Penalty should not be imposed on ITC wrongly availed when Transitional Credit used for discharging tax liability

Last updated: 16 October 2023

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The Madras High Court has ruled that a penalty should not be imposed on a company for wrongly availing Input Tax Credit (ITC) if that credit was used to pay tax liabilities and has since been reversed. The court found that the situation was revenue-neutral as the company was entitled to transition the credit, and any temporary misstep due to technical issues did not result in a loss to the exchequer. Therefore, imposing interest and penalties was deemed unsustainable.

Court :
Madras High Court

Brief :
The Hon'ble Madras High Court in the case of M/s. PMA Controls India Limited v. Joint Commissioner of Central Tax and others, Chennai [W.P. No. 16638 of 2023 dated September 20, 2023] allowed the writ petition and held that the penalty could not be imposed on wrongly availed Input Tax Credit as there is no change in tax liability of the Assessee when Transitional Credit has been debited for discharging tax liability and wrongly availed Input Tax Credit has been reversed.

Citation :
W.P. No. 16638 of 2023 dated September 20, 2023

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