Karnataka HC directs immediate release of blocked input tax credit following binding precedent in Section 16(4) GST dispute

The Karnataka HC held that sub-section (4) to Section 16 of the Central GST Act, 2017 and Karnataka GST Act, 2017 regarding input tax credit availment date was directly covered by precedent in M/s. Sadhana Enviro Engineering Services case. Following this binding precedent, the court directed respondents to immediately unblock and release the petitioner's credit balance in their ITC Ledger/Account without delay. The petition was allowed and disposed of accordingly.

---

---

Issues:
Challenge to legality of Sub-section (4) to Section 16 of the CGST Act and KGST Act, accounting of input tax credit, legality of Sub-rule (5) and (6) to Rule 61 of the CGST Act, validity of Form GSTR-3B, quashing of Summary of Show Cause Notice, and implementation of amended provisions of Section 16 (5) of the CGST Act.

Analysis:
The petitioner sought various reliefs challenging the legality of Sub-section (4) to Section 16 of the Central Goods and Service Tax Act, 2017 and the Karnataka Goods and Service Tax Act, 2017. Additionally, the petitioner argued for the accounting of input tax credit based on the date of availment, questioning the binding nature of the restriction imposed under Sub-section (4) of Section 16. The petitioner also challenged the legality of Sub-rule (5) and (6) to Rule 61 of the CGST Act, substituted through a retrospective amendment, and the validity of Form GSTR-3B as a return. Furthermore, the petitioner sought the quashing of the Summary of Show Cause Notice and related orders issued by the Respondents. The primary contention revolved around the claim for input tax credit for a specific period and compliance with the provisions of Section 16 (1) of the CGST Act, 2017 and KGST Act, 2017.

The Court noted that the issue in controversy was addressed in a previous judgment of the Court in a similar case. The Court highlighted the insertion of Section 16 (5) into the CGST Act through "The Finance (No. 2) Act, 2024," extending the time limit for availing input tax credit for certain financial years. Both the petitioner and the revenue authorities acknowledged the applicability of this amendment, leading to an agreement on the extension of the time limit for filing returns and claiming input tax credit. Consequently, the Court directed the parties to adhere to the amended provisions and provide a reasonable opportunity for the petitioner to comply with the law within a specified timeframe.

Based on the amendment inserting Section 16 (5) into the CGST / KGST Act, the Court disposed of the petition, instructing the original authority to implement the amended provisions and allow the petitioner to avail input tax credit as per the extended deadline. The Court ordered the release of the blocked Input Tax Credit ledger of the petitioner and emphasized the need for immediate action by the respondents to unblock and release the credit balance without delay. The Court refrained from expressing opinions on other prayers sought by the petitioner, keeping those contentions open for future consideration.

In conclusion, the Court allowed the petition in alignment with the previous judgment and directed the implementation of the amended provisions of Section 16 (5) of the CGST Act. The Court quashed the impugned order and directed the parties to proceed in accordance with the law while maintaining neutrality on other prayers sought by the petitioner.

---