Where the claim of ITC is erroneous, provisions of Section 42 is not applicable since it is not the case of mismatch

Facts: The petitioner has challenged the order levying interest under Section 50 of the Central Goods and Services Tax Act, 2017 relating to both interest on cash remittances as well as remittances by way of adjustment of electronic credit register.

The Petitioner has relied on the provisions of Section 42 of the CGST Act which provides for a notice to be issued by the Assessing Authority in the case of mismatch of particulars at the end of the Petitioner, vis-à-vis particulars furnished in the returns of the selling/purchasing dealer.

Held: The Madras High court held as under: 

• Analysed the provisions of Section 42 of the CGST Act, and noted that, the same is not applicable as the Petitioner has accepted the error in claim on receipt of intimation of wrongful claim of ITC by the Respondent and has accordingly reversed ITC through voluntary payment of tax in Form GST DRC-03. Whereas, such provisions can only be invoked, in case the mismatch is on account of the error in the database of the Respondent or a mistake that has been occasioned at the end of the Respondent. But in the present case, the Petitioner’s claim for ITC is erroneous, and it is not the case of mismatch.
• As far as the levy in respect of remittances by way of adjustment of electronic credit register, the court noted that it was covered by a decision in the case of Maansarovar Motors Private Limited V. The Assistant Commissioner, Poonamallee Division, Chennai, and therefore the interest to this extent is not leviable and the impugned order to this extent was set aside.
• Held that, the levy of interest on belated cash remittance is compensatory and mandatory and the levy is upheld to this extent.

To read the complete judgment 2021 Taxo.online 762