Input tax credit denial must be re-examined after later statutory amendment and clarification; garnishee order falls with demand

Input tax credit for FY 2018-19 was denied on the basis of delayed filing of GSTR-3B returns, but later insertion of Section 16(5) of the CGST Act, 2017 and the CBIC clarification required the amended entitlement to be examined by the assessing authority. The Court held that the impact of the subsequent legal change could not be ignored, so the original demand order was set aside. As the garnishee order flowed from that demand, it could not survive and was also quashed. The matter was remanded for fresh adjudication in accordance with law.

---

---

Issues: Whether the order denying input tax credit and the consequential garnishee order were liable to be set aside in view of the subsequent insertion of Section 16(5) and the CBIC clarification, and whether the matter required remand for fresh decision.

Analysis: The challenge was directed against the rejection of input tax credit for the financial year 2018-19 on the ground of delay in filing GSTR-3B returns. The Court took note of the subsequent insertion of Section 16(5) of the CGST Act, 2017, which extends entitlement to avail input tax credit for specified financial years upto 30 November 2021, and also noted the CBIC circular clarifying implementation of the amended provision. In light of these later legal developments, the Court held that the effect of the amendment and clarification had to be examined by the assessing authority. The garnishee order, having been issued in pursuance of the original demand order, could not survive once that order was set aside.

Conclusion: The impugned order was quashed and set aside, the garnishee order was also quashed, and the matter was remanded to the assessing authority for fresh adjudication in accordance with law.

---