GST Interest/Penalty Waiver Can't Be Denied For Initial Wrong RCM Payment Through ITC Once Cash Compliance Is Made: Orissa High Court
The Orissa High Court has held that a GST interest and penalty waiver application filed by the petitioner cannot be rejected merely because a portion of tax liability under reverse charge mechanism (RCM) was initially discharged through input tax credit, subsequently pays the amount in cash and complies with legal requirements. A Division Bench comprising the Chief Justice Harish...
The Orissa High Court has held that a GST interest and penalty waiver application filed by the petitioner cannot be rejected merely because a portion of tax liability under reverse charge mechanism (RCM) was initially discharged through input tax credit, subsequently pays the amount in cash and complies with legal requirements.
A Division Bench comprising the Chief Justice Harish Tandon and Justice Murahari Sri Raman heard the writ petition filed by Simon India Ltd., a company engaged in execution of works contracts, challenging the rejection of its application seeking waiver of interest and penalty in relation to GST demands raised for the period July 2017 to March 2018.
The dispute arose after a demand was confirmed under Section 73 of the GST Act pursuant to audit proceedings. While the company had initially filed an appeal, it later withdrew the same in order to avail the benefit of the waiver scheme introduced pursuant to the recommendations of the GST Council and the insertion of Section 128A by the Finance Act, 2024. The petitioner claimed to have paid the entire tax demand before the cut-off date prescribed under the scheme.
However, the Assistant Commissioner rejected the waiver application on the ground that a portion of IGST liability under RCM ought to have been paid entirely in cash and not through credit ledger. The authority held that this non-compliance disentitled the petitioner from availing the benefit of waiver.
During the pendency of the writ proceedings, the High Court granted the petitioner an opportunity to demonstrate bona fides. Pursuant to the court's direction, the petitioner deposited the disputed IGST amount of ₹1,36,352 in cash and produced documentary proof evidencing payment through challan and corresponding debit entries.
Taking note of the subsequent compliance, the court held that the statutory requirement under Section 128A read with Rule 164 of the GST Rules stood satisfied in the petitioner's case.
The court accordingly set aside the order rejecting the waiver application and directed the Assistant Commissioner to reconsider the application afresh by taking into account all payments made by the petitioner. The authority was further directed to pass a reasoned order within four weeks and to refund any excess amount found to have been deposited beyond what is required under law.
The court held that, in view of the petitioner having subsequently complied with the requirement of cash payment under RCM, the statutory conditions under Section 128A stood satisfied, warranting reconsideration of the waiver application.
Case Title: M/s. Simon India Ltd. v. Assistant Commissioner of CT & GST & Ors.
Case Number: W.P.(C) No. 33058 of 2025
For Petitioner: Senior Advocate Jagabandhu Sahoo assisted by Advocate Kajal Sahoo
For Respondents: Standing Counsel Sunil Mishra
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