Order Date – 21 Sepember 2023

Parties: Deepak Sales Corporation Vs Union of India and Others

Facts –

• The Petitioner, Deepak Sales Corporation by mistake claimed an excess ITC in the return filed for the month of August 2017. The petitioner came to know about the error made in entering the amount of ITC only while filing return on 28.12.2017. 
• The petitioner thereafter kept on requesting the respondents to guide, however no responds were received. Therefore, ultimately, the petitioner could reverse the excess ITC while submitting its return for themonth of July 2018.
• A show cause notice dated 27.10.2020 was issued cosequent to the audit conducted by the respondent demanding interest @ 18% on entire amount of excess ITC, for a period of 235 days. Penalty was also proposed to be imposed upon the petitioner. The demand for interest was partly confirmed and penalty was dropped. Being aggrieved the petitioner filed the writ petition.

Issue –

• Whether the petitioner was proved to have utilized the excess ITC amount?

Order –

• The Divisional Bench of Hon’ble High Court observed that from a purposeful reading of the provisions underlying Section 50 of the CGST Act, the legislation intent that stands reflected is that where an ITC/cenvat credit is wrongfully reflected in electronic ledger, the same itself is not sufficient to draw penal proceedings until the same or any part of such ITC is put to use so as to become recoverable and if such cenvat credit is reversed before utilization, then even the demand of interest and penalty cannot be said to be tenable.
• On a perusal of Annexure P-5 which is extract of electronic credit ledger during the period from August 2017 till December 2018, it is notice that the petitioner did not utilize the excess ITC of Rs.12,65,20,827/- during the month of August 2017. Similarly, till August 2018, the balance of ITC available in the electronic credit ledger of the petitioner was never below the sum of Rs.12,65,20,827/- which shows that till August 2018 when the petitioner reversed the excess ITC amount, it had never utilized the same.
• Once it was proved that the amount of excess ITC though entered in the ledger in excess, was never utilized by the petitioner and since it was reversed prior to utilizing, therefore, it was held that the petitioner was not liable to pay the amount of interest or penalty on the excess ITC wrongly entered by it in its electronic credit ledger for the relevant period.