Section 74 of the CGST Act, 2017 – Imposition of Penalty – ITC availed but not utilized--The petitioner challenged the impugned order dated 06.02.2020, whereby, ITC claim of the petitioner under Tran-1 was rejected. The petitioner contended that the credit was never utilized and therefore the question of levying interest and imposing penalty on the petitioner does not arise inasmuch as the entire transitional credit was reversed by the petitioner in the monthly returns. The counsel for the petitioner submitted that Section 74 will get attracted only where there is a wrong utilization of credit availed. Further Section 42 (10) is not attracted in this case, as the petitioner has never utilized the credit which was attempted for transition by filing TRAN-1. The court observed that petitioner had not utilized the ITC and reversed the same on 10.02.2020 after SCN was issued. Further, this SCN dated 31.12.2019 does not meet the requirements of Section 74(9) of the Act, 2017. Proceedings can be initiated for mere wrong availing of ITC followed by imposition of interest penalty either under Section 73 or under Section 74 they stand attracted only where such credit was not only availed but also utilised for discharging the tax liability. The court relied on the Hon'ble Supreme Court decision in Union of India Vs. Ind-Swift Laboratories Limited.  

Held that:- The Hon’ble High Court held that the petitioner is not liable to penalty imposed. Since there was an attempt to wrongly avail credits and utilise the same as and when the tax liability would have arisen, the petitioner is held liable to a token penalty of Rs. 10,000/-.