GST Interest and Penalty Order Set Aside: Excess ITC Already Reversed

 GST Interest and Penalty Order Set Aside: Excess ITC Already Reversed

Summary in Key Points:

• Issue: Was the order levying interest and penalty valid, given that the disputed excess Input Tax Credit (ITC) had already been reversed?

• Facts: The petitioner filed GST returns and paid taxes. The department noticed a mismatch between GSTR-3B and GSTR-2A, leading to a show cause notice (DRC-01A) and a personal hearing. Despite the petitioner’s reply and the fact that the excess ITC had been reversed in 2019, the respondent passed an order confirming the levy of interest and penalty.

• Decision: The court held that since the petitioner had already reversed the disputed ITC, the impugned order was liable to be set aside. The order was treated as a show cause notice, and the petitioner was granted a reasonable opportunity to file objections.

Important Note: This decision highlights the importance of considering all relevant facts and circumstances before levying interest and penalties. The department’s failure to acknowledge the reversal of the excess ITC resulted in an unjust order. The court’s decision to set aside the order and provide the petitioner with an opportunity to present their case ensures fairness and prevents undue penalties. This ruling underscores the need for tax authorities to exercise due diligence and consider all relevant information before making a decision.