Retrospective GST credit amendment limits time-bar denial of input tax credit and requires fresh scrutiny of other conditions

Retrospective insertion of Sections 16(5) and 16(6) into the GST enactments meant that input tax credit could not be denied solely because it was claimed after the original time limit under Section 16(4). The Madras HC held that the limitation-based denial could not survive on that ground alone and set aside the adjudication to that extent. It also required the assessing authority to reconsider the claim on the remaining statutory conditions, since eligibility for credit still depended on compliance with the other requirements in fact and law. The matter was remanded for fresh decision on those unresolved issues.

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Issues: Whether denial of input tax credit on the ground of delay under Section 16(4) of the GST enactments could survive after the retrospective insertion of Sections 16(5) and 16(6), and whether the impugned order required to be set aside with remand for examination of the remaining statutory conditions.

Analysis: The impugned order confirmed the tax demand, interest and penalty primarily on the footing that the input tax credit had been availed belatedly. The order was challenged on the ground that the time-limit issue was no longer decisive in view of the statutory intervention by the insertion of Sections 16(5) and 16(6) by Finance (No. 2) Act, 2024, with retrospective effect from 01.07.2017. The Court accepted that the substantial benefit of input tax credit could not be denied merely on the ground of lapse of time, but also noted that compliance with the other statutory requirements still had to be examined on facts and in law.

Conclusion: The denial of input tax credit solely on the ground of limitation could not stand, and the impugned order was set aside with a remand for fresh decision on the remaining requirements.

Final Conclusion: The writ petition succeeded to the extent of setting aside the adjudication on limitation, while leaving open the question of eligibility on other statutory conditions for reconsideration by the assessing authority.

Ratio Decidendi: Where the statutory time-bar for availing input tax credit is retrospectively altered, denial of credit cannot rest only on delay, and the authority must independently examine the other substantive conditions for availment before finalising liability.

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