The Goods and Services Tax Appellate Tribunal, Bengaluru Bench has held that the benefit of waiver of interest and penalty under Section 128A of the CGST/KGST Acts cannot be extended to excess Input Tax Credit that was first availed in December 2020, even where the taxpayer contended that the underlying debit notes or transactions related to FY 2018-19.
Background of the Dispute
Rodman Technologies Pvt Ltd was subjected to scrutiny of its returns for FY 2020-21. The tax authorities found excess ITC in the GSTR-3B for December 2020 when compared with the ITC reflected in GSTR-2A. The disputed ITC comprised IGST of Rs. 68,573, CGST of Rs. 2,46,747 and SGST of Rs. 2,46,747, aggregating to Rs. 5,62,067.
A notice under Section 73 was issued proposing recovery of the excess ITC along with interest of Rs. 3,23,753 and penalty of Rs. 69,350. The appellant subsequently paid the disputed tax amount of Rs. 5,62,067 through DRC-03 on 9 January 2025, but did not pay the proposed interest and penalty. The adjudicating authority thereafter confirmed the interest and penalty.
The taxpayer claimed that although the amount was reported in December 2020, the underlying transactions and debit notes actually related to FY 2018-19. On this basis, it sought waiver of interest and penalty under Section 128A.
Section 128A Relief Is Restricted to the Statutory Period
The Tribunal noted that Section 128A grants waiver of interest and penalty in specified Section 73 proceedings only where the tax demand pertains to the period from 1 July 2017 to 31 March 2020, subject to fulfilment of the prescribed statutory and procedural conditions.
The Tribunal clarified that eligibility cannot be determined merely on the basis that the underlying commercial transaction originated in an earlier financial year. What is material is the period to which the tax or ITC demand forming the subject matter of the Section 73 proceedings actually pertains.
ITC Was First Availed in December 2020
On examining the returns and documents, the Tribunal found that the disputed ITC was first claimed in the GSTR-3B for December 2020. It was not ITC originally availed during FY 2018-19 and thereafter carried forward through subsequent monthly returns.
Accordingly, the Tribunal held that the demand related to the ITC claim made in December 2020. Since December 2020 falls outside the period ending 31 March 2020 specified in Section 128A, the benefit of the waiver provision was unavailable.
The Tribunal further observed that the statutory period prescribed under Section 128A cannot be enlarged by an adjudicating or appellate authority. The provision represents a limited statutory relief, and its benefit cannot be extended to tax liabilities pertaining to periods outside those expressly prescribed by the legislature.
Reliance on Wipro India Distinguished
The appellant relied on the Karnataka High Court decision in Wipro India Ltd. v. Assistant Commissioner of Central Tax. The Tribunal distinguished that decision, noting that it concerned application of a CBIC circular dealing with reconciliation of ITC mismatch, whereas the present dispute concerned the specific statutory conditions governing waiver under Section 128A.
It held that such a circular could not enlarge the period expressly stipulated by Parliament under Section 128A.
No Application for Section 128A Benefit
The Tribunal also noted that the appellant had not attempted to file the prescribed Form SPL-01 to claim the benefit under Section 128A. More importantly, however, the Tribunal found that the substantive condition itself was not satisfied because the disputed ITC had been availed for the first time in December 2020.
GSTAT’s Decision
The Tribunal concluded that the appellant failed to establish that the excess ITC demand confirmed under Section 73(9) pertained to the period between 1 July 2017 and 31 March 2020.
Since the demand arose from the ITC claim made in December 2020, it fell outside the temporal scope of Section 128A. The Tribunal therefore dismissed the appeal and upheld the interest and penalty confirmed under Section 73(9) of the CGST/KGST Acts.
Key Takeaway
The ruling makes an important distinction between the date of the underlying transaction and the period in which the disputed ITC was actually availed. For Section 128A relief, merely tracing a debit note or commercial transaction to FY 2018-19 will not be sufficient where the ITC forming the subject matter of the demand was first claimed after 31 March 2020.
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