Retrospective GST input tax credit amendment led to fresh adjudication and restoration of the show-cause notice.

Section 16(5) of the GST enactment was inserted retrospectively from 1 July 2017, allowing a registered person to claim input tax credit on specified invoices or debit notes notwithstanding the restriction in Section 16(4). Because this statutory change occurred during the pendency of the challenge to the adjudication order denying credit, the existing order could not be sustained without reconsideration under the amended law. The High Court therefore set aside the adjudication order and restored the show-cause notice to the adjudicating authority for fresh adjudication, after permitting an additional reply and granting personal hearing. The challenge to Section 168A was not pressed and was struck off.

---

---

Issues: Whether the adjudication order sustaining denial of input tax credit required to be set aside and the matter remitted for re-adjudication in view of the subsequent insertion of sub-section (5) in Section 16 of the GST enactment.

Analysis: The appeal and the writ petition challenged the adjudication order on the ground that the statutory position had materially changed during pendency of the proceedings. A special procedure for rectification had been notified, and sub-section (5) was inserted in Section 16 by the Finance (No. 2) Act, 2024 with retrospective operation from 1 July 2017. The inserted provision entitled a registered person to avail input tax credit for specified invoices or debit notes pertaining to the relevant financial years, notwithstanding the restriction in sub-section (4). In view of the change in law, the existing adjudication could not stand without fresh consideration of the amended entitlement. The prayer challenging Section 168A was expressly not pressed and stood struck off.

Conclusion: The adjudication order was set aside and the show-cause notice was restored to the file of the adjudicating authority for fresh adjudication in the light of Section 16(5), after permitting an additional reply and granting personal hearing.

---