Credit Reversal before Utilization | No Interest Liability – HC Decision

Case Details:  Grundfos Pumps India (P.) Ltd. v. Joint Commissioner of GST & Central Excise - [2023] 150 taxmann.com 176 (Madras)

Judiciary and Counsel Details

• • Dr. Anita Sumanth, J.

Facts of the Case

The petitioner submitted that when ITC without explanation, came to be reflected in ECL, such credit was reversed without set off / utilization against output tax liability at any point of time. However, the department passed demand order levying interest. It filed writ petition against the levy of interest.

High Court Held

The Honorable High Court noted that the liability to interest arises only in case of actual utilisation of credit by assessee. By virtue of amendment in 2022 with retrospective effect from 2017, interest liability was attracted only when ITC wrongly availed and utilized with revenue impact. However, in present case, original error of non-maintenance of ECL was admittedly attributable to department. Moreover, the petitioner did not utilise credit and reversed the same.

Thus, it was held that there was no liability to interest and the impugned order to extent to which it levied interest under section 50(3) was to be set aside.