Fairmacs Shipstores Private Limited Vs Deputy Commissioner (ST) (Madras High Court)
Madras High Court held that imposition of interest and penalty unwarranted as Input Tax Credit wrongly availed is reversed without utilization. Accordingly, since Input Tax Credit is not utilised, interest and penalty is not justified.
Facts- On 17/6/2023, petitioner had received ASMT – 10 notice and replied to the same on 20/6/2023 in ASMT 11. The petitioner had admitted the credit and reversed the same and states that he has not utilised the credit. On 20/7/2023, DRC-01A notice was issued to the petitioner and on 2/8/2023 show cause notice in DRC-01 was issued to the petitioner and the petitioner had replied to the show cause notice on 30/8/2023. But, on 14/9/2023, the second respondent had passed the impugned order, directing the petitioner to pay interest of Rs.33,320/- and penalty of Rs.3,86,094/- totalling to Rs.4,19,414/-. Being aggrieved, the petitioner had filed this instant writ petition.
Conclusion- Order dated 11/6/2024 made in W.P.(MD) No.26254 of 2022 it is held that imposition of penalty under the peculiar facts and circumstances of the case is unjustified. However, considering the fact that the petitioner has availed input tax credit, which was not eligible to be availed, but could have resulted in wrong utilization of input tax credit, a token penalty of Rs.10,000/- is imposed on the petitioner. The observation of the first respondent by placing reliance on the decisions of the Hon’ble Supreme Court, referred to supra, is also not relevant as Section 74 of the CGST Act deals with a situation where the credit is availed or utilized by reason of fraud or any wilful misstatement or suppression of facts.
