2024 (10) TMI 1631 - HC - GST

Retrospective GST amendment under Section 16(5) allows input tax credit claims beyond original limitation period

Sri Ganapathi Pandi Industries, rep. by its Proprietor Versus The Assistant Commissioner (State Tax) (FAC) Tondiarpet Assessment Circle, Chennai

Madras HC allowed writ petitions challenging denial of input tax credit (ITC) claims beyond Section 16(4) CGST Act limitation period. Following 53rd GST ... Reversal of ITC - availment of ITC beyond the period of limitation prescribed under Section 16 (4) of the CGST Act - HELD THAT:- After the filing of these Writ Petitions, certain development took place, i.e. that 53rd GST Council Meeting was held on 22.06.2024, and during the said Meeting, the GST Council recommended for extension of the deadline for availing ITC on any invoice or debit note under Section 16(4) of the CGST Act and this extension would be applicable to any GSTR-3B returns filed for the Fys 2017-18, 2018-19, 2019-20 and 2020-21 with a new deadline deemed to be as ''30.11.2021'', to which, the Presidential Assent was also obtained by the Government of India on 16.08.2024, whereby, the financial proposals of the Central Government for the Financial Year 2024- 25 was given effect to vide Finance Act, (No.2) of 2024, and in view of the aforesaid enactment, the Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes and Customs, issued a Notification, bearing No.17 of 2024-Central Tax, dated 27.09.2024, pursuant to which, a Circular No.237/31/2024-GST was issued by the Central Board of Indirect Taxes and Customs, which was addressed to all the Principal Chief Commissioners/Chief Commissioners/Principal Commissioners/Commissioners of Central Tax (All), thereby, clarifying the issues regarding implementation of provision of sub-section (5) and subsection (6) in Section 16 of CGST Act, 2017, the impugned orders are no longer sustainable and liable to be quashed. This Court considering the fact that the issue involved in all these Writ Petitions is only with regard to the availment of ITC, which is barred by limitation in terms of Section 16 (4) of the CGST Act, and in the light of the subsequent developments took place, whereby, Section 16 of the CGST Act was amended and sub-section (5) was inserted to Section 16, which came into force with retrospective effect from 01.07.2017, the petitioners are entitled to avail ITC in respect of GSTR-3B filed in respect of FYs 2017-18, 2018-19, 2019-20 and 2020-21 as the case may be, on or before 30.11.2021, is inclined to quash the impugned orders. The orders impugned in all Writ Petitions are quashed insofar as it relates to the claim made by the petitioners for ITC which is barred by limitation in terms of Section 16 (4) of the CGST Act, 2017 but, within the period prescribed in terms of Section 16 (5) of the said Act - In view of the fact that the impugned orders are quashed, the respondent-Department is directed to take immediate steps towards defreezure of the concerned petitioners bank accounts, which have been freezed in furtherance of the impugned orders, by sending intimation to the concerned bankers. Conclusion - i) The legislative amendments providing retrospective relief must be applied to pending disputes, especially when such amendments are intended to address widespread issues affecting taxpayers. ii) The orders impugned in all Writ Petitions are quashed insofar as it relates to the claim made by the petitioners for ITC which is barred by limitation in terms of Section 16 (4) of the CGST Act, 2017 but, within the period prescribed in terms of Section 16 (5) of the said Act. All the Writ Petitions are allowed. ISSUES PRESENTED and CONSIDEREDThe primary issue considered in this batch of writ petitions was whether the petitioners, who are registered dealers under the Goods and Services Tax Act, 2017 (GST Act), were entitled to claim Input Tax Credit (ITC) for the financial years 2017-18 to 2020-21 beyond the deadline initially prescribed under Section 16(4) of the Central Goods and Services Tax Act (CGST Act). The issue arose due to the reversal of ITC claims by the respondent-Department, which also imposed tax, penalty, and interest on the petitioners for belated filing of GSTR-3B returns.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsSection 16(4) of the CGST Act initially restricted the entitlement to claim ITC to the thirtieth day of November following the end of the financial year to which the invoice or debit note pertains. However, during the 53rd GST Council Meeting, it was recommended that this deadline be extended for the financial years 2017-18 to 2020-21, with a new deadline of November 30, 2021. This recommendation was given legislative effect through the Finance Act (No.2) of 2024, which amended Section 16 by adding sub-sections (5) and (6), allowing ITC claims for the specified years to be filed up to the new deadline.Court's Interpretation and ReasoningThe Court recognized the retrospective amendment to Section 16 of the CGST Act, which allowed the petitioners to file ITC claims for the specified financial years by the extended deadline. It acknowledged the legislative intent to provide relief to taxpayers affected by the initial deadline, which was particularly relevant given the disruptions caused by the COVID-19 pandemic.Key Evidence and FindingsThe Court noted the submission of the GST Council's recommendation and the subsequent amendment to the CGST Act, as well as the Presidential Assent to the Finance Act (No.2) of 2024. These developments were crucial in determining the legality of the petitioners' ITC claims.Application of Law to FactsApplying the amended Section 16(5) to the facts, the Court concluded that the petitioners were entitled to claim ITC for the financial years 2017-18 to 2020-21, provided the claims were filed by November 30, 2021. The Court found that the impugned orders reversing the ITC claims were not sustainable in light of the legislative amendments.Treatment of Competing ArgumentsThe respondent-Department argued that the impugned orders should stand for issues other than the limitation, such as discrepancies or fraudulent claims. The Court addressed this by granting the Department liberty to pursue action on these other issues, ensuring that the quashing of the orders related solely to the limitation aspect.ConclusionsThe Court concluded that the petitioners were entitled to the ITC claims for the specified financial years, quashing the impugned orders to the extent they were based on the limitation issue. It also provided directions for the defreezing of bank accounts and refund or adjustment of any tax amounts collected under the impugned orders.SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal ReasoningThe Court emphasized the retrospective application of the amendment: '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 persons 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.'Core Principles EstablishedThe judgment established the principle that legislative amendments providing retrospective relief must be applied to pending disputes, especially when such amendments are intended to address widespread issues affecting taxpayers.Final Determinations on Each IssueThe Court quashed the impugned orders related to the limitation issue, restrained the respondent-Department from initiating proceedings based on these orders, and directed the defreezing of bank accounts. It allowed the Department to address other issues such as discrepancies or fraudulent claims separately, in accordance with the law.