Input tax credit claim denied for late return filing; remitted for document verification and regularisation of lapse.

Denial of input tax credit solely for delayed filing of returns was held unsustainable where the taxpayer can substantiate entitlement through requisite documents. The HC held that, notwithstanding the default in timely return filing, the authority must consider the statutory intervention permitting regularisation and, upon verification of supporting records, pass appropriate orders to regularise the lapse and reconsider the ITC claim; consequently, the matter was remitted for such action. The HC further held that if the taxpayer files a supplementary rectification application against the impugned order, the authority must dispose it in accordance with law; the writ petition was disposed of accordingly.

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The writ petition challenged an order in DRC-07 and a summary demand for tax period 2018-2019 denying Input Tax Credit (ITC) on the ground that returns were not filed in time. The Court noted that the issue stood settled in favour of the taxpayer due to "statutory intervention" by insertion of Sections 16(5) and 16(6) to the GST enactments (retrospectively from 01.07.2017) and the clarification in Circular No.237/31/2024-GST dated 15.10.2024. Relying on para 3.5 of the Circular, the Court recognized that where demands were confirmed for "wrong availment" but ITC is now available under Section 16(5)/(6), a taxpayer may seek rectification under the special procedure under Section 148 within the prescribed time. The Court held that ITC, once made available by statute, is "a substantive benefit and should not be denied merely on account of procedural lapses," reiterating that "procedure is the handmaid of justice and not its mistress." The impugned order was set aside and remitted for fresh adjudication on merits, "de hors the procedural objections," subject to production of requisite documents and regularization of default in filing returns. A supplementary rectification application may also be filed and disposed of in accordance with law.

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