Input tax credit denial under Section 16(4) set aside for fresh reconsideration under binding directions after hearing the assessee.

Denial of input tax credit under Section 16(4) was interfered with only to that limited extent because the claim had to be examined in light of the binding directions in M. Trade Links. The assessment was therefore curtailed on the credit issue, and the competent authority was required to reconsider the assessee's claim after affording an opportunity of hearing. The result was partial relief, with the disallowance on input tax credit set aside only for fresh consideration under the governing directions.

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Issues: Whether the denial of input tax credit under Section 16(4) could be sustained and whether the assessment order required interference to the extent it disallowed the credit.

Analysis: The assessee had been denied input tax credit for the assessment year 2018-19 on the basis of Section 16(4) of the CGST/SGST regime. Taking note of the directions issued in M. Trade Links, the Court found it appropriate to interfere with the assessment only to the extent that it denied input tax credit on that ground and to require the competent authority to reconsider the claim in accordance with those directions after hearing the petitioner.

Conclusion: The denial of input tax credit under Section 16(4) was set aside to that limited extent, and the matter was directed to be reconsidered by the competent authority in light of M. Trade Links and after affording an opportunity of hearing to the petitioner.

Final Conclusion: The petitioner obtained partial relief, with the assessment curtailed on the input tax credit issue and the dispute sent back for fresh consideration in accordance with the governing directions.

Ratio Decidendi: Where denial of input tax credit is governed by binding directions already issued by the Court, the assessment can be interfered with to that extent and the claim must be reconsidered by the authority after hearing the assessee.

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