Quash of order denying ITC barred by limitation; taxpayers allowed ITC under Section 16(5) for FY 2017-18 to 2020-21

The HC quashed the impugned order dated 26.02.2021 insofar as it denied input tax credit (ITC) claims barred by limitation under Section 16(4) of the CGST Act, holding petitioners entitled to avail ITC for GSTR-3B filings relating to FYs 2017-18 through 2020-21 within the period prescribed by the retrospectively inserted Section 16(5) (on or before 30.11.2021). The respondent-Department was restrained from initiating proceedings against the petitioners based on the limitation issue. Petition allowed.

---

---

The High Court of Madras considered a writ petition filed by a taxpayer challenging orders passed by the tax department reversing their Input Tax Credit (ITC) claim under the Goods and Service Tax Act, 2017. The issue revolved around the timeliness of filing GSTR-3B returns for availing ITC due to various difficulties faced by the taxpayers. The court referred to a previous order where it was held that due to subsequent developments, taxpayers were entitled to avail ITC for specified financial years until November 30, 2021, despite the limitation under Section 16(4) of the CGST Act. The court quashed the impugned orders, restrained the tax department from initiating proceedings based on the limitation issue, directed unfreezing of bank accounts, and ordered refunds of tax amounts collected based on the impugned orders. The court granted liberty to the tax department to proceed against taxpayers for other issues such as discrepancies in ITC claims. The writ petition was allowed with no costs.The court's analysis focused on the amendments to Section 16 of the CGST Act, particularly the insertion of sub-section (5) allowing taxpayers to avail ITC until November 30, 2021, for specified financial years. The court emphasized that due to these amendments and subsequent developments, the impugned orders were no longer sustainable. The court's reasoning was based on the retrospective effect of the amendments and the relief provided to taxpayers in light of the extended deadline for availing ITC.The key evidence considered by the court was the notification issued by the Ministry of Finance, Circular No.237/31/2024-GST, and the recommendations of the 53rd GST Council Meeting regarding the extension of the deadline for availing ITC. These pieces of evidence supported the court's interpretation that taxpayers were entitled to avail ITC within the extended deadline despite the limitation under Section 16(4) of the CGST Act.The court's conclusions included quashing the impugned orders, restraining the tax department from further actions based on the limitation issue, directing unfreezing of bank accounts, and ordering refunds of tax amounts collected. The court also granted liberty to the tax department to proceed against taxpayers for other issues related to ITC claims.In summary, the court's judgment provided relief to taxpayers by allowing them to avail ITC within the extended deadline despite initial limitations, emphasizing the importance of subsequent developments and amendments to the law in determining the rights of taxpayers in such cases.

---