Page 36 - GSTL_23rd July 2020_Vol 38_Part 4

J94 GST LAW TIMES [ Vol. 38
paid/short paid or erroneously refunded, or where input tax credit has been
wrongly availed or utilised’, the proper tax officer shall notice as to why the no-
ticee should not pay ‘the amount specified in the notice along with interest paya-
ble thereon under Section 50 and a penalty leviable under the provisions of this
Act or the rules made thereunder’.
Section 50 is the omnibus provision in the CGST Act as far as demand of
interest is concerned. Section 50(1) provides that every person who is liable to
pay tax under the CGST Act/Rules but fails to pay the tax or any part thereof
within the period prescribed, the assessee shall for the period for which the tax
remains unpaid, pay interest at the rate, as prescribed.
A proviso was inserted to Section 50(1) by the Finance Act, 2019 which
provides that the interest on the tax payable in respect of supplies made during a
tax period and declared in the return for the said period furnished after the due
date, shall be levied on that portion of the tax that is paid by debiting the elec-
tronic cash ledger.
Section 50(3) provides that where a taxable person makes an un-
due/excess claim of input tax under Section 42(10) or undue/excess reduction in
the output tax liability under Section 43(10), he shall pay interest on such un-
due/excess claim or reduction, as the case may be, at the rates notified.
The two situations specified in Section 50 where interest shall be appli-
cable specifically are :
(1) where there is a short payment of tax
(2) where there is an undue/excess claim due to a mismatch under Sec-
tion 42.
In cases where the wrongful availment of credit does not lead to situation where
there is a short payment of tax, due to accumulation of eligible credits, interest un-
der Section 50(1) will not be attracted.
Even in cases where excess availment of credit is not due to any mis-
match under Section 42 but on account of being an ineligible credit under Section
16, interest cannot be demanded under Section 50(3).
In the above position, even though Section 73 contemplates a demand of
interest under Section 50 for wrongly availed credit, since there is presently no
mechanism under Section 50 under which such interest can be demanded, no
interest liability will be applicable to a situation where credit availed wrongly is
reversed prior to utilization.
Suo motu re-availment of reversed credit
Position under the Cenvat Credit Rules, 2004
In the earlier regime, Cenvat credit of inputs/input services specified in
Rule 3 of the Cenvat Credit Rules, 2004 (“CCR, 2004”) was to be availed on the
basis of documents prescribed under Rule 9 of the CCR, 2004. The conditions for
availing credit was prescribed in Rule 4 of the CCR, 2004.
In the erstwhile regime, there were no specific provisions for re-claiming
credit that was wrongly or erroneously reversed in the books of account. How-
ever, in cases where assessees had reclaimed credit wrongly reversed, show
cause notices were issued on the ground that assessees cannot suo motu reclaim
Cenvat credit reversed by them. In some instances, it was also the case of the De-
partment that once credit is reversed, assessees can only reclaim the credit by
filing a refund claim under Section 11B of the Central Excise Act, 1944.
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