Karnataka HC sets aside recovery notice and ITC rejection, orders immediate credit balance release following established precedent

Karnataka HC allowed petition challenging recovery notice and rejection of Input Tax Credit. Court followed precedent from M/s. Sadhana Enviro Engineering Services case, directing respondents to unblock and release credit balance in petitioner's ITC Ledger immediately upon receipt of order. The impugned order was set aside and petition was disposed of favorably based on the established precedent covering identical issues.

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Issues:
1. Quashing of recovery notice issued under KGST Act
2. Quashing of assessment order rejecting input credit claim
3. Quashing of notice rejecting input credit benefits
4. Direction to allow input tax credit benefits
5. Implementation of amended provisions under Section 16(5) of CGST/KGST Act

Analysis:

Issue 1: Quashing of recovery notice under KGST Act
The petitioner sought a writ of certiorari to quash the recovery notice issued under the KGST Act for the period of April 2018 to March 2019. The court noted the petitioner's request and directed the respondents to implement the amended provisions under Section 16(5) of the CGST Act within a specified timeframe.

Issue 2: Quashing of assessment order rejecting input credit claim
The petitioner also sought to quash the assessment order rejecting the input credit claim of Rs. 35,3900 and imposing penalties. The court acknowledged the insertion of Section 16(5) through "The Finance (No. 2) Act, 2024," extending the time limit for availing credit. The court directed the respondents to implement the amended provisions and quashed the impugned blocking of the Input Tax Credit (ITC) ledger.

Issue 3: Quashing of notice rejecting input credit benefits
Additionally, the petitioner requested the quashing of a notice rejecting input credit benefits. The court, in line with the earlier judgment and the amended provisions, directed the respondents to provide a reasonable opportunity to the petitioner and proceed in accordance with the law within a specified timeframe.

Issue 4: Direction to allow input tax credit benefits
The petitioner sought a writ of mandamus to allow claiming input tax credit benefits. The court, considering the insertion of Section 16(5) and the petitioner's entitlement to credit, directed the respondents to unblock and release the credit balance in the petitioner's ITC Ledger without delay.

Issue 5: Implementation of amended provisions under Section 16(5) of CGST/KGST Act
The court emphasized the significance of the amended provisions under Section 16(5) of the CGST Act, inserted through "The Finance (No. 2) Act, 2024," extending the time limit for availing input tax credit. The court disposed of the petition in accordance with the judgment in a similar case and directed the parties to comply with the amended provisions within a specified timeframe.

In conclusion, the court's judgment focused on the implementation of the amended provisions under Section 16(5) of the CGST Act, extending the time limit for availing input tax credit, and directed the respondents to provide a reasonable opportunity to the petitioner and proceed in accordance with the law.

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