Madras High Court Holds That Penalty Under Section 73/ 74 Cannot Be Imposed

BRIEF FACTS OF THE CASE

• The Petitioner¹ challenged the order confirming the demand for wrong availment of transitional credit amounting to INR 30,33,615/- along with interest and penalty under section 74 of Central Goods and Services Tax Act [CGST Act]. It was an undisputed fact that the Petitioner had reversed the wrongly availed transitional credit before the issuance of show cause notice.
• Aggrieved by the order of the adjudicating authority, Petitioner filed appeal before the first appellate authority where the demand to the extent of interest was set aside and demand on account of penalty was upheld.
• Since the constitution of Tribunal [Second Appellate authority] was pending, the Petitioner preferred the writ before the Hon'ble Court. The Petitioner challenged the imposition of penalty on grounds that there was no loss to the revenue as transitional credit was never utilized by the Petitioner and penalty under section 74 of CGST Act can only be imposed