Section 15 of PVAT Act 2005 deals with the Net Tax Payable by a taxable person. Sub section 1 of Section 15 provides that the output tax under PVAT Act shall be adjusted from the Input Tax Credit for determining Net Tax Payable by a taxable Person. If any excess ITC is still left then it is to be adjusted from the CST liability under CST Act 1956 at the option of the taxable person as per section 15(2) of PVAT Act.
Section 15(3) of PVAT Act provides that the Excess ITC if any left after adjustment of output tax or CST liability u/s 15(1) and 15(2) then such ITC shall be adjusted against any outstanding tax, Penalty or Interest under PVAT Act 2005 or CST Act 1956 as the case may be.
Section 15(3) of PVAT Act runs as under:
‘Excess amount of input tax credit, if any, after adjustment under sub-section (2) shall be adjusted against any outstanding tax, penalty or interest under this Act or under the Central Sales Tax Act, 1956, as the case may be’
Thus not only the Penalty leviable u/s 54 under PVAT Act 2005 for late filling of return can be adjusted from the Excess ITC but other penalties levied and Interest under PVAT Act 2005 or CST Act 1956 can also be adjusted from the Excess ITC. Moreover the word ‘Shall’ has been used u/s 15(3) which makes mandatory exhausting of Excess ITC if any left after adjustment u/s 15(2) for any outstanding tax, Penalty or Interest under PVAT Act 2005 or CST Act 1956.
Although for levying penalty a show cause notice needs to be issued But as there is usual practice in the department asking for deposit of Penalty u/s 54 along with the return without a show cause notice.
Still when there is small penalty involved and one had to get one’s Locked TIN No opened the dealers tend to deposit the penalty along with the return agreeing with the authorities to avoid the harassment that is caused by the delay in opening the Locked TIN No.
In such cases or in any other case where either the penalty for the late filling of return u/s 54 or any other penalty is levied and the dealer is having excess ITC the same shall be adjusted in view of the provisions of section 15(3).