act, 2017 read with section 20 of the
IGST Act, 2017 should not be demanded and
recovered from them on the amounts of tax
demanded at (i) above;
(iii) Penalty equivalent to the tax liability as demanded
at (i) should not be imposed on them under Section
74(1) of the CGST Act, 2017 read with section 20 of
the IGST Act, 2017 for availing inadmissible ITC and
defrauding the Government Exchequer.
9. The Noticee, i.e., M/s. Manoja Kumar Nayak,
(GSTIN: 21AANPN1032G2Z6), are also informed that
in terms of Section 74(8) of the CGST Act, 2017 read
with Section 20 of the IGST Act, 2017, where tax
and interest is paid within a period of thirty days of
the date of service of notice under sub-section (1) of
Section 74, the penalty payable shall be twenty five
percent (25%) of such tax and proceedings in respect
of such GST, interest and penalty shall be deemed to
be concluded provided the said reduced penalty is
also paid within the said thirty (30) days.
***"
8.3. As against such notice as aforesaid, by furnishing a
written reply dated 30.01.2025 (Annexure-4) the
petitioner intimated as follows:
"In the notice, your goodself has requested to reverse the
ITC of Rs.4,39,970/- availed from M/s. Auxesia Traders,
GSTIN: 19APGPB1744M1ZS.
Important to mention here that, in order to avoid litigation
and buy peace of mind, the noticee has suo motu
reversed the entire input tax credit of (IGST)
Rs.4,39,970/- (GSTR-3B for the month of April 2024
of Rs.2,64,342/-, GSTR-3B for the month of June
2024 of Rs.1,75,128/). Hence the noticee is not
beneficiary of the impugned transaction. Copy of the
GSTR 3B are attached.
Further, upon perusal of the Electronic Credit Ledger, your
honour may observe that the noticee has more credit
balance than the impugned ITC in the electronic credit
ledger. Hence, the liability of interest under Section
50 of the CGST Act may not arise. In view of the
retrospective amendment made in Section 50 of the CGST
Act from 01.07.2017, interest is chargeable only on ITC
wrongly availed and utilised, not just on wrongly
availed."
8.4. Despite the reply to Show Cause Notice is candid to be
noticed that the noticee had already made deposits as
pointed out by the Superintendent (Anti-Evasion) vide
Letter dated 12.07.2024 even before issue of Summary
Show Cause Notice dated 26.07.2024. The Letter dated
17.07.2024 before issue of Show Cause Notice dated
26.07.2024 (Annexure-2 series) and Reply dated
30.01.2025 (Annexure-4) both addressed to the
Superintendent (Anti-Evasion) unambiguously depicts
that the petitioner has shown the reversal of input tax
credit for an amount of Rs.4,39,970/- while filing
returns for the month of April, 2024 and June, 2024
vide Form GSTR-3B. The said letter as well as the reply
indicates that evidence showing such fact and figure has
been enclosed. For the sake of consideration of
argument, even in its absence, since the fact of such
reversal was also uploaded in the web-portal of the
Goods and Services Tax Organisation, which is
accessible by the authority concerned, the
Superintendent (Anti-Evasion) appears to have acted
over-zealously, which is reflected in the following
sentences culled out from the Order-in-Original
No.24/SUPDT/ GST/AGL-I/2025, dated 03.02.2025:
"3.0. Reply of the Noticee:
3.1 In response to the Demand-cum-SCN, the
Noticee submit a reply on 30.01.2025 in which
he stated that in order to avoid litigation and
buy peace of mind, the Noticee has suo motu
reversed the entire input tax credit of (IGST) Rs.
4,39,970/- (GSTR-3B for the months of April
2024 of Rs.2,64,342/- and June 2024 of
Rs.1,75,128/- respectively). Hence the Noticee is
not beneficiary of the impugned transaction. Further,
the Noticee added that upon in electronic credit
ledger the Noticee has more credit balance than the
impugned ITC so Liability of interest under Section
50 of the CGST Act may not arise and further he
requested to drop the case.
***
6.0 Discussions and findings:
6.1 I have carefully gone through the case records,
including the allegations contained in the impugned
SCN and the reply furnished by the Noticee. I find
that in the instant case, the reply to the SCN
submitted by the Noticee is not satisfactory as the
Noticee mentioned that he has Suo-motto reversed
the ITC of Rs. 4,39,970/- (GSTR-3B for the months of
April 2024 of Rs.2,64,342/- and June 2024 of
Rs.1,75,128/- respectively). First of all, the
Noticee did not submit any document that
ascertains that the ITC reversed by GSTR-3B is
the same as demanded from them. Further, on
verifying the GSTR-3B return for the month of
April-2024 it was found that no ITC was
reversed through that return hence the reply
submitted by the Noticee is not accepted.
Moreover, as per Rule 142 of the CGST Act 2017, the
taxpayers shall make payments tow£irds tax,
interest, penalty, and other amounts before or after
the issuance of a show-cause notice by Form GST
DRC-03. Hence the ITC reversed in GSTR-3B would
not be taken into consideration.
6.2 The allegation in the impugned SCN is that the
Noticee has contravened the provisions of Section 16
of the CGST, 2017 (hereinafter referred to as the Act)
read with Rule 36 of Central Goods and Services
Tax Rules, 2017 by fraudulently availing ITC of
Rs.4,39,970/- on the strength of fake/bogus
invoices issued by M/s. AT having GSTIN:
19APGPB1744M1ZS, who has been, upon
verification found to be non-existent and fictitious
firm, which is recoverable from them under the
provisions of Section 74 of the Acts along with
interest under Section 50(1) and applicable penalty
under Section 74 of the Acts.
6.8 The Noticee being registered taxpayer under the
CGST and OGST Act, 2017, it is expected to be well
versed with the GST laws and provisions of taxation.
They should have taken reasonable steps to ensure
genuineness of ITC being availed of by them. As
stated above, the burden lies on the Noticee to
demonstrate that he had taken such care. However,
it appears that the Noticee have availed of the ITC of
Rs. 4,39,970/- (IGST= Rs.4,39,970/-) [Rupees four
lakh thirty nine thousand nine hundred seventy
only] on the basis of bogus/fake invoices, knowing
well that such invoices were issued by non-existent
firm and therefore have no legal sanctity and no tax
was actually paid to the Government on such supply
and therefore they were not eligible to avail ITC on
such invoices, as per the provisions of Section 16 of
the CGST Act, 2017 read with Section 20 of the IGST
Act, 2017. But the Noticee deliberately availed of
such inadmissible ITC with sole intention to defraud
the Government Exchequer. Had the departmental
officers not initiated the enquiry, such wrong
availment of ITC would have remained unnoticed
and the Noticee continued to have enjoyed this
unlawful benefit. Therefore, the extended period of
limitation as envisaged in the proviso to Section 74
of the Acts appears to be invocable in the instant
case for recovery of tax, interest, and imposition of
penalty.
7.0 As per my discussion above, I find that the Noticee
has fraudulently availed the ITC (IGST) amounting to
Rs.4,39,970/- (Rupees Four Lakh Thirty-Nine
Thousand Nine Hundred and Seventy Only) in
contravention of the provisions as laid down in
Section 16 of the CGST Act, 2017 read with section
20 of the IGST Act, 2017 during the FY 2017-18 and
the same is recoverable from him under Section 74(1)
of the Acts.
7.1 Since the Noticee has availed the ITC fraudulently
and thereby violated the provisions of Section 16 of
the CGST Act, 2017 read with section 20 of the IGST
Act, 2017. Therefore, the Noticee is liable to pay
interest in compliance with Section 50 of CGST Act,
2017 read with section 20 of the IGST Act, 2017."
8.5. It is transparent from a close scrutiny of returns in Form
GSTR-3B as enclosed with the writ petition at Annexure-
2 series as broad daylight that the finding of fact of the
Superintendent (Anti-Evasion) is fallacious and cannot
be countenanced. The return in Form GSTR-3B for the
month of April in the year 2023-24 reveals as follows:
"Year 2023-24
Period April
***
4. Eligible ITC
Details Integrated Central State/ Ces
tax tax UT tax s
* * * * *
B. ITC Reversed
(1) As per Rules 38, 42 264342.00 0.00 0.00 0.00
and 43 of CGST
Rules and Section
17(5)
(2) Others 0.00 0.00 0.00 0.00
C. Net ITC available -264342.00 192583 19258 0.00
(A-B) .88 3.88
The return in Form GSTR-3B for the month of June in
the year 2024-25 reveals as follows:
"Year 2024-25
Period June
***
4. Eligible ITC
Details Integrated Central State/ Ces
tax tax UT tax s
* * * * *
B. ITC Reversed
(3) As per Rules 38, 42 175128.00 0.00 0.00 0.00
and 43 of CGST
Rules and Section
17(5)
(4) Others 0.00 0.00 0.00 0.00
C. Net ITC available -175128.00 322425 32242 0.00
(A-B) .99 5.99
8.6. Learned Senior Advocate drew attention of this Court to
the copy of the Electronic Credit Ledger to demonstrate
that corresponding effect is also given by the petitioner
while maintaining such Ledger. It is not forthcoming
from record that the Superintendent (Anti-Evasion)
having scope to access to these documents, which were
available to him in response to the Show Cause Notice,
has called for any other document(s) for production by
the petitioner. Perusal of impugned Order-in-Original
also indicates no material is put forth by the
Adjudicating Authority or was confronted to the
petitioner even remotely to show that the petitioner has
any complicity with the supplier's non-performance.
8.7. Bare reading of Summary Show Cause Notice would
reveal that the foundation of allegation of claim of input
tax credit by the petitioner against fake/bogus invoices
is this:
"Also, Shri Tamoji Bose (Proprietor of M/s. AT) in his
statements dated 07.03.2019 and 08.09.2019 stated that
there is actually no real business activity in the name of
M/s. Auxesia Traders, only fake GST invoice are issued in
the name of M/s. Auxesia Traders to different business
entities in order to pass on fake input tax credit without
supply of underlying goods and/or services. He also
admitted that he did not have any idea about sales and
purchase of the company."
8.8. From the above statement fact it is demonstrably clear
that based on third party statement the proceeding
under Section 74 on the presumption that input tax
credit has been "wrongly availed or utilised by reason of
fraud, or any wilful misstatement or suppression of facts
to evade tax". It may be highlighted that input tax credit
could be availed erroneously or on a mistaken
interpretation of law. Therefore, it would not be apposite
to form an opinion that in each and every case where the
supplier admits or defaults, it would lead to infer that
the recipient fraudulently in order to evade tax has
availed the input tax credit against fake/bogus invoices.
No inference or presumption or assumption can be
deduced that mere availability of balance in the
Electronic Credit Ledger would lead to suggest there was
utilization.
8.9. Merely because the supplier is found to be non-existent
as indicated in the Alert Notice of the DGGI, the
Adjudicating Authority has jumped to the conclusion
that by dint of the bogus/fake invoices the petitioner has
availed the input tax credit. From the given facts it
emanates that the input tax credit in question has been
claimed by the petitioner on account of transactions of
supply made from outside this State. Obviously such
goods could not move in absence of e-waybill which is
generated from the authority of the Goods and Services
Tax Organisation. It is not the case of the Revenue that
the e-waybills were not utilised by the petitioner for
receiving the supplies from alleged supplier. No material
is brought on record by the Revenue that there was
absence of waybills with respect to alleged invoices.
Furthermore, the Order-in-Original is silent about the
period since when the supplier was found to be non-
existent. The Adjudicating Authority has proceeded
merely on the basis of Alert Notice of DGGI based on
admission of third party-supplier. No inquiry was made
by the Adjudicating Authority nor was any finding of fact
returned as to the status of registration of the supplier
on the date of issue of alleged invoices. There is no
finding as to whether supplier was non-existent and/or
found to be unregistered during the period when the
transactions were being effected. Without independent
application of mind to the allegations/objections
contained in the Alert Notice of the DGGI, possibly the
Adjudicating Authority could not proceed to exercise
power under Section 74 under supposed premise that
the recipient had also defrauded the Revenue. From said
Summary Show Cause Notice it could be gathered that
the Alert Notice contained issue of invoices by the
fake/bogus entity. Nothing is demonstrated by the
Revenue to show that prior to issue of such SCN the
authority concerned had examined the complicity of the
petitioner in such transactions in order to evade tax.
Allegation against supplier vide Alert Notice No.11/2023-
24, dated 19.03.2024 would not ipso facto empower the
Adjudicating Authority to initiate action against the
recipient (petitioner) under Section 74. The language
employed in Section 74 suggests that strong and
tangible material must be available on record to suggest
that the petitioner had the conscious and active
involvement in such dubious transactions.
8.10. Thus, it can be seen from the approach made by the
Adjudicating Authority that he blindly followed the Alert
Notice of the DGGI, without undertaking any
independent inquiry to ascertain credibility of such
allegation qua the petitioner. The Adjudicating Authority
having religiously followed the Alert Notice assumed that
the petitioner was the beneficiary of alleged input tax
credit in order to evade tax. Hence, discrediting such
inchoate material being utilised for the purpose of
raising demand of tax, interest and penalty under
Section 74 this Court thus finds the determination of
liability null and invalid in absence of any independent
inquiry being carried out to verify the allegation
contained in the Alert Notice of the DGGI. The
Adjudicating Authority has made no attempt whatsoever
by seeking specified records to be produced. He could
have examined the statement of fact made by the
petitioner in the reply. Instead of conducting such
inquiry the Adjudicating Authority hastily jumped to the
conclusion that the petitioner has availed input tax
credit wrongfully on the basis of fake/bogus invoices
issued by the non-existent supplier. The Adjudicating
Authority accepted the information based on admission
of an outside source as reflected in the Alert Notice
without subjecting it to a critical scrutiny and
independent application of mind. Hence, the initiation of
proceeding under Section 74 for Financial Year, 2017-18
[covering tax periods July, 2017 to December, 2017]
solely based on such information does smack tinge of
caprice of the Adjudicating Authority.
8.11. Section 74(1) of the GST Act is quoted hereunder:
"(1) Where it appears to the Proper Officer that any tax
has not been paid or short paid or erroneously
refunded or where input tax credit has been wrongly
availed or utilised by reason of fraud, or any
wilful-misstatement or suppression of facts to
evade tax, he shall serve notice on the person
chargeable with tax which has not been so paid or
which has been so short paid or to whom the refund
has erroneously been made, or who has wrongly
availed or utilised input tax credit, requiring him to
show cause as to why he should not pay the amount
specified in the notice along with interest payable
thereon under Section 50 and a penalty equivalent
to the tax specified in the notice."
8.12. Sub-sections (1), (9) and (10) of Section 73 of the GST
Act stand as follows:
"(1) Where it appears to the proper officer that any tax
has not been paid or short paid or erroneously
refunded, or where input tax credit has been
wrongly availed or utilised for any reason, other
than the reason of fraud or any wilful-
misstatement or suppression of facts to evade
tax, he shall serve notice on the person chargeable
with tax which has not been so paid or which has
been so short paid or to whom the refund has
erroneously been made, or who has wrongly availed
or utilised input tax credit, requiring him to show
cause as to why he should not pay the amount
specified in the notice along with interest payable
thereon under section 50 and a penalty leviable
under the provisions of this Act or the rules made
thereunder.
(9) 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.
(10) The proper officer shall issue the order under sub-
section (9) within three years from the due date
for furnishing of annual return for the financial
year to which the tax not paid or short paid or input
tax credit wrongly availed or utilised relates to or
within three years from the date of erroneous
refund."
8.13. The period for which the Show Cause Notice was issued
and the Order-in-Original was passed is concerning
transactions effected during the period August, 2017 to
December, 2017 [Financial Year 2017-18] and genesis of
such allegation could be ascertained from Summary of
Show Cause Notice which is to the following effect:
"On going through the list of availers of input tax credit
passed on by M/s. Auxesia Traders (as provided by
DGGI, Kolkata Zonal Unit, along with the aforesaid alert
notice), it is observed that M/s. Auxesia Traders, which is
a fake/bogus firm, have passed on bugus input tax credit
of Rs.4,39,970/- to the noticee".
8.14. From the finding of fact as recorded in the Order-in-
Original it is un-understandable that the conduct of
business by the petitioner with respect to the subject-
transactions in question could be said to be fraudulent
one having its involvement in the issue of fake/bogus
invoices. Nonetheless, the petitioner has shown bona
fide by reversing the amount of input tax credit the
moment a letter from the Superintendent (Anti-Evasion)
was issued bringing such conduct of the supplier to his
notice.
8.15. Careful reading of the provisions of Section 73 and
Section 74 of the GST Act as extracted hereinabove
would lead to show that limitation has been specified for
the Adjudicating Authority for proceeding under Section
73(1). From the pleadings it could be discerned that the
period so stipulated therein had been elapsed. However,
for invocation of power under Section 74(1), the
circumstances are spelt out, which in the humble
opinion of this Court are absent in the present case. It is
emerged from the chronology of events obtained on
record that after the period of limitation stipulated in
Section 73 is lapsed, the Adjudicating Authority has
sought to initiate proceeding under Section 74 by issue
of Letter dated 17.07.2024 of the Superintendent (Anti-
Evasion). The Show Cause Notice itself indicates that
pertaining to transactions during August, 2017 to
December, 2017, the proceeding under Section 74 is
drawn up by issue of Summary of Show Cause Notice
and Demand Show Cause Notice, both dated 26.07.2024
conspicuously after 8 years of the alleged transactions.
8.16. Sri Rudra Prasad Kar, learned Senior Advocate
stemming on Instruction No.05/2023-GST vide F. No.
CBIC-20004/3/2023-GST, dated 13.12.2023 issued by
the Government of India, Ministry of Finance,
Department of Revenue, Central Board of Indirect Taxes
and Customs, GST Policy Wing, submitted that there
was no scope for the Revenue on the facts and in the
circumstances of the case choosing not to proceed under
Section 73 as the period stipulated therein is lapsed and
to proceed by instituting proceeding under Section 74 of
the GST Act.
8.17. In the aforesaid Circular it has been impressed upon
every field formation not to invoke proceeding under
Section 74 mechanically. The relevant portion of the
Circular is reproduced hereunder for better
comprehension:
"Attention is invited to the Hon‟ble Supreme Court‟s
judgment dated 19.05.2022 in the case of CC, CE &
ST, Bangalore, (Adjudication) etc. Vrs. Northern
Operating Systems Private Limited (NOS) in Civil
Appeal No. 2289-2293 of 2021 1 on the issue of
nature of secondment of employees by overseas
entities to Indian firms and its Service Tax
implications. Representations have been received in
1 (2022) 18 SCR 901.
the Board that, subsequent to the aforesaid
judgment, many field formations have initiated
proceedings for the alleged evasion of GST on the
issue of secondment under Section 74(1) of the
Central Goods and Services Tax Act, 2017
(hereinafter referred to as the „CGST Act‟).
2.1 The matter has been examined by the Board. It
appears that the Hon‟ble Supreme Court in its
judgment inter-alia took note of the various facts of
the case like the agreement between NOS and
overseas group companies, and held that the
secondment of employees by the overseas group
company to NOS was a taxable service of
„manpower supply‟ and Service Tax was applicable
on the same. It is noted that secondment as a
practice is not restricted to Service Tax and issue of
taxability on secondment shall arise in GST also. A
careful reading of the NOS judgment indicates that
Hon‟ble Supreme Court‟s emphasis is on a nuanced
examination based on the unique characteristics of
each specific arrangement, rather than relying on
any singular test.
2.2. Hon‟ble Supreme Court in the case of Commissioner
of Central Excise, Mumbai Vrs. M/s. Fiat India) Ltd
in Civil Appeal 1648-49 of 2004 2 has grven the
following observation:
„66. *** Each case depends on its own facts and a
close similarity between one case and another
is not enough because either a single
significant detail may alter the entire aspect. In
deciding such cases, one should avoid the
temptation to decide cases (as said by
2 (2012) 12 SCR 975.
Cardozo) by matching the colour of one case
against the colour of another. To decide,
therefore, on which side of the line a case falls,
the broad resemblance to another case is not at
all decisive.‟
2.3. It may be relevant to note that there may be multiple
types of arrangements in relation to secondment of
employees of overseas group company in the Indian
entity. In each arrangement, the tax implications
may be different, depending upon the specific nature
of the contract and other terms and conditions
attached to it. Therefore, the decision of the Hon‟ble
Supreme Court in the NOS judgment should not be
applied mechanically in all the cases. Investigation
in each case requires a careful consideration of its
distinct factual matrix, including the terms of
contract between overseas company and Indian
entity, to determine taxability or its extent under
GST and applicability of the principles laid down by
the Hon‟ble Supreme Court‟s judgment in NOS case.
3.1. It has also been represented by the industry that in
many cases involving secondment, the field
formations are mechanically invoking extended
period of limitation under Section 74(1) of the CGST
Act.
3.2. In this regard, Section 74(1) of CGST Act reads as
follows:
„(1) Where it appears to the proper officer that any
tax has not been paid or short paid or
erroneously refunded or where input tax credit
has been wrongly availed or utilized by reason
of fraud, or any wilful-misstatement or
suppression of facts to evade tax.‟
3.3. From the perusal of wording of section 74(1) of CGST
Act, it is evident that Section 74(1) can be invoked
only in cases where there is a fraud or wilful mis-
statement or suppression of facts to evade tax on the
part of the said taxpayer. Section 74(1) cannot be
invoked merely on account of non-payment of
GST, without specific element of fraud or wilful
mis-statement or suppression of facts to evade
tax. Therefore, only in the cases where the
investigation indicates that there is material
evidence of fraud or wilful misstatement or
suppression of fact to evade tax on the part of
the taxpayer, provisions of Section 74(1) of
CGST Act may be invoked for issuance of show
cause notice, and such evidence should also be
made a part of the show cause notice.
4. The above aspects may be kept in consideration
while investigating such cases and issuing show
cause notices.
5. Difficulties, if any, in implementation of these
instructions may be informed to the Board (gst-
[email protected]).
(Sanjay Mangal)
Principal Commissioner (GST)"
8.18. In C.C., C.E. & S.T., Bangalore (Adjudication) etc. Vrs.
Northern Operating Systems Pvt. Ltd., (2022) 18 SCR 901
it has been observed that:
"Invocation of the extended period of limitation:
62. The revenue‟s argument that the assessee had
indulged in wilful suppression, in this court‟s
considered view, is insubstantial. The view of a
previous three judge ruling, in Cosmic Dye Chemical
Vrs. Collector of Central Excise, (1995) 6 SCC 117, in
the context of Section 11A of the Central Excise Act,
1944, which is in identical terms with Section 73 of
the Finance Act, 1994 was that:
„Now so far as fraud and collusion are concerned, it
is evident that the requisite intent, i.e., intent to
evade duty is built into these very words. So far as
misstatement or suppression of facts are concerned,
they are clearly qualified by the word "wilful"
preceding the words "misstatement or suppression
of facts" which means with intent to evade duty. The
next set of words "contravention of any of the
provisions of this Act or Rules" are again qualified
by the immediately following words "with intent to
evade payment of duty". It is, therefore, not correct
to say that there can be a suppression or
misstatement of fact, which is not wilful and yet
constitute a permissible ground for the purpose of
the proviso to Section 11-A. Misstatement or
suppression of fact must be wilful.‟
63. This decision was followed in Uniworth Textiles Vrs.
Commissioner of Central Excise, (2013) 9 SCC 753
where it was observed that "(t)he conclusion that
mere non-payment of duties is equivalent to
collusion or wilful misstatement or suppression of
facts" is "untenable". This view was also followed in
Escorts Vrs. Commissioner of Central Excise, (2015)
9 SCC 109, Commissioner of Customs Vrs. Magus
Metals, (2017) 16 SCC 491 and other judgments.
64. The fact that the CESTAT in the present case, relied
upon two of its previous orders, which were pressed
into service, and also that in the present case itself,
the revenue discharged the later two show cause
notices, evidences that the view held by the
assessee about its liability was neither untenable,
nor mala fide. This is sufficient to turn down the
revenue‟s contention about the existence of "wilful
suppression" of facts, or deliberate misstatement.
For these reasons, the revenue was not justified in
invoking the extended period of limitation to fasten
liability on the assessee."
8.19. Section 155 of the GST Act lays down that "Where a
person claims that he is eligible for input tax credit
under the Act, the burden of proving such claim shall lie
on such person". Rule 36 of the CGST Rules envisages
documentary requirements and conditions for claiming
input tax credit. This Court is not oblivious of guidelines
enshrined in State of Karnataka Vrs. Ecom Gill Coffee
Trading Private Limited, (2023) 2 SCR 647 in order to
establish genuineness of claim of input tax credit by the
recipient. Mere production of tax invoices and proof of
payment through banking channels is insufficient to
prove a genuine transaction. To successfully rebut
allegations/objections specified in the Show Cause
Notice under Section 74, the recipient of goods and
services is required to provide additional evidence, such
as: e-way bills and vehicle tracking data; proof of
physical delivery (weighbridge slips, gate passes). In the
perspective of the recipient to justify its claim for input
tax credit it has been observed in said reported
judgment as follows:
"In view of the above and for the reasons stated above
and in absence of any further cogent material like
furnishing the name and address of the selling dealer,
details of the vehicle which has delivered the goods,
payment of freight charges, acknowledgement of taking
delivery of goods, tax invoices and payment particulars
etc. and the actual physical movement of the goods by
producing the cogent materials, the Assessing Officer was
absolutely justified in denying the ITC, which was
confirmed by the first Appellate Authority. ***"
8.20. Nevertheless, such a situation does not arise in the
instant case. In the case at hand, realising the difficulty
on account of alleged non-existence of the supplier, the
recipient appears to have chosen to abandon the claim
and sought to reverse the input tax credit claimed at the
relevant point of time while furnishing returns. The
tenor of reply dated 17.07.2024 shows that "in order to
buy peace of mind", the petitioner reversed the amount
of input tax alleged to have been availed on the basis of
fake/bogus invoices issued by the supplier. It is obvious
that it would not be in a position to prove the
genuineness of the claim as the Directorate General of
Goods and Services Tax Intelligence, Kolkata Zonal Unit,
has pointed out vide Alert No.11/2023-24, dated
19.03.2024 that the supplier is non-existent. When the
petitioner has reversed the input tax credit and placed
on record material to evince such fact, the reference to
Rule 36 of the CGST Rules, 2017 made by the
Adjudicating Authority to indicate that documents
required to be produced were not submitted by the
petitioner is redundant, uncalled for and supported by
germane reason. By reversing the input tax credit, the
petitioner did not thereby set up claim for availing the
benefit. Therefore, since there was no input tax credit
claim survived due to reversal, no document was
required to be produced in terms of Rule 36. Only
document(s) which was required to be produced (and in
fact it was produced) is the evidence showing reversal of
amount of input tax credit alleged to have been claimed
against the bogus/fake invoices.
8.21. Hence, unless the recipient files return and debits the
respective registers, the statutory authority is not
supposed to assume that the output tax liability was
adjusted against available credits. In Union of India Vrs.
Bharti Airtel Ltd., (2021) 10 SCR 825, it has been
observed as follows:
"37. The question of reading down paragraph 4 of the
said Circular 3 would have arisen only if the same
was to be in conflict with the express provision in the
2017 Act and the Rules framed thereunder. The
3 Circular No.26/26/2017-GST, dated 29.12.2017 issued by the Commissioner
(GST), Government of India, Ministry of Finance, Department of Revenue,
Central Board of Excise and Customs, GST Policy Wing.
express provision in the form of Section 39(9)
clearly posits that omission or incorrect
particulars furnished in the return in Form
GSTR-3B can be corrected in the return to be
furnished in the month or quarter during
which such omission or incorrect particulars
are noticed. This very position has been restated in
the impugned Circular. It is, therefore, not contrary
to the statutory dispensation specified in Section
39(9) of the Act. The High Court, however,
erroneously noted that there is no provision in the
Act, which restricts such rectification of the return in
the period in which the error is noticed. It is then
noted by the High Court that as there is no
possibility of getting refund of surplus or excess ITC
shown in the electronic credit ledger, therefore, the
only remedy that can enable the writ petitioner to
enjoy the benefit of the seamless utilization of the
ITC is by way of rectification in its annual tax return
(Form GSTR-3B) for the relevant period. Further, the
High Court in paragraph 23 of the impugned
judgment, noted that the relief sought in the case
before it, was indispensable. This logic does not
commend to us. For, if there is no provision
regarding refund of surplus or excess ITC in the
electronic credit ledger, it does not follow that the
assessee concerned who has discharged Outward
Tax Liability by paying cash (which he is free to pay
in cash in spite of the surplus or excess electronic
credit ledger account), can later on ask for swapping
of the entries, so as to show the corresponding
Outward Tax Liability amount in the electronic cash
ledger from where he can take refund. Payment for
discharge of Outward Tax Liability by cash or by
way of availing of ITC, is a matter of option, which
having been exercised by the assessee, cannot be
reversed unless the Act and the Rules permit such
reversal or swapping of the entries. As a matter of
fact, Section 39(9) provides for an express
mechanism to correct the error in returns for
the month or quarter during which such
omission or incorrect particulars have been
noticed."
8.22. Examining the contention of the petitioner confronted
with the arguments advanced by the Senior Standing
Counsel(s) and perusal of documents available on record
it emerges that undeniably on detection of error in claim
of input tax credit against the allegation of fake/bogus
invoices issued by Auxesia Traders (supplier-third party)
pursuant to Letter dated 12.07.2024 of Superintendent
(Anti-Evasion), the petitioner reversed the alleged
amount of input tax credit even before the Show Cause
Notice contemplating initiation of proceeding under
Section 74 of the GST Act.
8.23. In this connection regard may be had to the following
observation of the Hon'ble Supreme Court of India
rendered in the case of Lipi Boilers Ltd. Vrs.
Commissioner of Central Excise, (2025) 11 SCR 578:
"Therefore, in the absence of any deliberate act on the
part of the assessee with an intention to evade being
established by the revenue, the essential precondition of
wilful suppression with intent to evade duty is not
satisfied. Consequently, the invocation of the extended
period of limitation under the proviso to Section 11A(1) is
held to be not tenable in law."
8.24. Therefore, in view of Northern Operating Systems Pvt.
Ltd. (supra), Lipi Boilers Ltd. (supra) and Bharti Airtel Ltd.
(supra) the Revenue having failed to bring in wilful
intention to evade tax it is safe to say that the petitioner
could not be held to have availed input tax credit
"wrongly availed or utilised by reason of fraud, or any
wilful misstatement or suppression of facts to evade
tax".
9. Another facet which deserves to be taken note of is with
respect to absence of circumstances to exercise power
under Section 74 of the GST Act. It has already been
discussed in the foregoing paragraphs that after period
of limitation stipulated in Section 73, the Adjudicating
Authority alleging availing input tax credit wrongfully on
assumed intent to evade payment of tax so as to bring
the petitioner into the net of investigation/process of
adjudication mechanically could not invoke provisions of
Section 74.
9.1. Fact borne on record in abundance suggests that the
petitioner had the excess balance left in the Electronic
Credit Ledger. It is also not gainsaid by the Senior
Standing Counsel(s) representing the opposite parties
that the petitioner had surplus left in the Electronic
Credit Ledger than the input tax credit so adjusted.
9.2. Section 50 of the GST Act dealing with "Interest on
delayed payment of tax" reads thus:
"(1) Every person who is liable to pay tax in accordance
with the provisions of this Act or the rules made
thereunder, but fails to pay the tax or any part
thereof to the Government within the period
prescribed, shall for the period for which the tax or
any part thereof remains unpaid, pay, on his own,
interest at such rate, not exceeding eighteen per
cent., as may be notified by the Government on the
recommendations of the Council.
4[Provided that the interest on tax payable in respect
of supplies made during a tax period and declared
in the return for the said period furnished after the
due date in accordance with the provisions of
Section 39, except where such return is furnished
after commencement of any proceedings under
Section 73 or Section 74 5[or Section 74A] in respect
of the said period, shall be payable on that portion of
the tax which is paid by debiting the electronic cash
ledger.]
(2) The interest under sub-section (1) shall be
calculated, in such manner as may be prescribed,
4 Substituted by the Finance Act No.13 of 2021; Section 112 of said Finance Act,
2021 is extracted hereunder:
"In Section 50 of the Central Goods and Services Act, in sub-section (1), for the
proviso, the following proviso shall be substituted and shall be deemed to have
been substituted with effect from the 1st day of July, 2017, namely,--
„Provided that the interest on tax payable in respect of supplies made during the
tax period and declared in the return for the said period furnished after the due
date in accordance with the provisions of Section 39, except where such return is
furnished after commencement of any proceedings under Section 73 or Section 74
in respect of the said period, shall be payable on that portion of the tax which is
paid by debiting the electronic cash ledger.‟ "
5 Inserted by the Finance Act (No. 2) Act, 2024 [15 of 2024], with effect from
01.11.2024.
from the day succeeding the day on which such tax
was due to be paid.
6[(3) Where the input tax credit has been wrongly availed
and utilised, the registered person shall pay interest
on such input tax credit wrongly availed and
utilised, at such rate not exceeding twenty-four per
cent. as may be notified by the Government, on the
recommendations of the Council, and the interest
shall be calculated, in such manner as may be
prescribed.]"
9.3. Relevant Rule 88B of the Central Goods and Services
Tax Rules, 2017, dealing with "Manner of calculating
interest on delayed payment of tax", as inserted vide
Notification No.14/2022-CT dated 05.07.2022, with
effect from 01.07.2017, stands as follows:
"(1) In case, where the supplies made during a tax
period are declared by the registered person in the
return for the said period and the said return is
furnished after the due date in accordance with
provisions of Section 39 , except where such return
is furnished after commencement of any proceedings
under Section 73 or Section 74 in respect of the said
period, the interest on tax payable in respect of such
supplies shall be calculated on the portion of tax
which is paid by debiting the electronic cash ledger,
for the period of delay in filing the said return
beyond the due date, at such rate as may be notified
under sub-section (1) of Section 50.
6 Sub-section (3) of Section 50 has been substituted and is deemed to have been
substituted with effect from the 1st day of July, 2017 by virtue of Section 111
of the Finance Act No.6 of 2022.
(2) In all other cases, where interest is payable in
accordance with sub section (1) of Section 50 , the
interest shall be calculated on the amount of tax
which remains unpaid, for the period starting from
the date on which such tax was due to be paid till
the date such tax is paid, at such rate as may be
notified under sub-section (1) of Section 50.
(3) In case, where interest is payable on the amount of
input tax credit wrongly availed and utilised in
accordance with sub-section (3) of Section 50 , the
interest shall be calculated on the amount of input
tax credit wrongly availed and utilised, for the
period starting from the date of utilisation of such
wrongly availed input tax credit till the date of
reversal of such credit or payment of tax in respect
of such amount, at such rate as may be notified
under said sub-section (3) of Section 50.
Explanation.--
For the purposes of this sub-rule,--
(1) input tax credit wrongly availed shall be
construed to have been utilised, when the
balance in the electronic credit ledger falls
below the amount of input tax credit wrongly
availed, and the extent of such utilisation of
input tax credit shall be the amount by which
the balance in the electronic credit ledger falls
below the amount of input tax credit wrongly
availed.
(2) the date of utilisation of such input tax credit
shall be taken to be,--
(a) the date, on which the return is due to be
furnished under Section 39 or the actual
date of filing of the said return, whichever
is earlier, if the balance in the electronic
credit ledger falls below the amount of
input tax credit wrongly availed, on
account of payment of tax through the
said return; or
(b) the date of debit in the Electronic Credit
Ledger when the balance in the Electronic
Credit Ledger falls below the amount of
input tax credit wrongly availed, in all
other cases."
9.4. Qua the above amendment so made, a Circular
No.192/04/2023-GST [File No. CBIC-20001/5/2023-
GST], dated 17.07.2023 was issued by the Government
of India, Ministry of Finance, Department of Revenue,
Central Board of Indirect Taxes & Customs, GST Policy
Wing, clarifying whether interest would be leviable in the
event the Electronic Credit Ledger has the balance more
than the input tax credit sought to be reversed. The said
Circular is reproduced hereunder:
"Subject: Clarification on charging of interest under
Section 50(3) of the CGST Act, 2017, in cases of
wrong availment of IGST credit and reversal thereof.
References have been received from trade requesting
for clarification regarding charging of interest under
sub-section (3) of Section 50 of the Central Goods
and Services Tax Act, 2017 (hereinafter referred to
as the "CGST Act") in the cases where IGST credit
has been wrongly availed by a registered person.
Clarification is being sought as to whether such
wrongly availed IGST credit would be considered to
have been utilized for the purpose of charging of
interest under sub-section (3) of Section 50 of CGST
Act, read with Rule 88B of Central Goods and
Services Tax Rules, 2017 (hereinafter referred to as
the "CGST Rules"), in cases where though the
available balance of IGST credit in the electronic
credit ledger of the said registered person falls
below the amount of such wrongly availed IGST
credit, the total balance of input tax credit in the
electronic credit ledger of the registered person
under the heads of IGST, CGST and SGST taken
together remains more than such wrongly availed
IGST credit, at all times, till the time of reversal of
the said wrongly availed IGST credit.
2. Issue has been examined and to ensure uniformity
in the implementation of the provisions of law across
the field formations, the Board, in exercise of its
powers conferred by Section 168(1) of the CGST Act,
hereby clarifies the issues as under:
S. No. Issue Clarification
1. In the cases of wrong Since the amount of input tax credit available
availment of IGST in electronic credit ledger, under any of the
credit by a registered heads of IGST, CGST or SGST, can be utilized
person and reversal for payment of liability of IGST, it is the total
thereof, for the input tax credit available in Electronic Credit
calculation of interest Ledger, under the heads of IGST, CGST and
under Rule 88B of SGST taken together, that has to be
CGST Rules, whether considered for calculation of interest under
the balance of input tax Rule 88B of CGST Rules and for determining
credit available in as to whether the balance in the electronic
electronic credit ledger credit ledger has fallen below the amount of
under the head of IGST wrongly availed input tax credit of IGST, and
only needs to be to what extent the balance in electronic credit
considered or total ledger has fallen below the said amount of
input tax credit wrongly availed credit.
available in electronic Thus, in the cases where IGST credit has
credit ledger, under the been wrongly availed and subsequently
heads of IGST, CGST reversed on a certain date, there will not
and SGST taken be any interest liability under sub-section
together, has to be (3) of Section 50 of CGST Act if, during
considered. the time period starting from such
availment and up to such reversal, the
balance of input tax credit (ITC) in the
Electronic Credit Ledger, under the heads
of IGST, CGST and SGST taken together,
has never fallen below the amount of
such wrongly availed ITC, even if
available balance of IGST credit in
electronic credit ledger individually falls
below the amount of such wrongly
availed IGST credit. However, when the
balance of ITC, under the heads of IGST,
CGST and SGST of Electronic Credit Ledger
taken together, falls below such wrongly
availed amount of IGST credit, then it will
amount to the utilization of such wrongly
availed IGST credit and the extent of
utilization will be the extent to which the total
balance in Electronic Credit Ledger under
heads of IGST, CGST and SGST taken together
falls below such amount of wrongly availed
IGST credit, and will attract interest as per
sub-section (3) of Section 50 of CGST Act, read
with Section 20 of Integrated Goods and
Services Tax Act, 2017 and sub-rule (3) of Rule
88B of CGST Rules.
2. Whether the credit of As per proviso to Section 11 of Goods and
compensation cess Services Tax (Compensation to States) Act,
available in electronic 2017, input tax credit in respect of
credit ledger shall be compensation cess on supply of goods and
taken into account services leviable under Section 8 of the said
while considering the Act can be utilised only towards payment of
balance of electronic compensation cess leviable on supply of goods
credit ledger for the and services. Thus, credit of compensation
purpose of calculation cess cannot be utilized for payment of any tax
of interest under sub- under CGST or SGST or IGST heads and/ or
rule (3) of Rule 88B of reversals of credit under the said heads.
CGST Rules in respect Accordingly, credit of compensation cess
of wrongly availed and available in electronic credit ledger cannot be
utilized IGST, CGST or taken into account while considering the
SGST credit. balance of electronic credit ledger for the
purpose of calculation of interest under
subrule (3) of rule 88B of CGST Rules in
respect of wrongly availed and utilized IGST,
CGST or SGST credit.
3. It is requested that suitable trade notices may be
issued to publicize the contents of this Circular.
4. Difficulty, if any, in implementation of this Circular
may please be brought to the notice of the Board.
Hindi version would follow.
(Sanjay Mangal)
Principal Commissioner (GST)"
9.5. The Clarification dated 17.07.2023 read juxtaposed with
provisions of Rule 88B there is no ambiguity that when
the Electronic Credit Ledger has sufficient balance left
for adjustment of reversal of input tax credit no interest
is chargeable or payable under Section 50.
10. So far as penalty as imposed under Section 74 in the
Order-in-Original is concerned, suffice it to say that
since there is no tax implication in the instant case, as
the matter related to wrong availment of input tax credit
on account of fake/bogus invoices issued by the supplier
and the petitioner has reversed the alleged amount of
input tax credit prior to initiation of proceeding under
Section 74, the imposition of penalty cannot be a
mechanical exercise of power and, thus such order is
unsustainable.
10.1. In the Order-in-Original an amount of Rs.4,39,970/- is
stated to have been demanded towards input tax credit
(IGST) for the Financial Year 2017-18 (July, 2017 to
March, 2018). Notwithstanding the fact that prior to
issue of Summary Show Cause Notice and Demand
Show Cause Notice, both dated 26.07.2024 the
petitioner had reversed the amount of input tax credit to
the tune of Rs.4,39,970/-, the demand of equal amount
is shown in the Order-in-Original. This would
tantamount to double taxation which is prohibited under
law. As is patent from the said Order, the same amount
of Rs.4,39,970/- has been demanded in order to impose
penalty of equal amount, i.e. Rs.4,39,970/-. On the
conspectus of factual position it is ascertainable that the
petitioner has voluntarily reversed input tax credit of
Rs.4,39,970/-; and the Adjudicating Authority in the
Order-in-Original demanded input tax credit (IGST) of
Rs.4,39,970/-. This apart, he imposed penalty of
Rs.4,39,970/-. In such event the petitioner is subjected
to penalty twice for the self-same transaction. Once it is
conceded by the Revenue that the amount of input tax
credit for a sum of Rs.4,39,970/- has been reversed,
raising demand to the same without giving due credit to
such reversal is unethical and without authority of law.
In such an event, since net tax effect would be "zero",
thereby no penalty would be imposable. This Court,
therefore, would show indulgence in the matter as the
Adjudicating Authority has traversed his jurisdiction by
acting at his whims and fancies.
Conclusion:
11. Given the factual scenario and on the afore-discussed
legal perspective, this Court finds arbitrariness in raising
demand of tax equivalent to the amount of input tax
credit (i.e., Rs.4,39,970/-, which was already reversed by
the petitioner voluntarily prior to initiation of proceeding
under Section 74). Furthermore, since there was
availability of surplus/excess balance left in the
Electronic Credit Ledger after adjustment of input tax
credit so voluntarily reversed, no interest is exigible in
view of Section 50(3) read with Rule 88B coupled with
clarification contained in Circular dated 17.07.2023.
Over and above, the imposition of penalty under Section
74 is unwholesome and unsustainable inasmuch as
raising demand of "tax" equivalent to the amount of
"input tax credit" already reversed would tantamount to
subjecting a person to double taxation and is, therefore,
liable to be nullified.
12. Having diligently considered the arguments of the Senior
Counsel for the petitioner and learned Senior Standing
Counsel(s), this Court comes to hold that the Order-in-
Original dated 03.02.2025 passed under Section 74 by
the Superintendent (Anti-Evasion), GST & Central
Excise, Angul-I Range for the Financial Year 2017-18
(July, 2017 to March, 2018) [Annexure-5] in connection
with Summary Show Cause Notice dated 26.07.2024
and Demand Show Cause Notice dated 26.07.2024
[Annexure-3] cannot be held to be tenable in the eye of
law. Hence, with the discussions made supra, the said
Order-in-Original is quashed for the reason assigned
hitherto.
13. As it is conceded by the counsel(s) appearing for both
sides that the case of the petitioner in W.P.(C) No.12686
of 2025 being identical to the fact-situation of the case
in W.P.(C) No.12682 of 2025, the former writ petition at
the behest of the partnership firm is also disposed in the
above terms.
14. Ergo, the writ petitions, being W.P.(C) No.12682 of 2025
and W.P.(C) No.12686 of 2025, stand allowed and
pending Interlocutory Application(s), if any, is also
disposed of, but in the circumstances there shall be no
order as to costs.
I agree.
(HARISH TANDON) (MURAHARI SRI RAMAN)
CHIEF JUSTICE JUDGE
Signature Not
Verified
Digitally Signed
Signed by: ASWINI KUMAR
SETHY
Designation: Personal Assistant High Court of Orissa, Cuttack
(Secretary-in-charge)
Reason: Authentication The 8th April, 2026//Aswini/Bichi/Laxmikant
Location: ORISSA HIGH COURT,
CUTTACK
Date: 08-Apr-2026 21:41:52
