GSTAT Pune upheld interest of ₹3,80,408 against a Pune plywood trader, holding that the second proviso to Section 16(2) created the liability even though Form GSTR‑2 never operated.
GSTAT Pune has held that interest is payable on ITC where the recipient did not pay its suppliers within 180 days during 2018-19, as the liability arises from the second proviso to Section 16(2) itself and not from the reporting mechanism in Rule 37. [Indermal Aidanmal Oswal v. Commissioner of Central Tax, Pune-II, 2026-juristway.com-3187-GSTAT(Pune)-GST]
The Bench of Shridhar Mahadeo Bhosale, Member (Judicial), and Dr. Nirmal Kumar Soren, Member (Technical), dismissed the appeal. Dr. Nirmal Kumar Soren wrote the order.
An audit for July 2017 to March 2020 led to a Section 73 notice dated 10 Mar 2023 for ITC of ₹31,115 on invoices of a supplier whose registration was cancelled from 3 Jul 2017, and for interest of ₹3,80,408 on credit for supplies not paid for within 180 days. The appellant later paid the ₹31,115 through DRC‑03, without interest.
On the credit, the appellant produced no invoice, payment record or proof of receipt, and the burden under Section 155 lay on it. The ITC demand was upheld, with interest to be quantified by the proper officer.
On interest, the Bench agreed that the amended proviso and Rule 37 quoted by the authorities did not apply to 2018-19, but held that the unamended proviso itself required the credit to be added to output tax “along with interest thereon”, leaving only the manner to the Rules. Non-operation of Form GSTR‑2 affected reporting, not liability. Reading Rule 37(3) to excuse a recipient who never reversed the credit would let it benefit from its own default, and later payment to suppliers, COVID-19 hardship and agreements with suppliers did not help.
The penalty of ₹20,000 under Section 73(9) read with the IGST Act was upheld. The proper officer must adjust the pre-deposit of ₹39,091 and the DRC‑03 payment against the demand and communicate any balance.
2026-juristway.com-3187-GSTAT(Pune)-GST
