Retrospective amendment and circular validate ITC claim despite delayed return filing

Issue

Whether Input Tax Credit (ITC) for the period 2018-2019 can be denied solely on the ground of delayed filing of returns, in light of the retrospective statutory amendments introduced by the Finance (No. 2) Act, 2024 and Circular No. 237/31/2024-GST.

Facts

Impugned Order: The petitioner challenged an order-in-original and the corresponding summary demand in Form DRC-07.
Reason for Denial: The Revenue Department denied the petitioner’s claim for Input Tax Credit (ITC) for the period 2018-2019. The sole reason cited for this denial was the non-furnishing or delayed furnishing of returns.
Petitioner’s Defense: The petitioner argued that the denial was incorrect, relying on the Finance (No. 2) Act, 2024, which retrospectively expanded the scope of ITC entitlement.
Reliance on Circular: The petitioner also cited Circular No. 237/31/2024-GST, which provides clarification on the eligibility of ITC in cases of delayed filings.

Decision

Retrospective Applicability: The High Court held that the issue is settled in favor of the petitioner due to the retrospective insertion of provisions in the GST enactments, effective from July 2017.
Clarification by Circular: The Court noted that Circular No. 237/31/2024-GST explicitly clarifies that ITC claims should not be denied in such specific circumstances of delayed returns.
Substantive Right: The Court emphasized that ITC is a substantive benefit provided by the statute. It ruled that such benefits cannot be denied merely due to procedural lapses.
Legal Principle: The Court invoked the legal maxim that “procedure is the handmaid of justice and not its mistress,” asserting that procedural technicalities should not override substantive justice.
Remand: The impugned order was set aside. The matter was remitted to the adjudicating authority to pass a fresh order on merits, with instructions to regularize the return default upon the petitioner producing the requisite documents.

Key Takeaways

Procedural vs. Substantive: A mere delay in filing returns (a procedural lapse) is insufficient grounds to deny Input Tax Credit (a substantive right), especially when tax has been paid to the government.
Impact of 2024 Amendment: The Finance (No. 2) Act, 2024, along with Circular 237, serves as a curative mechanism for GST taxpayers who missed original deadlines for ITC claims between 2017 and 2020/21.
Regularization: Taxpayers facing similar demands for past periods can seek regularization of their defaults by citing this precedent, provided they have the necessary documentation (invoices, proof of payment) to substantiate the credit.

HIGH COURT OF MADRAS

Kabriyal Rajan

Supertintendent, CGST & Central Excise

C.Saravanan, J.

W.P. No. 47205 of 2025
W.M.P. Nos. 52745 and 52746 of 2025

DECEMBER 3, 2025

A.P.Karventhan for the Petitioner. Sai Srujan Tagi, Senior Standing Counsel for the Respondent.

ORDER

1. This writ petition has been disposed of at the time of admission after hearing the learned counsel for the petitioner and the learned counsel for the respondent.

2. In this writ petition, the petitioner has challenged the impugned order in Original No.1/2024-25(GST)-Range-III-Amb dated 10.04.2024 in DRC-07 and the summary demand dated 29.03.2025 passed by the Respondent for the tax period 2018-2019.

3. The reading of the impugnd order prima facie indicates that the petitioner had been denied the Input Tax Credit on the ground that the petitioner failed to file the Returns in time.

4. However, the issue is settled in favour of the petitioner in view of the statutory intervention by insertion of Sections 16(5) and 16(6) to the respective GST enactments by of the Act with insertion of Section 16(5) to the respective GST enactments vide SO 4253(E) with retrospective effect from 01.07.2017 inserted by Finance (No.2) Act, 2024 (15 of 2024) dated 16.08.2024.

5. The petitioner is prima facie entitled to the Input Tax Credit as clarified in Circular No.237/31/2024-GST, dated 15.10.2024.

4. In Para 3.5 of the said circular, it is clarified under:

3.5 Where order under Section 73 or section 74 of the CGST Act has been issued but no appeal against the said order has been filed with the Appellate Authority, or where the order under section 107 or section 108 of the CGST Act has been issued by the Appellate Authority or the Revisional Authority but no appeal against the said order has been filed with the Appellate Tribunal:

In such cases, where any order under section 73 or section 74 or section 107 or section 108 of the CGST Act has been issued confirming demand for wrong availment of input CGST Act, but where such input tax credit is now available as per the provisions of sub-section(5) or sub-section(6) of section 16 of the CGST Act, and where appeal against the said order has not been filed, the concerned taxpayer may apply for rectification of such order under the special procedure under section 148 of the CGST Act notified vide Notification No.22/2024-Central tax dated 08.10.2024, within a period of six months from the date of issuance of the said notification.

5. This Court has taken a categorical view that the Input Tax Credit having been made available by virtue of the statutory provisions referred to above is a substantive benefit and should not be denied merely on account of procedural lapses, following the well-established principles laid down by the Hon’ble Supreme Court that procedure is the handmaid of justice and not its mistress. Therefore, the impuguned order is set aside and the case is remitted back to the respondent to pass a fresh order on merits, de hors the procedural objections, in light of the above circular.

6. As long as the petitioner produces requisite documents to substantiate that the petitioner has rightly claimed the Input Tax Credit and considering the fact that the petitioner failed to file the returns within the prescribed period, the respondent shall pass appropriate orders to regularize the default in filing the returns in view of the statutory intervention.

7. The petitioner may file a supplementary application seeking rectification of the impugned order, and in case such an application is filed by the petitioner, the same shall be disposed of in accordance with law by the Respondent.

8. The Writ Petition is disposed of with the above observations.

No costs. Connected W.M.Ps are closed.