Quashes refund-rejection citing relaxation in time limit for availment of ITC for initial years of GST

The Hon’ble Calcutta High Court in DYS Impex Private Limited Versus Assistant Commissioner of Revenue, State Tax, Refund Unit & Ors. - 2025 (7) TMI 137 - CALCUTTA HIGH COURT held that refund denial based on Section 16(4) of the CGST/ WBGST Act could not be sustained in light of the retrospective insertion of Section 16(5), which extended the timeline for availing input tax credit (ITC) for initial 4 FYs, starting from 2017-18 to 2020-21 up to November 30, 2021.

Facts:

DYS Impex Private Limited (“the Petitioner”), filed a writ petition challenging the order dated February 21, 2024, which rejected its appeal against partial refund rejection (Form GST RFD-06) for the tax period July 2019 to September 2019.

Assistant Commissioner of Revenue, State Tax, Refund Unit (“the Respondent”), rejected the refund claim by relying on the proviso to Section 16(4) of the CGST/ WBGST Act, stating that ITC relating to FY 2017–18 was availed beyond the prescribed time limit.

The Petitioner contended that, pursuant to the retrospective insertion of Section 16(5) in the Act, ITC for FYs 2017–18 to 2020–21 could be availed in any return filed up to November 30, 2021.

The Respondent contended that the refund was rightly disallowed under the unamended Section 16(4), which barred ITC beyond the specified deadline for FY 2017–18.

Aggrieved by this, the Petitioner approached the Court under Article 226, seeking relief against rejection of refund on the basis of a retrospective statutory amendment.

Issue:

Whether, in view of the retrospective insertion of Section 16(5) in the CGST/ WBGST Act, the Petitioner was entitled to claim ITC and refund for FY 2017–18 through returns filed up to November 30, 2021?

Held:

The Hon’ble Calcutta High Court in DYS Impex Private Limited Versus Assistant Commissioner of Revenue, State Tax, Refund Unit & Ors. - 2025 (7) TMI 137 - CALCUTTA HIGH COURT held as under:

• Observed that, both the refund sanctioning authority and the appellate authority rejected refund by invoking the proviso to Section 16(4).
• Noted that, Section 16(5) was inserted retrospectively from July 1, 2017, and allowed filing of returns for FYs 2017–18 to 2020–21 by November 30, 2021 for availing ITC.
• Held that, the authorities failed to consider the extended timeline introduced by Section 16(5), rendering the orders unsustainable.
• Further set aside both the refund rejection order dated April 14, 2023 and the appellate order dated February 21, 2024.
• Directed the proper officer to re-adjudicate the refund claim in light of Section 16(5), and to conclude proceedings within 12 weeks of receiving the order.

Our Comments:

This judgment affirms that refund claims involving ITC for the initial GST years must be adjudicated in light of Section 16(5), which was inserted retrospectively by the Finance Act, 2025. The Calcutta High Court correctly held that Section 16(5) overrides the earlier limitation under Section 16(4), allowing ITC for FYs 2017–18 to 2020–21 in returns filed up to November 30, 2021.

A similar approach was adopted by the Hon’ble Gauhati High Court inM/s ITI LTD Versus THE UNION OF INDIA AND 6 ORS, THE UNION OF INDIA, GST COUNCIL, CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS, GST NETWORK, COMMISSIONER JOINT SECRETARY IN THE BOARD, CENTRAL BOARD OF INDIRECT TAXES AND CUSTOMS NORTH BLOCK CENTARL SECRETARIAT NEW DELHI, ADDITIONAL COMMISSIONER CENTRAL GST DIBRUGARH - 2025 (2) TMI 841 - GAUHATI HIGH COURT, where the petitioner’s grievance regarding ITC availment became largely academic after the retrospective insertion of Section 16(5). The Gauhati High Court set aside the impugned order and remanded the matter for fresh consideration in accordance with the amended law. The Court there emphasized that refund or demand adjudication must reflect the legal position post-amendment, especially when such amendment cures a statutory limitation.

Relevant Provisions:

Section 16(4) and Section 16(5) of the CGST/WBGST Act

“16. Eligibility and conditions for taking input tax credit.-

(4)A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.

(5) Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed up to the thirtieth day of November, 2021.

Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.”

 (Author can be reached at [email protected])