Facts of the Case:

In this case, the petitioner challenged an assessment order to the limited extent of the levy of interest on alleged wrongful availment and utilisation of Input Tax Credit (ITC). The dispute arose due to a mismatch between the ITC reflected in the petitioner’s GSTR-3B returns and the auto-populated GSTR-2A statements. The petitioner argued that such a discrepancy did not amount to “wrongful availment and utilisation” of ITC and, therefore, interest could not be levied under Section 50(3) of the GST enactments.  It was further contended that, in view of the proviso to Section 50(1) and the CBEC Circular dated 18.09.2020, interest could only be levied on the portion of tax discharged through the electronic cash ledger, whereas the tax liability in the present case had been discharged through the electronic credit ledger. 

The Revenue, however, maintained that cases involving ineligible ITC are specifically governed by Section 50(3) read with Rule 88B(3), which mandates payment of interest from the date of utilisation of wrongly availed ITC until its reversal.

Issue:

Whether a discrepancy between ITC claimed in GSTR-3B and that reflected in GSTR-2A constitutes “wrongful availment and utilisation” of ITC attracting interest under Section 50(3) read with Rule 88B(3), or whether the assessee is entitled to the benefit of the proviso to Section 50(1) restricting interest to the tax paid through the electronic cash ledger.

Held That:

The Court held that Section 50(1) is a general provision dealing with delayed payment of tax, whereas Section 50(3) is a special provision specifically applicable to cases involving wrongful availment and utilisation of ITC. The expression “wrongful availment and utilisation” has not been statutorily restricted to fraudulent claims or cases involving fake invoices or blocked credits under Section 17(5). Therefore, any availment and utilisation of ITC to which a registered person is not legally entitled, including ITC arising from discrepancies between GSTR-3B and GSTR-2A, would fall within the ambit of Section 50(3).

The Court observed that fraudulent availment is separately dealt with under Section 74 and cannot be read into Section 50(3). Reading Section 50(3) together with Rule 88B(3), the Court held that interest is payable from the date the wrongly availed ITC is utilised until its reversal or payment of tax. Since the petitioner’s electronic credit ledger balance had fallen below the amount of wrongly availed ITC and the tax liability had been discharged by utilising such credit, the assessing authority rightly levied interest under Section 50(3). Consequently, the Court found no infirmity in the assessment order and dismissed the writ petition.

The High Court dismissed the writ petition and upheld the levy of interest under Section 50(3) of the GST enactments.

Case Name: Jayashree Enterprises, Rep. by its Proprietor Kumaravel Kanagaraju Versus Assistant Commissioner (ST), Udumalpet dated 17.06.2026

To read the complete judgement 2026 Taxo.online 1733