Input Tax Credit Disallowance Set Aside: Retrospective Amendment Allows Claim for 2017-18 to 2020-21

Summary in Key Points:

Issue: Whether the disallowance of Input Tax Credit (ITC) was justified due to claims being filed beyond the initially prescribed period under Section 16(4) of the CGST/TNGST Act.
Facts: The assessee’s ITC claims for the period 2017-18 to 2020-21 were disallowed as they were deemed late. The assessee challenged the assessment order.
Decision: The ITAT/High Court (depending on the specific court hierarchy) held that the Finance (No. 2) Act, 2024, which inserted Section 16(5), retrospectively allowed ITC claims in any return filed up to November 30, 2021. The adjudicating authority was directed to reassess the case considering this amendment.

Important Note: This decision highlights the impact of retrospective amendments on tax assessments. The insertion of Section 16(5) provided a window for assessees to claim ITC that was previously disallowed due to time limitations, showcasing the dynamic nature of tax laws and their interpretation.

HIGH COURT OF MADRAS

Winet Communications

Superintendent

Mohammed Shaffiq, J.

W.P.(MD) No. 23325 of 2023
W.M.P.(MD) No. 19509 of 2023

OCTOBER 23, 2024

Ms. C.P. Priya for the Petitioner. R. Nandakumar, Senior Standing Counsel and Ms. S. Ragaventhre, Junior Standing Counsel for the Respondent.

ORDER

1. The present Writ Petition is filed challenging the assessment order dated 27.02.2022, on the premise that the Input Tax Credit has been disallowed only on the ground that the claims have been lodged beyond the period prescribed under Section 16(4) of the GST Acts.

2. It is submitted that an amendment has been brought into the GST Acts and that Section 16(5) has now been inserted vide Section 118 of the The Finance (No. 2) ACT, 2024 and the relevant provisions reads as under:

“118. In section 16 of the Central Goods and Services Tax Act, with effect from the 1st day of July, 2017, after sub-section (4), the following sub-sections shall be inserted, namely:—

“(5) Notwithstanding anything contained in subsection (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed up to the thirtieth day of November, 2021. ”

(6) Where registration of a registered person is cancelled under section 29 and subsequently the cancellation of registration is revoked by any order, either under section 30 or pursuant to any order made by the Appellate Authority or the Appellate Tribunal or court and where availment of input tax credit in respect of an invoice or debit note was not restricted under subsection (4) on the date of order of cancellation of registration, the said person shall be entitled to take the input tax credit in respect of such invoice or debit note for supply of goods or services or both, in a return under section 39,—

(i)

filed up to thirtieth day of November following the financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier; or

(ii)

for the period from the date of cancellation of registration or the effective date of cancellation of registration, as the case may be, till the date of order of revocation of cancellation of registration, where such return is filed within thirty days from the date of order of revocation of cancellation of registration, whichever is later. “

3. It is submitted by the learned counsel for the petitioner that in view of the above amendment, the reasons cited by the adjudicating authority while passing the impugned order of assessment may no longer survive and the respondent would have to re-do the assessment in accordance with the above amendment.

4. The learned counsel for the petitioner would submit that earlier this Court has on numerous occasions, remanded on the basis of the Bill proposing the present amendment. The learned counsel for the respondent would submit that they would re-do the assessment taking into account the Finance (No. 2) ACT, 2024.

5. In view thereof, the impugned order passed by the respondent dated 27.07.2022 is set aside. In respect of other issues, the impugned order shall remain undisturbed. The learned assessing adjudicating authority/respondent would re-do the assessment by taking into account the amendment referred supra. The petitioner may submit their objection by way of reply, within a period of three weeks from the date of receipt of a copy of this order along with the amendment and other details. If such reply is filed, the same shall be considered and orders shall be passed, after affording reasonable opportunity of personal hearing to the petitioner. If such reply is not filed within the prescribed period, i.e., three weeks from the date of receipt of a copy of this order, the impugned order shall stand revived.

6. With the above direction, this Writ Petition is disposed of. No costs. Consequently, connected miscellaneous petition is closed.