Interest u/s 50(3) & Penalty u/s 74 Valid on Belated ITC Payment via DRC-03 | HC

Case Details: Geena Garments vs. State Tax Officer - [2026] 184 taxmann.com 225 (Madras)

Judiciary and Counsel Details

• C. Saravanan, J.
• S. Sathyanarayanan for the Petitioner.
• Ms Amirtha Poonkodi Dinakaran, Govt. Adv. for the Respondent.

Facts of the Case

The petitioner was issued a show cause notice (SCN) alleging wrongful availment of input tax credit (ITC) under the CGST Act. The petitioner accepted the demand proposed in the SCN and proceeded to make payment through Form GST DRC-03 by debiting the Electronic Credit Ledger (ECL). Upon verification, it was noticed by the department that the balance in the ECL was insufficient for the period during which such a debit was made, resulting in the delayed payment of tax liability. Consequently, interest under section 50(3) of the CGST Act was confirmed through the impugned assessment order, and a penalty under section 74 was also levied. Aggrieved by such levy of interest and penalty, the petitioner filed a writ petition challenging the consequential liability. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the petitioner had admitted the tax liability and effected payment through Form GST DRC-03, though belatedly and without sufficient balance in the ECL. The Court observed that interest under section 50(3) of the CGST Act was rightly attracted on account of the delayed payment of tax. It further held that the penalty under section 74 was also justified, particularly when the statute provided graded options for a reduced penalty which were not availed by the petitioner. The Court concluded that once the liability stood admitted and payment was effected belatedly, the challenge to consequential interest and penalty was not sustainable. Accordingly, the writ petition was dismissed.