Case Law Details
Ranjan Sarkar Vs Assistant Commissioner of State Tax (Calcutta High Court)
In a landmark decision that brings significant relief to taxpayers, the Calcutta High Court, Circuit Bench at Jalpaiguri, has ruled in favor of the taxpayer in the case of Ranjan Sarkar Vs Assistant Commissioner of State Tax. The court addressed the issue of wrongful availment of Input Tax Credit (ITC) and its reversal, particularly when the credit was availed but not utilized. This judgment underscores a critical aspect of the Goods and Services Tax (GST) regime, touching upon the implications of interest on reversed ITC.
Analysis
The case centered on whether interest under Section 50(3) of the West Bengal Goods and Service Tax Act 2017 can be levied in instances of incorrect availment of ITC and its subsequent reversal. The court’s decision was influenced by Circular No. 192/04/2023 – GST, dated 17.7.2023, and several judgments from various High Courts, including Madras and Punjab & Haryana, as well as a specific order in the case of M/s. Larsen & Toubro Limited vs. State of West Bengal & Ors.
The respondents acknowledged an amendment made in the Finance Act, 2022, to Section 50(3), applied retrospectively from July 1, 2017. This amendment specifies that taxpayers who have availed and reversed ITC but have not utilized it are not required to pay interest. The High Court, taking note of these developments and precedents, ruled that no interest is payable under the given circumstances.
Conclusion
The Calcutta High Court’s ruling in Ranjan Sarkar Vs Assistant Commissioner of State Tax marks a pivotal moment in the interpretation and application of GST laws concerning the reversal of ITC. By stating that no interest is payable on wrongfully availed but unutilized ITC, the court has provided clarity and relief to taxpayers. This judgment aligns with the intent of the GST regime to be a fair and equitable system. Furthermore, the retrospective application of the amendment to Section 50(3) of the Finance Act, 2022, reinforces the principle that the law intends to penalize only the misuse of credit that impacts the revenue, not the mere technical or procedural errors. Taxpayers and practitioners alike should take note of this significant ruling, as it sets a precedent for handling similar cases in the future and encourages compliance with the GST framework’s nuanced provisions.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
The issue involved in the present mater i.e. whether any interest can be levied under Section 50(3) of the West Bengal Goods and Service Tax Act 2017 in cases of wrong availment of Input of Tax Credit and reversal thereof, is no more res integra in view of Circular No. 192 /04/ 2023 – GST, dated 17.7.2023 and also the judgments of various High Courts in (2023) 150 taxmann.com 176 (Madras); (2023) 156 taxmann.com 325 (Punjab & Haryana) and order dated 13.12.2022 in the Writ Petition No. 2654 of 2020, M/s. Larsen & Toubro Limited vs. State of West Bengal & Ors.
Learned counsel for the respondents fairly states that there has been an amendment made in the Finance Act, 2022 in Section 50(3) with retrospective effect from 1st July, 2017 which entitles the petitioner not to pay the interest on the Input Tax Credit availed and reversed but the same has not been utilized.
In view of the aforesaid facts and circumstances of the case, the present writ petition is allowed and the impugned order dated 15.10.2020 passed by the respondent no.2 and an order dated 11.01.2022 passed by respondent no.3 are hereby set aside and the petitioner is relegated back to the adjudicating authority for fresh consideration as per law.
Author Bio
No interest on wrong ITC availed & reversed but not utilized
Appeal Number : W.P.A. 1108 of 2022 Date of Judgement/Order : 06/03/2024
We need copy of the above Judgement and like to avail your service/advice on ITC penalty issue