Input tax credit denial must be reconsidered when a later enabling provision may affect entitlement, with hearing required.

Denial of input tax credit based on section 16(4) was set aside where the petitioner contended that section 16(5) had become applicable and could support entitlement to credit for the 2018-19 period. The Court held that the adverse order had to be reconsidered in light of section 16(5) and after giving the petitioner an opportunity of hearing. The matter was remitted for fresh orders on the credit claim, with the rejection sustained only to the extent it required reconsideration rather than final confirmation.

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Issues: Whether the denial of input tax credit under section 16(4) could be interfered with in view of section 16(5), and whether the order rejecting the credit required reconsideration.

Analysis: The petitioner's claim to input tax credit for the financial year 2018-19 had been rejected by reference to section 16(4). The Court noted the submission that, on the coming into force of section 16(5), the petitioner would be entitled to the benefit of input tax credit. In that context, the impugned order was required to be revisited after considering section 16(5) and after affording an opportunity of hearing.

Conclusion: The impugned order was set aside to the extent it denied input tax credit under section 16(4), and the matter was remitted for fresh orders after considering section 16(5) and granting a hearing to the petitioner.

Final Conclusion: The petitioner obtained partial relief, with the rejection of input tax credit annulled for reconsideration by the competent authority.

Ratio Decidendi: Where statutory relaxation or a later enabling provision becomes relevant to the entitlement to input tax credit, the adverse order must be reconsidered on that basis after hearing the affected party.

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