PMA Controls India Limited Vs Joint Commissioner of Central Tax (Appeals-II) (Madras High Court)
Madras High Court ruling in PMA Controls India Limited vs Joint Commissioner of Central Tax – important insights on Input Tax Credit transition under GST.
In a recent decision, the Ahmedabad bench of the Income-tax Appellate Tribunal (ITAT) ruled on a crucial tax matter concerning non-resident taxpayers providing services to foreign clients of an Indian entity. The case, Shell Global Solutions International BV v. Deputy Commissioner of Income Tax, International Taxation-I [2023] 155 taxmann.com 242, has significant implications for the taxation of such income under Section 9 of the Income-tax Act, 1961 (“the Act”).
The Hon’ble Madras High Court allowed the writ petition and held that the penalty could not be imposed on wrongly availed Input Tax Credit as there is no change in tax liability of the Assessee when Transitional Credit has been debited for discharging tax liability and wrongly availed Input Tax Credit has been reversed.
Facts:
M/s. PMA Controls India Limited (“the Petitioner”), is a Central Excise Assessee. The Petitioner filed a TRAN-1 Application under Form TRAN-1 for the transition of unutilized Input Tax Credit (“ITC”) of Rs.12,47,610/- as of June 30, 2017. However, due to technical glitches, the Petitioner’s claim for transition of ITC failed.
The Petitioner again filed TRAN-1 Application on August 17, 2021, claiming the transition of ITC, which was allowed by the Revenue Department (“the Respondent”). During the time period the TRAN-1 Application was processed, the Petitioner wrongly availed ITC of the amount of Rs. 12,47,610/- in Electronic Credit Ledger and utilized the ITC availed for discharging tax liability. The ITC of Rs. 12,43,000/- was transitioned on August 08, 2021, thereby, the Petitioner debited the amount of Rs. 12,47,610, which was claimed as ITC and utilized earlier.
The Petitioner was issued a Show Cause Notice dated July 19, 2021 (“the SCN”) by the Respondent, calling upon the Petitioner to show cause as to why the amount of Rs. 12,47,610/- wrongly claimed as ITC should not be denied.
The Respondent vide Order-In-Original No. 05/2022 dated February 28, 2022 (“the OIO”) declined the ITC claimed by the Petitioner, and demanded the Transitional Credit of Rs. 12,47,610/- and imposed a penalty for the amount of Rs. 12,47,610/- under Section 122(2)(a) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) read with Section 74(1) of the CGST Act.
Aggrieved by the OIO passed by the Respondent, the Petitioner filed an appeal before the Respondent. However, the Respondent vide Order-in-Appeal No. 267/2022-JC (GST-II) dated August 4, 2022 (“the Impugned Order”) partly allowed the appeal by rejecting Petitioner’s claim for ITC.
Aggrieved by the Impugned Order, the Petitioner filed a writ petition before the Hon’ble Madras High Court for setting aside of Impugned Order.
Issue:
Whether penalty can be imposed on wrongly availed ITC when Transitional Credit allowed has been debited for discharging tax liability?
Held:
The Hon’ble Madras High Court in W.P. No. 16638 of 2023 held as under:
