Retrospective cure of input tax credit defect defeats GST demand, with matter sent back for fresh merits-based reconsideration.

Belated availment of input tax credit under GST could not support the confirmed tax demand once the underlying defect was cured by retrospective insertion of Section 16(5) with effect from 01.07.2017. The HC held that the foundation of the impugned order was no longer sustainable without fresh merits-based consideration. The demand order was therefore quashed, and the matter was remitted for reconsideration in accordance with law. The tax liability issue was left open for fresh adjudication by the authority.

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Issues: Whether the order confirming tax demand for belated availment of input tax credit under the GST law could stand after the retrospective insertion of Section 16(5) to the GST enactments.

Analysis: The impugned demand related to belated availment of input tax credit for the same tax period that had already been the subject of an earlier confirmation order. The defect forming the basis of the demand stood cured by the statutory intervention through insertion of Section 16(5) with retrospective effect from 01.07.2017. In view of that curative amendment, the foundation of the impugned order could not be sustained without a fresh consideration on merits.

Conclusion: The impugned order was quashed and the matter was remitted to the respondent for fresh adjudication in accordance with law.

Final Conclusion: The petitioner obtained setting aside of the challenged demand order, but the tax liability issue was left open for reconsideration by the authority.

Ratio Decidendi: A demand founded on a defect in availing input tax credit cannot be sustained once the statutory provision governing that defect has been retrospectively cured, and the matter must be reconsidered afresh on merits.

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