Time Limit for reclaim of reversed ITC

[ROHIT GOEL]

Dear Sirs,

One of our clients took ITC against a certain class of expenditure belonging to FY 2018-19 in their return for September 2019 as per section 16. However, on advice of their counsel, they reversed the ITC in the return for October 2019.

Thereafter, they changed their counsel and the new counsel in Feb 2020 adviced that the ITC was in fact fully allowable and as such the client again took ITC in their return for March 2020. As per the advice of the counsel, section 16 only imposes conditions for claim of ITC by Sep 2019 and that there is no time limit for reclaim of ITC once correctly claimed by Sep 2019.

I could not find any provision which prescribes non time barring of reclaim of ITC and in my opinion, reclaim of ITC in Feb 2020 of invoice of FY 2018-19 would be time barred.

Requesting your expert opinions on this matter.

[KASTURI SETHI]

Once ITC is taken, time-bar limit is not applicable on re-credit of the same if credit by mistake reversed. In pre-GST era and in the present GST regime, the provisions are silent on the issue but there is a plethora judgement (pertaining to pre-GST era) where re-credit of Cenvat Credit was allowed by CESTAT and the point to be noted that the department accepted all those case-laws on this very issue. A few case laws are mentioned below:-

VINAYAK STEELS LTD. VERSUS COMMISSIONER OF C. EX., HYDERABAD-III [2016 (2) TMI 1030 - CESTAT HYDERABAD]

TOTAL ENVIRONMENT WOODWORK P. LTD. VERSUS C.C.E.,C. & S.T., BANGALORE-I [2017 (1) TMI 1534 - CESTAT BANGALORE]

DABUR INDIA LTD. VERSUS C.C.E., GHAZIABAD [2016 (12) TMI 1177 - CESTAT ALLAHABAD]

M/S KRISHNAV ENGINEERING LTD. VERSUS CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL AND ANOTHER [2015 (12) TMI 234 - ALLAHABAD HIGH COURT]

COMMR. OF C.E.,C. & S.T., BANGALORE VERSUS STUMPP, SCHEULE & SOMAPPA P. LTD. [2015 (9) TMI 1375 - CESTAT BANGALORE]

(The Department's appeal dismissed)

[ROHIT GOEL]

Dear Sir,

Thank you for your response.

I have gone through the decisions referred by you and am discussing brief facts hereunder.

VINAYAK STEELS LTD. VERSUS COMMISSIONER OF C. EX., HYDERABAD-III [2016 (2) TMI 1030 - CESTAT HYDERABAD]-Assessee debited ITC from ledger on deptt view that same was not allowable. Later demand for same was also raised. Thus, assessee recredited earlier reversal. CESTAT allowed recredit relying on earlier decisions holding that duty could not be recovered twice.

TOTAL ENVIRONMENT WOODWORK P. LTD. VERSUS C.C.E.,C. & S.T., BANGALORE-I [2017 (1) TMI 1534 - CESTAT BANGALORE]-Assessee initially duty by way of adjustment of ITC but since such adjustment was bad in law, it deposited duty again in cash on demand post audit. CESTAT allowed refund of doubly-paid duty holding that duty cannot be recovered twice.

DABUR INDIA LTD. VERSUS C.C.E., GHAZIABAD [2016 (12) TMI 1177 - CESTAT ALLAHABAD].-In this case, assessee paid duty under protest and later recredited same in credit ledger upon success of appeal. CESTAT ruled that assessee was within its rights to do so.

M/S KRISHNAV ENGINEERING LTD. VERSUS CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL AND ANOTHER [2015 (12) TMI 234 - ALLAHABAD HIGH COURT]- Assessee debited and then again recredited the input and separately intimated the same to department. HC ruled that recredit was only a case of modification of a ledger and no actual funds passed from department to assessee, therefore same was allowable.

COMMR. OF C.E.,C. & S.T., BANGALORE VERSUS STUMPP, SCHEULE & SOMAPPA P. LTD. [2015 (9) TMI 1375 - CESTAT BANGALORE]-Assessee initially reversed credit on recommendation of department but again reclaimed upon disagreeing with deptt view.

Therefore, in all such cases either ITC was reversed on insistence of deptt or question of law before CESTAT whether recredit was allowed under law or assessee filed refund claim which was held to be time barred and CESTAT ruled in assessee's favour.

The question of time barring of ITC claim under third proviso to Rule 4(1) of CCR Rules was not discussed. which was similar to section 16(4) of CGST Act imposing limit until September of next year for claiming ITC (1 year under CCR Rules). In our case, assessee claimed ITC initially by time in Sep 2019 return and reversed in October 2019 return and then again reclaimed in Feb 2020 without any direction from department but solely on advice of counsel. Would the ITC reclaim in Feb 2020 done solely suo motu, not be time barred?

[KASTURI SETHI]

There is no revenue loss by taking re-credit. No question of time bar case. During my whole service, never raised such objection . It is harassment to the party if SCN is issued on time bar limit in the of re-credit. It is RE-CREDIT. Technically it is not time barred.

[KASTURI SETHI]

Time limit is prescribed for taking credit and not for Re-credit whether it is pre-GST era or present GST regime.

You have nicely interpreted and analyzed all the case laws posted by me. You are well aware about any decision --------------------.

[Venkataprasad Pasupuleti]

I endorse the views of Shri. Kasturi ji. CBIC has issued a circular in Cenvat regime clarifying that time limit do not apply for re-credit cases. The provisions being pari materia, the clarification equally applies for GST also.

[Ganeshan Kalyani]

I agree with Sri Kasturi Sir's view.

[Bhavika Chothani]

Time limit is applicable only for taking ITC. It is not applicable if you want to reclaim the ITC reversed earlier

[Sagar Phadke]

Very Very valuable and important discussion. Thanks to KASTURI SETHI sir and all the experts.

Now started thinking whether to make claim of all balance ITC not reflected in 2B in the return of September 2021 and then reverse the same in October 2021. Then one can try and get benefit of any future legal developments regarding ITC.

regards

[Manali Daiya]

Dear Experts,

If credit reversed as per Rule 42(1) is in excess of than that determined Rule 42(2), whether the time limit prescribed under Rule 42(2) applies to recrediting i.e. to reclaim the credit not later than the month of September following the end of the financial year to which such credit relates ?

AI Summary

Debate on Reclaiming ITC Under GST: Experts Argue No Time Limit Exists After Initial Reversal Per Section 16. A client initially claimed Input Tax Credit (ITC) for FY 2018-19 in their September 2019 return but reversed it in October 2019 on legal advice. Later, new counsel advised reclaiming the ITC in March 2020, asserting that Section 16 of the GST Act does not impose a time limit for reclaiming ITC once correctly claimed. The discussion highlights differing opinions on whether reclaiming ITC after reversal is time-barred. Several experts argue that there is no time limit for re-credit, citing past legal precedents and CBIC circulars. The consensus is that reclaiming ITC does not result in revenue loss and is not time-barred.