Interest Payable on Excess TRAN-1 Credit

Case Details: Kjv Alloys Conductors (P.) Ltd. vs. Union of India - [2026] 184 taxmann.com 362 (Madhya Pradesh)

Judiciary and Counsel Details

Vivek Rusia & Pradeep Mittal, JJ.
Mukesh Agrawal, Adv. for the Petitioner.
Gautam Prasad, Adv. for the Respondent.

Facts of the Case

The petitioner carried forward transitional credit through TRAN-1, which did not reflect in the electronic credit ledger (ECL) but was reported in GSTR-3B. The petitioner subsequently admitted that excess credit had been availed and reversed the same after a period of 630 days. The Department of Revenue demanded interest on such excess availment and retention and adjusted the same from the refund available in the cash ledger, which action was affirmed by the appellate authority. It was contended that since the credit was not reflected in the ECL, interest was not leviable and challenged the adjustment of refund towards such interest liability. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that interest liability under Section 50 read with Section 42 of the CGST Act is mandatory in cases of wrongful availment and retention of input tax credit. It was observed that the petitioner had admitted excess availment and retained such credit for a substantial period of 630 days without any evidence showing that the ECL balance had fallen below the wrongly availed amount. The Court held that mere non-reflection of credit in the ECL does not absolve liability where credit was availed and utilised through returns. It was further held that interest is compensatory in nature and arises automatically upon wrongful availment and retention of credit. Accordingly, the writ petition was dismissed.