2026 (3) TMI 1303 - HC - GST

Retrospective input tax credit extension under GST barred reversal for credits within the extended filing period.

The amendment inserting Section 16(5) of the CGST Act was treated as retrospectively extending the time to claim input tax credit for invoices or debit ... Reversal of input tax credit - Retrospective extension of time for availing ITC - prescribed a time limit under Section 16(4) - statutory amendment inserted Section 16(5). Input tax credit limitation - Retrospective extension of time for availing ITC - HELD THAT:- The Court held that the controversy stood covered by its earlier common order dealing with the effect of the subsequent amendment to Section 16. Proceeding on that basis, it accepted that for the financial years 2017-18 to 2020-21, entitlement to ITC stood preserved where the return under Section 39 had been filed up to 30.11.2021, notwithstanding the bar under Section 16(4). Consequently, the impugned order, to the extent it denied ITC solely on limitation, was unsustainable. The Court, however, left it open to the Department to proceed in accordance with law on other issues such as wrong, excess or fake ITC, if arising independently of limitation. [Paras 2, 5] The impugned order was quashed insofar as it reversed ITC on the ground of limitation, with consequential protection against recovery on that basis, liberty to seek refund, and reservation of the Department's right to proceed on other legally permissible grounds. Final Conclusion: The writ petition was allowed by applying the earlier ruling of the Court on the retrospective extension for availing ITC. The impugned order was quashed to the extent it denied ITC on limitation, while preserving the Department's liberty to act on other distinct ITC-related irregularities in accordance with law. Issues: Whether the order reversing input tax credit was liable to be quashed on the ground that the credit claim, though otherwise within the extended time introduced by the amendment, was hit by the limitation in Section 16(4) of the Central Goods and Services Tax Act, 2017.Analysis: The challenged order concerned reversal of input tax credit for the relevant financial year. The governing provision originally prescribed a time limit under Section 16(4) of the Central Goods and Services Tax Act, 2017. The later statutory amendment inserted Section 16(5) and extended the entitlement to take input tax credit for invoices or debit notes pertaining to the specified financial years where the return under Section 39 was filed up to 30.11.2021. The amendment was treated as operating retrospectively from 01.07.2017, and the subsequent notification and circular supported its implementation. In light of the amended framework, the limitation-based reversal could not be sustained for credits falling within the extended period.Conclusion: The impugned order was quashed to the extent it reversed input tax credit that fell within the period allowed by Section 16(5) of the Central Goods and Services Tax Act, 2017, and the Department was restrained from proceeding further on that limitation issue.