IN THE HIGH COURT OF MADHYA PRADESH

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AT JABALPUR

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BEFORE

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HON'BLE SHRI JUSTICE VIVEK RUSIA

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&

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HON'BLE SHRI JUSTICE PRADEEP MITTAL

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ON THE 12

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th

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OF FEBRUARY, 2026

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WRIT PETITION No. 16440 of 2022

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M/S KJV ALLOYS CONDUCTORS PVT. LTD.

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Versus

UNION OF INDIA AND OTHERS

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Appearance:

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Shri Mukesh Agrawal - Advocate for the petitioner.

Shri Gautam Prasad - Advocate for the respondents.

ORDER

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Per

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: Justice Vivek Rusia

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The petitioner has filed the present petition under Article 226/227

of the Constitution of India against the order dated 10.02.2020 passed by

the Respondent No.3 - Commissioner, Central GST Custom & Central

Excise Office, Jabalpur and order dated 21.04.2021 passed by the

Respondent No.4 - Joint Commissioner (Appeals) Central GST, Bhopal

(M.P.), whereby interest amounting to Rs.54,29,792/- was confirmed on

reversal of input tax credit and refund of Rs.32,00,000/- available in the

electronic cash ledger was adjusted towards such interest liability.

Facts of the case, in short, are as under:-

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2.

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The petitioner is a private limited company engaged in the

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business of manufacturing transmission line equipment such as

aluminium conductors, cables and wire rods, and is registered under the

Goods and Services Tax regime.

3.

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Upon introduction of the Goods and Services Tax with effect

from 01.07.2017, the petitioner became entitled to carry forward eligible

CENVAT credit under Section 140(1) of the Central Goods and Services

Tax Act, 2017. Accordingly, the petitioner filed Form TRAN-1 on

10.07.2017 claiming a transitional credit amounting to Rs. 1,31,07,632/-.

It is the case of the petitioner that due to technical glitches in the GST

portal during the initial phase of implementation, the said transitional

credit did not reflect in its Electronic Credit Ledger (ECL).

Apprehending loss of substantial credit, the petitioner reflected the said

amount as Input Tax Credit in its GSTR-3B return for the month of July

2017.

4.

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Subsequently, the petitioner realised that they had taken

wrong excess credit of transitional credit amounting to Rs.3,48,523.00

and the petitioner was entitled to claim only Rs.1,28,21,441/-,

accordingly, the petitioner rectified the mistake and reversed by

submmiting Trans form on 26.12.2017. The petitioner asserts that the

credit so reflected in GSTR-3B was never utilised for discharge of its

outward tax liability and remained unutilized in the electronic credit

ledger. The petitioner made attempts to reverse the wrongly reflected

credit but encountered technical difficulties in doing so through the

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portal. Ultimately, in April 2019, the petitioner reversed the entire

amount of Rs.1,31,07,632/- through available balance in the electronic

credit ledger. Thereafter, the departmental authorities issued notices

demanding an interest amounting to Rs.54,29,792/- under Section 50(3)

read with Section 42(10) of the CGST Act, 2017 on the ground that the

petitioner had wrongly availed input tax credit.

5.

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During the pendency of the aforesaid dispute, the petitioner

filed an application dated 12.11.2019 seeking a refund of Rs.32,00,000/-

lying in its electronic cash ledger. However, the Assistant

Commissioner, CGST & Central Excise Division, Chhindwara, adjusted

the said refund against the alleged interest liability and intimated the

same to the petitioner vide order dated 10.02.2020.

6.

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Being aggrieved by the order dated 10.02.2020 passed by the

Assistant Commissioner, CGST & Central Excise Division, Chhindwara,

the petitioner preferred an appeal before the Joint Commissioner

(Appeals), CGST, Bhopal, which came to be dismissed vide order dated

21.04.2021 confirming levy of interest and adjustment of refund. Hence,

being aggrieved by both the aforesaid orders dated 10.02.2020 and

21.04.2021, the petitioner approached this Court by way of the present

writ petition.

Submissions made by the learned counsel for the petitioner.

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7.

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Learned counsel appearing for the petitioner submits that the

impugned order dated 10.02.2020, passed by the Assistant

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Commissioner, CGST & Central Excise Division, Chhindwara, and the

order dated 21.04.2021, passed by the Joint Commissioner (Appeals),

CGST, Bhopal, are wholly illegal, arbitrary and contrary to the

provisions of the Central Goods and Services Tax Act, 2017. He also

submits that though the petitioner reflected transitional credit of

Rs.1,31,07,632/- in GSTR-3B due to non-reflection of the same in the

electronic credit ledger on account of technical glitches in the GST

portal, the said credit was never utilised for discharge of any outward tax

liability. The petitioner ultimately reversed the entire amount through

available balance in the electronic credit ledger, and no part of the said

reversal was made by debiting the electronic cash ledger. Therefore, it is

submitted that in the absence of utilisation of input tax credit, the

question of levy of interest does not arise.

8.

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Further, learned counsel for the petitioner also contends that

by virtue of the amendment to Section 50(3) of the CGST Act, 2017

brought into force retrospectively with effect from 01.07.2017, interest is

leviable only when input tax credit is wrongly availed and utilised. The

legislative intent, as clarified through subsequent amendment, makes it

abundantly clear that mere availment without utilisation does not attract

interest liability. Since in the present case, the credit was never utilised

and stood reversed, the essential condition for the levy of interest is

absent. The learned counsel submits that the authorities have failed to

appreciate the retrospective nature of the amendment and have

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proceeded on an erroneous interpretation of the unamended provision.

9.

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Learned counsel further submits that the impugned action of

adjusting the petitioner’s legitimate refund of ₹32,00,000/- towards

alleged interest liability without proper adjudication and without

establishing actual utilisation of credit is in violation of principles of

natural justice. It is argued that the petitioner had placed on record

statutory returns, including GSTR-9 and GSTR-9C, to demonstrate that

the disputed credit was not utilised; however, the Appellate Authority

failed to consider the same. The petitioner’s conduct throughout has

been bona fide, and the initial reflection of credit in GSTR-3B was a

procedural error arising during the nascent stage of GST implementation

without any fraudulent intent or revenue loss. In such circumstances, the

levy of interest and adjustment of refund are unsustainable in law and

liable to be quashed.

Submissions made by the learned counsel for the respondents.

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10.

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The Learned Counsel for the respondents submits that the

present writ petition is devoid of merit and deserves dismissal. The

petitioner admittedly availed transitional credit twice; once through

TRAN-1 and another through GSTR-3B for the month of July 2017 on

28.08.2017, resulting in wrongful availment of input tax credit

amounting to Rs. 1,31,07,632/-. Although discrepancies were pointed

out by the department in September 2017, the petitioner reversed the

substantial inadmissible input tax credit only on 20.05.2019 i.e.

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approximately after 630 days. During this period, the electronic credit

ledger did not maintain a balance equivalent to the wrongly availed

amount, clearly establishing utilisation. Once input tax credit is wrongly

availed and utilised, interest liability under Sections 50(3) and 42(10) of

the CGST Act, 2017 automatically arises. The liability is statutory and

compensatory in nature. The amendment to Section 50(3) does not assist

the petitioner, as utilisation is clearly established from the record.

11.

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It is further submitted that despite repeated communications,

the petitioner failed to pay the statutory interest amounting to

Rs.54,29,792/-. When the petitioner filed a refund claim of Rs.

32,00,000/- from the electronic cash ledger, the same was lawfully

adjusted against the outstanding interest liability under Section 79 of the

CGST Act, 2017. The Joint Commissioner (Appeals) has upheld the

action of the department by a reasoned order. There is no jurisdictional

error, violation of natural justice, or illegality warranting interference

under Article 226.

12.

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Learned counsel for the respondent submits that the

petitioner seeks to avoid a statutory consequence arising from its own

wrongful conduct. The action of the Respondents is strictly in

accordance with the law and safeguards public revenue. It is therefore

respectfully prayed that the writ petition be dismissed.

Appreciation & Conclusion.

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13.

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In para 5.4 of this Writ Petition, the petitioner has admitted

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that it has wrongly received excess credit of transitional credit amount

Rs. 3,48,523/-. The petitioner was only entitled to claim Rs.1,28,21,441/-

, thereafter, the petitioner tried to reverse the amount of TRANS- 1

twice, but failed to do so. In September 2018, the GSTR-3 B return was

submitted in order to reverse the amount of TRANS-1, but the same was

not reflected in the GST portal. The petitioner finally reversed the Input

Tax Credit of Rs.1,31,07,632/- in monthly return April GSTR- 3B,

therefore, the petitioner wrongly availed the excess credit of

Rs.1,31,07,632/- from electronic credit ledger from 28.08.2017 to

20.05.2019 i.e. total 630 days, therefore, a show cause notice was issued

to pay the interest @ of 24% per annum under Section 42(10) and

Section 50(3) of the GST Act, 2017 amounting to Rs.54,29,792/-.

14.

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All the grounds raised by the petitioner have been duly

considered by the Assistant Commissioner, CGST & Central Excise

Division, Chhindwara vide order dated 10.02.2020. Thereafter, the

Appellate Authority vide Order-in-Appeal dated 21.04.2021 had

considered all the three objections of the petitioner; firstly, that the

interest cannot be recovered under GST Act, 2017 without issuing SCN;

secondly, interest on delayed payment of tax to be calculated on the net

tax payable only and; thirdly, mere reflection of transitional credit could

not be treated as availment or utilisation unless such availment or

utilisation of credit reduce tax liability. All three grounds have been met

by quoting appropriate sections of the GST Act, 2017. Para 8, 9, 10, 11

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and 12 of the Order -in- Appeal dated 21.04.2021 are reproduced below

for ready reference and convenience:-

"8.

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In the instant appeal, the appellant had

contested the impugned order on following grounds

:

i. Interest had been recovered without issuing

any SCN.

ii. Interest on delayed payment of tax to be

calculated on net tax payable only.

iii. Mere reflection of transitional credit could

not be treated as availment or utilisation unless

such availment or utilisation of credit reduce tax

liability.

"9.

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Upon perusal of the available facts on record,

I observe that the appellant himself, as per self-

assessment, had reversed the ITC amounting to Rs.

13107632 on 20.05.2019 which was claimed by

them on 28.08.2017. Thus, it is very clear that the

appellant had accepted the fact that they had

wrongly taken/claimed said credit.

Now, section 50(3)of the CGST Act, 2017 reads

as:

"(3) A taxable person who makes an undue or

excess claim of input tax credit under sub-section

(10) of section 42 or undue or excess reduction in

output tax liability under sub-section (10) of section

43, shall pay interest on such undue or excess claim

or on such undue or excess reduction, as the case

may be, at such rate not exceeding twenty-four per

cent., as may be notified by the Government on the

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recommendations of the Council.”

In view of the same, CGST Act, 2017 clearly

provides that the interest would be payable on

excess claim of the ITC. Thus, the applicability of

interest on ITC as per the said section arises on the

claim of ITC. And, in the instant case, the appellant

had claimed the credit under dispute on 28.08.2017.

10.

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Further, the appellant's contention that the

interest on delayed payment of tax to be calculated

on net tax payable is not applicable to the instant

case as the instant case pertains to the excess claim

of ITC in their electronic credit ledger and not

related to the payment of tax per se.

11.

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Now, I would take up the issue whether

interest can be recovered without issuance of SCN

or otherwise.

In this respect, section 79(12) of the CGST Act,

2017 reads as:

"(12) Notwithstanding anything contained in

section 73 or section 74, where any amount of self-

assessed tax in accordance with a return furnished

under section 39 remains unpaid, either wholly or

partly, or any amount of interest payable on such

tax remains unpaid, the same shall be recovered

under the provisions of section 79.”

Further, section 79 of the CGST Act, 2017

reads as:

"(1) Where any amount payable by a person to

the Government under any of the provisions of this

Act or the rules made thereunder is not paid, the

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proper officer shall proceed to recover the amount

by one or more of the following modes, namely:—

a. the proper officer may deduct or may require any

other specified officer to deduct the amount so

payable from any money owing to such person

which may be under the control of the proper

officer or such other specified officer;

...................................................................................

...................................................................................

...................................................................................

(3) Where any amount of tax, interest or

penalty is payable by a person to the Government

under any of the provisions of this Act or the rules

made thereunder and which remains unpaid, the

proper officer of State tax or Union territory tax,

during the course of recovery of said tax arrears,

may recover the amount from the said person as if it

were an arrear of State tax or Union territory tax

and credit the amount so recovered to the account

of the Government."

It is a matter of fact that the ITC under dispute

is self-assessed and accepted by the appellant. Thus,

if there is reversal of ITC by the appellant on the

basis of self- assessment, on the same premise,

automatically interest comes into the picture. In

view of the above, interest on the self-assessed

liability is a confirmed demand and no SCN is

needed to be issued for the recovery of the

confirmed demand ie. arrear.

Thus, in view of the above, I find that the

interest amount arising on the self- assessed

reversal of ITC is an arrear and recoverable from

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the appellant without issuance of separate SCN for

the same. Accordingly, recovery of arrear by the

adjudicating authority vide impugned order is well

within the purview of provisions as mandated under

the CGST Act, 2017.

12.

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Further, the authorized representative of the

appellant has submitted during the personal hearing

that the appellant has sufficient balance in credit

ledger and thus, they are not required to discharge

any liability in cash. In this regard, I place reference

to section 49 of the CGST Act, 2017 as:

"49. (1) Every deposit made towards tax,

interest, penalty, fee or any other

amount.......................................................................

...................................................................................

...................................................................................

(3) The amount available in the electronic cash

ledger may be used for making any payment

towards tax, interest, penalty, fees or any other

amount payable under the provisions of this Act or

the rules made thereunder in such manner and

subject to such conditions and within such time as

may be prescribed.

(4) The amount available in the electronic credit

ledger may be used for making any payment

towards output tax under this Act or under the

Integrated Goods and Services Tax Actin such

manner and subject to such conditions and within

such time as may be prescribed."

Thus, in view of the above, it is clear that

liability towards output tax only would be

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discharged through the electronic credit ledger.

Whereas, any liability towards tax, interest, penalty

or any other amount would be discharged from the

electronic cash ledger. Thus, the liability towards

interest can only be discharged from the electronic

cash ledger and therefore the said Submission made

by the authorized representative on behalf of the

appellant does not merit consideration."

15.

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Learned counsel for the petitioner has placed reliance on a

judgment passed by the Division Bench of the High Court of Bombay in

the case of "Soorajmull Bajinath (P.) Ltd. Vs. Union of India [(2024)

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169 taxmann.com 120 (Bombay)]".

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In the said case, the recovery of

interest was quashed on a consent given by the department. The interest

is payable only when the balance in the electronic credit ledger falls

below the wrongly availed input tax credit amount. No such material has

been produced by the petitioner to justify that the balance amount in the

electronic credit ledger was below the amount of Rs. 1,31,07,632/-.

Apart from that, the petitioner is admitting that the aforesaid amount was

wrongly availed as input tax credit and retained for 630 days and finally

returned. Therefore, the interest is mandatory under Section 50(3) read

with Section 42(10) of the CGST Act, 2017.

16.

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No case for interference is made out to interfere with the

order dated 10.02.2020 passed by the Respondent No.3 - Commissioner,

Central GST, Custom & Central Excise Office, Jabalpur and the order

dated 21.04.2021 passed by the Respondent No.4 - Joint Commissioner

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(VIVEK RUSIA)

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JUDGE

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(PRADEEP MITTAL)

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JUDGE

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(Appeals) Central GST, Bhopal (M.P.)

17.

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In view of the above, the present petition is dismissed.

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Shivani

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