241.            The taxable person was a supplier of both taxable as well as exempt goods. The taxable person had wrongly availed & utilized the input tax credit on exempt goods in order to evade tax. The proper officer issued an order on 1.10.2017 demanding the following:

Input tax credit wrongly availed & utilized: 20,000

Interest payable u/s 50

Penalty= 100% of tax with an option to pay penalty=50% of tax, if payment made within 30 days of order

What shall be the penalty payable by the taxable person if following payments are made:

(i) ITC = 20,000, full interest thereon on 25.10.2017

(ii) ITC=10,000, interest thereon on 25.10.2017

     ITC = 6,000, interest thereon on 12.11.2017

     ITC = 4,000, interest thereon on 17.12.2017

(iii) ITC = nil

(iv)  ITC = 20,000, interest thereon = nil on 30.10.2017

(v) ITC= 20,000, interest thereon on 12.11.2017

(vi) ITC= 10,000, no interest on 20.10.2017 

Since the ITC was wrongly availed & utilized in order to evade tax, therefore, section 74 is applicable accordingly.

As per section 74 of the CGST Act, where a taxable person on issue or order pays tax and interest within 30 days of issue of order then penalty levied shall be 50% of tax.

As per section 78 of the CGST Act, any amount payable by a taxable person in pursuance of an order passed shall be paid by such person within a period of three months from the date of service of such order failing which recovery proceedings shall be initiated.

(i) the taxable person has paid full amount of input tax credit wrongly availed and utilized= 20,000 along with interest thereon within 30 days of issue of order.

The penalty levied shall be

=50% of ITC wrongly availed or utilised

= 50% (20,000)

=10,000

(ii) the taxable person has paid 10,000 along with interest thereon within 30 days of issue of order. Therefore penalty shall be

=50% of ITC wrongly availed or utilised

=50% (10,000)

=5,000

The taxable person has paid remaining 10,000 (6,000 on 12.11.2017 + 4,000 on 17.12.2017) along with interest thereon after 30 days but within 3 months of issue of order. Therefore, the penalty levied shall be:

=100% of ITC wrongly availed or utilised

=100% (10,000)

10,000

Thus, total penalty = 5,000+10,000 =15,000

(iii) the taxable person has not paid any amount within the time limit specified after issue of order. The proper officer shall initiate the recovery proceedings against the outstanding tax amount including interest & penalty. The taxable person may also appeal to the appellate authority against the order passed by the adjudicating authority.

(iv) the taxable person has made full payment of input tax credit wrongly availed & utilized but has not made any interest payment. The taxable person shall pay:

Interest on 20,000 payable u/s 50 &

penalty =100% of ITC wrongly availed or utilised 

            = 100% (20,000)

            =20,000

(v) The taxable person has paid full ITC wrongly availed & utilized 20,000 alongwith interest thereon after 30 days but within 3 months of issue of order. Therefore, the penalty levied shall be:

=100% of ITC wrongly availed or utilised

=100% (20,000)

20,000

(vi) The taxable person has short paid the input tax credit wrongly availed & utilized & has not made any interest payment. The taxable person shall pay:

penalty =100% of ITC wrongly availed or utilised 

            = 100% (10,000)

            =10,000

The proper officer shall initiate recovery proceedings u/s 78 of the Act for the following amounts:

ITC wrongly availed & utilized = 10,000

Interest as applicable u/s 50

penalty =100% of ITC wrongly availed or utilised 

            = 100% (10,000)

            =10,000