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of <h1>Entitlement to input tax credit despite limitation -- quashing limitation-based assessments and restraining recovery, with directions on refunds</h1> Entitlement to input tax credit survives despite a limitation bar because an amendment creating a new limitation regime operates retrospectively; ... Entitlement to input tax credit despite limitation u/s 16(4) - retrospective operation of amendment inserting Section 16(5) - quashment of assessment orders insofar as they are based solely on limitation - restraint on recovery proceedings premised only on limitation - departmental liberty to proceed on merits in cases of fraudulent/excess ITC claims - directions for de-freezing bank accounts and refund or adjustment of amounts - HELD THAT:- The impugned original order dated 28.03.2024 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. Therefore, the respondent-Department is restrained from initiating any proceedings against the petitioners by virtue of the impugned order based on the issue of limitation. The liberty is granted to the petitioner to move a separate application for refund, if any, and the respondent-Department shall consider and decide the same on its own merits and in accordance with law. In view of the fact that the impugned order is quashed, the respondent-Department is directed to de-freezure of the concerned petitioner bank account, if any, which have been freezed in furtherance of the impugned order, by sending intimation to the concerned bankers. In the event, in the interregnum, i.e. during the pendency of this Writ Petition, if any orders are proposed to be passed towards recovery, same shall be dropped immediately upon production of the order copy by the petitioners, in whichever case, where, there is no interim order. It is also made clear that if at all, if there is any tax amounts collected from the petitioner based on the impugned assessment order from the cash ledgers/credit ledgers of the petitioner concerned, the same shall be refunded to them or by means of orders of this Court or even in the absence of any order from this Court, if any amount is deposited either in the cash ledgers/credit ledgers of the petitioner concerned, the same is permitted to be utilized/adjusted by the petitioners towards payment of future tax. If there is any challenge related to issues such as discrepancies in availing the ITC/wrong availment of ITC/excess claim of ITC/Fake ITC claim, as the case may be, or such other issues, liberty is be granted to the respondent-Department to proceed against the assessee/petitioner in furtherance of the impugned order in accordance with law. Accordingly, the present Writ Petition is allowed on the aforesaid terms. Issues: Whether the petitioner is entitled to avail input tax credit (ITC) for invoices/debit notes pertaining to FYs 2017-18 to 2020-21 notwithstanding the limitation in Section 16(4) of the CGST Act, 2017 by virtue of the insertion of Section 16(5) (and related notifications/circulars) and whether the impugned orders reversing ITC and directing recovery must be quashed to that extent.Analysis: The issue concerns interplay between Section 16(4) (which prescribes the deadline for availing ITC) and the subsequently inserted Section 16(5) which, with retrospective effect from 01.07.2017, permits registered persons to take ITC in any return filed under section 39 up to 30.11.2021 for invoices/debit notes pertaining to FYs 2017-18 to 2020-21. The legislative change received Presidential assent and was implemented by Finance Act (No.2) of 2024, followed by Notification No.17 of 2024-Central Tax and Circular No.237/31/2024-GST clarifying implementation. The impugned assessment orders reversed ITC solely on limitation grounds under Section 16(4). Given the retrospective operation of Section 16(5) and the administrative clarifications, the orders reversing ITC as time-barred are inconsistent with the amended statutory position and related administrative instructions; consequential measures tied to those orders (such as account freezes and recovery steps) affect the petitioners' rights and require remedy.Conclusion: The impugned order is quashed insofar as it reverses or denies the petitioner's claim for ITC that is otherwise allowable within the period provided by Section 16(5) of the CGST Act, 2017. Relief is granted in favour of the assessee on the limitation issue.Final Conclusion: The decision gives effect to the retrospective amendment embodied in Section 16(5) for the specified financial years, restrains proceedings and recovery premised solely on the limitation under Section 16(4), and directs restoration of reliefs and procedural steps (including de-freezing of accounts and allowance for refund/adjustment) subject to other lawful challenges not based on limitation.Ratio Decidendi: Section 16(5) of the CGST Act, 2017, as inserted with retrospective effect and supported by implementing notification and circular, permits registered persons to claim ITC in returns filed under section 39 up to 30.11.2021 for invoices/debit notes pertaining to FYs 2017-18 to 2020-21, and administrative or adjudicatory orders reversing ITC solely on the ground of limitation under Section 16(4) must be quashed to that extent.
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