2026 (1) TMI 501 - HC - GST

Input tax credit claims for FY 2017-21 GSTR-3B filings: time-limit denial u/s16(4) set aside after s.16(5) extension.

Denial and reversal of input tax credit (ITC) solely on the ground of limitation under s.16(4) CGST Act was in issue. Relying on its earlier decision and ... Reversal of claim of ITC - denial only on the ground of time limitation - petitioner is directed to pay tax/penalty/interest - HELD THAT:- The issue involved in the present Writ Petitions, has been squarely covered by the common order of this Court in SRI GANAPATHI PANDI INDUSTRIES, REP. BY ITS PROPRIETOR VERSUS THE ASSISTANT COMMISSIONER (STATE TAX) (FAC) TONDIARPET ASSESSMENT CIRCLE, CHENNAI [2024 (10) TMI 1631 - MADRAS HIGH COURT] wherein, this Court has categorically held that 'this Court considering the fact that the issue involved in all these Writ Petitions is only with regard to the availment of ITC, which is barred by limitation in terms of Section 16 (4) of the CGST Act, and in the light of the subsequent developments took place, whereby, Section 16 of the CGST Act was amended and sub-section (5) was inserted to Section 16, which came into force with retrospective effect from 01.07.2017, the petitioners are entitled to avail ITC in respect of GSTR-3B filed in respect of FYs 2017-18, 2018-19, 2019-20 and 2020-21 as the case may be, on or before 30.11.2021, is inclined to quash the impugned orders.' The impugned original order dated 02.04.2024 is quashed insofar as it relates to the claim made by the petitioner for ITC which is barred by limitation in terms of Section 16 (4) of the CGST Act, 2017 but, within the period prescribed in terms of Section 16 (5) of the said Act - the respondent-Department is restrained from initiating any proceedings against the petitioners by virtue of the impugned order based on the issue of limitation. Petition allowed by way of remand. Issues: Whether a registered person is entitled to avail input tax credit (ITC) for invoices/debit notes pertaining to financial years 2017-18 to 2020-21 notwithstanding the bar in Section 16(4) of the CGST Act, 2017, by virtue of the retrospective insertion of Section 16(5) and related notifications/circulars, and whether impugned assessment orders reversing ITC on limitation grounds are liable to be quashed.Analysis: The Court considered the amendments to Section 16 of the CGST Act, 2017, specifically the insertion of subsection (5) which provides that, notwithstanding subsection (4), registered persons may take ITC in any return under section 39 filed up to 30.11.2021 for invoices/debit notes pertaining to FYs 2017-18 to 2020-21. The legislative and administrative developments including the GST Council recommendation, Finance Act enactment, Notification No.17 of 2024-Central Tax and the Board's Circular clarifying implementation of the amended provision were treated as operative in determining entitlement. Applying the amended statutory scheme retrospectively from 01.07.2017, the Court confined its decision to claims barred solely by the time limit under Section 16(4) and allowed relief by quashing orders that reversed ITC on limitation grounds. The Court preserved the respondent-Department's right to proceed in cases where issues other than limitation (for example, fraudulent or incorrect ITC claims) are involved, and directed consequential reliefs including restraint on recovery proceedings, de-freezing of bank accounts, and refund or adjustment of amounts collected under the impugned orders.Conclusion: The petitioner is entitled to avail ITC for invoices/debit notes pertaining to FYs 2017-18 to 2020-21 if claimed in returns under section 39 filed on or before 30.11.2021; the impugned order is quashed insofar as it reverses ITC solely on limitation grounds, and ancillary reliefs as directed by the Court are granted in favour of the assessee.