Interest on reversal of ITC when ITC balance available

I have to reverse ITC of Rs. (15000 )I have availed in 2019 pertaining to retrospectivley cancelled dealer who has not filed his 3b which we are ready to pay voluntarily through DRC 03 u/s 73(5) on suggestion of the tax officer during a refund sanction process.

Now The conflict is regarding Interest on it

My Stand: I had enough amount available to cover the said ITC in ITC ledger from the period I have availed ITC (2019) to (2021) further at the end of 2022 all ITC was utilized and no balance was left but I further availed ITC in future peiords from 2023 to 2026 which was also enough to conver said reversal amount. So I paid interest for the period of 2019-2022 where i was falling short of balance and further i had enough balance through valid input throughout the priod

Officer's Stand : I have to pay interest from where I first utlilized all itc from 2022 to 2026 (i.e when the ITC ledger was totally utilized and after the new inputs were availed ) and those new ITC availed are counted for interest calculation .

Plz Guide in this Regard

Thank you

In my view, interest is payable only to the extent the wrongly availed ITC was actually utilised.

As per Section 50(3) of the CGST Act read with Rule 88B, interest applies on ITC wrongly availed and utilised, and the period starts from the date of utilisation of such wrong ITC till the date of reversal/payment.

Therefore, you should prepare a month-wise Electronic Credit Ledger working from 2019 till the date of reversal. If the available eligible ITC balance was always equal to or more than ₹15,000, then interest should not be payable because the disputed ITC was never actually utilised. If the balance fell short during any period, interest should be calculated only for that shortfall period and only on the shortfall amount.

The officer’s view of charging interest continuously up to 2026 merely because the ITC ledger was later utilised may not be correct, especially if fresh eligible ITC was available and sufficient balance existed subsequently.

You should submit a detailed ledger reconciliation along with DRC-03 working and rely on Section 50(3), Rule 88B, and CBIC Circular