Input tax credit entitlement under GST upheld where substantive conditions met, order quashed and matter remitted with payment condition

Challenge concerns entitlement to input tax credit where the taxpayer failed to respond to a show cause notice and missed personal hearing; the tribunal reasoned that if all other conditions of Section 16 under GST are met, entitlement to input tax credit is substantive and not vitiated by failure to file a rectification application, therefore credit must be allowed. The impugned ex parte order was quashed and the matter remitted for fresh adjudication on merits, subject to the taxpayer depositing amounts confirmed as penalty for belated filing of annual and monthly returns and for non-submission of documents within thirty days.

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Issues: Whether, in respect of invoices/debit notes pertaining to financial years 2017-18 to 2020-21, the petitioner is entitled to avail Input Tax Credit notwithstanding belated claim under the time-limit in Section 16(4), in view of Sections 16(5) and 16(6) inserted by Finance Act (No.2), 2024, and whether the impugned ex parte order confirming demand should be quashed and remitted for fresh adjudication.

Analysis: The Court examined the effect of the statutory amendments introduced by Finance Act (No.2), 2024 which inserted subsections 16(5) and 16(6) into Section 16 of the GST enactments and operate with retrospective effect from 01.07.2017 for the relevant financial years. The amendments prescribe a specific entitlement to take input tax credit in returns filed up to 30 November 2021 for invoices/debit notes pertaining to FY 2017-18 to 2020-21 and provide rules for cases where registration cancellation is revoked. The Court held that where the petitioner satisfies the other requirements of Section 16, the entitlement to claim ITC under the newly inserted provisions arises even if rectification applications were not filed in terms of the earlier interpretation of Section 16(6). Applying these provisions, the Court found that the portion of the demand relating to belated availment of ITC is governed by the statutory intervention and therefore cannot survive without fresh consideration on merits. The Court therefore quashed the impugned ex parte order insofar as it relates to ITC and remitted the matter to the respondent for fresh adjudication, subject to the petitioner depositing specified amounts (penalty for belated filing of annual return, amounts for belated monthly returns and non-submission of documents) within 30 days and filing a proper reply to be treated as rectification for the purposes of Sections 16(5) and 16(6).

Conclusion: The petitioner is entitled to avail Input Tax Credit in respect of invoices/debit notes pertaining to FY 2017-18 to 2020-21 if the other statutory requirements of Section 16 are satisfied; the impugned order is quashed insofar as it relates to ITC and the matter is remitted to the respondent for fresh orders. The decision is in favour of the assessee on the ITC issue and otherwise the petition is disposed of subject to the deposit and procedural conditions imposed.

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