Facts of the Case:

In this case, the taxpayer was issued a demand notice dated 21.03.2024 under Section 73 of the CGST/WBGST Acts alleging excess availment of ITC of ₹7,51,134 each under CGST and SGST, along with applicable interest and penalty. The adjudicating authority confirmed the demand vide order dated 10.07.2024. In appeal, the taxpayer contended that the excess ITC had been inadvertently availed but was fully reversed along with applicable interest much before issuance of the demand-cum-show cause notice, through GSTR-3B for December 2020.

Despite this, the first appellate authority upheld the penalty on the reasoning that the taxpayer had not paid the tax and interest within 30 days of issuance of the SCN, invoking Section 73(8). The Revenue, however, subsequently admitted before the Tribunal that the taxpayer had indeed reversed the entire excess ITC and paid the applicable interest prior to initiation of the proceedings.

Issue:

Whether penalty can be imposed under Section 73 of the CGST/WBGST Act where the taxpayer has voluntarily reversed the entire excess ITC along with applicable interest before issuance of the demand-cum-show cause notice, notwithstanding that such payment was not made within 30 days after issuance of the SCN.

Held That:

The GST Appellate Tribunal allowed the appeal and set aside the order of the first appellate authority, principally on the basis of the Revenue’s categorical admission regarding the taxpayer’s prior reversal of the excess ITC and payment of interest. The Tribunal noted that the Revenue, in its cross-objection, had expressly admitted that the taxpayer had reversed the exact amount of excess ITC, i.e. ₹7,51,134 towards CGST and ₹7,51,134 towards SGST, in Table 4(B)(2) of GSTR-3B for December 2020, filed on 20.01.2021, and had also paid interest of ₹91,865 each under CGST and SGST, all before initiation of the proceedings.

The Tribunal further took note of the submission made by the Additional Commissioner, WBGST, who, after scrutinising the records and the Revenue’s records, accepted the taxpayer’s claim as genuine. It was specifically submitted on behalf of the Revenue that the entire excess ITC had been reversed along with applicable interest before issuance of the demand-cum-show cause notice. Thus, the factual foundation of the taxpayer’s case was no longer in dispute.

In these circumstances, the Tribunal held that the case was fit to be allowed on admission. It accordingly set aside the impugned order passed by the first appellate authority. The Tribunal did not accept the approach of sustaining the demand merely because the taxpayer had not made payment within 30 days of the SCN. The crucial circumstance was that the excess ITC and applicable interest had already been discharged before the initiation of the proceedings itself, a fact subsequently admitted and verified by the Revenue.

The Tribunal also directed that, if required, the order of appropriation of the demand should be issued by the proper officer within one month from the date of communication of the Tribunal’s order. The appeal was accordingly disposed of.

Case Name: Zeneeda Information Technology Private Limited Versus Office of the Commissioner of State Tax (WB) Kolkata. Dated 02.09.2026