Tax Credit Dispute Resolved: Authorities Must Reexamine Case Within Two Months Under Section 118 of Finance Act, 2024

HC quashed the impugned order dated 15.07.2023 challenging input tax credit disallowance. Court directed tax authorities to reexamine the case within two months considering Section 118 of Finance Act, 2024, which allows input tax credit for specified financial years. The matter was remitted for fresh adjudication without examining case merits.

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Issues:
Challenge to the validity of Section 16(4) of Jharkhand Goods and Services Tax Act, 2017 and Rule 61(5) of Jharkhand Goods and Services Rules, 2017. Impugned order disallowing input tax credit under Section 16(4) read with Rules 36 of Central/Jharkhand Goods and Services Tax Act/Rules, 2017. Request for quashing the impugned order dated 15 July 2023.

Analysis:
The petitioner filed a writ petition under Article 226 of the Constitution of India seeking various reliefs. The first relief challenged the validity of Section 16(4) of Jharkhand Goods and Services Tax Act, 2017, alleging it violated constitutional provisions and the basic structure of the Act. The second relief challenged the amendment under Rule 61(5) of Jharkhand Goods and Services Rules, 2017, as ultra vires, affecting the petitioner's right to avail Input Tax Credit. The third relief sought quashing of the impugned order dated 15 July 2023, disallowing input tax credit, alleging violation of constitutional rights and principles of natural justice.

The matter was heard on 27.08.2024, where the petitioner's counsel argued for a fresh decision based on Section 118 of the Finance Act, 2024. The respondent sought time for instructions, and the matter was listed for further hearing. The respondent's counsel later requested an adjournment to seek instructions regarding quashing the impugned order in light of Section 118 of the Finance Act, 2024. The State counsel confirmed the need for fresh adjudication due to the provisions of the Finance Act, 2024.

The court noted the insertion of sub-section (5) under Section 16 of the CGST Act, effective from 1st July 2017, allowing input tax credit for specified financial years. The court observed that the impugned decision did not consider the implications of this new provision. Consequently, the State agreed to reexamine the issue. The court quashed the impugned order dated 15.07.2023 and remitted the matter for a fresh decision in light of sub-section (5) of Section 16 of the CGST Act, directing the authority to decide within two months.

The court clarified that it did not delve into the merits of the case but emphasized the need for a fresh consideration based on the new statutory provision.

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