2026 (2) TMI 657 - HC - GST

Input tax credit entitlement for FYs 2017-21 allowed where claimed within amended timeframe, quashing limitation-based denials.

Entitlement to input tax credit (ITC) for invoices/debit notes relating to FYs 2017-18 to 2020-21 was held to survive the limitation in Section 16(4) ... Entitlement to input tax credit u/s 16(5) despite limitation in Section 16(4) - retrospective amendment to Section 16 with effect from 01.07.2017 - extension of deadline for availing ITC for FYs 2017-18 to 2020-21 up to 30.11.2021 - quashing of assessment orders insofar as they disallow ITC on limitation grounds - reliefs on consequence of quashing - restraint on recovery, de-freezing of bank accounts and refund/adjustment of amounts - preservation of departmental rights to proceed on merits in cases of alleged fraud, excess or wrongful ITC - HELD THAT:- When these Writ Petitions are taken up for hearing, the learned counsel for the petitioner and learned counsel for the respondent, would submit that the issue involved in the present Writ Petition, has been squarely covered by the common order of this Court [2024 (10) TMI 1631 - MADRAS HIGH COURT]. Therefore, petitioner would submit that the above said order will hold good for the present Writ Petitions also and hence, prayed to dispose of the Writ Petitions. The learned counsel appearing for the respondent would fairly accede to the same. This Court passes the following: The impugned original orders dated 29.02.2024 & 09.03.2024 are 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. 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 Petitions are allowed on the aforesaid terms. Issues: Whether the petitioner/registered person is entitled to avail input tax credit (ITC) for invoices/debit notes pertaining to FYs 2017-18 to 2020-21 despite the limitation in Section 16(4) of the Central Goods and Services Tax Act, 2017, in view of the amendment by insertion of Section 16(5) and related notifications/circulars.Analysis: Section 16(4) originally restricted entitlement to take ITC after the thirtieth day of November following the end of the financial year to which the invoice/debit note pertains or furnishing of the relevant annual return, whichever is earlier. Section 16(5) was inserted to provide 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, 2018-19, 2019-20 and 2020-21. The legislative amendment received Presidential assent and was given effect through Finance Act (No.2) of 2024, followed by Notification No.17 of 2024-Central Tax dated 27.09.2024 and Circular No.237/31/2024-GST which implemented and clarified the scope of the amendment. Applying the amended statutory text and the implementing instruments to the facts, the limitation bar in Section 16(4) is displaced in respect of the specified financial years for returns filed up to 30.11.2021, rendering orders that reverse ITC solely on the ground of limitation unsustainable to that extent.Conclusion: The impugned orders are quashed insofar as they deny the petitioner's claim for ITC for invoices/debit notes pertaining to FYs 2017-18 to 2020-21 where the ITC was availed within the period permitted by Section 16(5) of the Central Goods and Services Tax Act, 2017; consequential reliefs including restraint on proceedings, de-freezing of bank accounts, and refund/adjustment directions are granted, while the respondent retains liberty to proceed on non-limitation issues in accordance with law.