*In the Favour of Taxpayer*
*Issue*
Whether proper officer was correct in imposing 100% penalty and interest u/s 50(3) of the CGST Act 2017 where the taxpayer has availed excess transition credit with an intention to utilise the same in future. Where such excess credit availed by the taxpayer remains unutilised, whether department can proceed with the penalty and interest on such credit availed.
*Held*
The H’ble Madras High Court in the case of M/s Aathi Hotel has held that no penalty or interest can be charged on the taxpayer for having availed excess transition credit where the same remain unutilised. The court held that even if there were intentions of the taxpayer to utilise the said excess ITC but had not actually utilised, token penalty u/s 122 of Rs. 10,000 may be imposed on him. The court pronounced that interest and penalty u/s 50 and 74 respectively can only be invoked where the taxpayers claims excess ITC and utilises the same to set-off its outward tax liabilities. Where the credit remains unutilized, the same may be reversed along with token penalty that too on proving that the taxpayer had intentions to utilise the same.
*Our View*
The judgment will provided a huge relief to large number of taxpayers who have availed the ITC due to lack of clarity and has not utilised the same. Even in cases of ineligible credit claims where the same remains unutilised the judgment provide relief as no penalty and interest could be levied. It would be interesting to see how the department would see this judgment in light of the ITC availed in case of bogus or fake invoicing. In our view, even in such cases of fake invoices where the credit remain unutilised, the department should levy only a token penalty of Rs. 10,000 as there had never been any loss incurred to the revenue though the malafide intentions were present.
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