Retrospective Section 16(5) Amendment Validates Belated Input Tax Credit Filed Before November 30, 2021

By | October 15, 2026
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Retrospective Section 16(5) Amendment Validates Belated Input Tax Credit Filed Before November 30, 2021

Issue

Whether the petitioner is entitled to Input Tax Credit (ITC) for the period July 2017 to March 2018 under the retrospectively inserted Section 16(5) of the CGST/KGST Act when monthly returns were filed belatedly between April 2019 and August 2019.

Facts

  • Registration & Period: The petitioner, a registered person under the CGST/KGST Act, claimed Input Tax Credit for the financial year 2017–18 (July 2017 to March 2018).
  • Return Filing Details: The petitioner furnished monthly returns due between August 2017 and April 2019 belatedly between April 2019 and August 2019.
  • Adjudication Order: The assessing authority issued a Show Cause Notice (SCN) and passed an adjudication order along with a summary order denying ITC solely due to the delay in filing returns.
  • Assessee’s Claim: On writ petition, the petitioner asserted eligibility for ITC under the retrospectively inserted Section 16(5), which validates ITC for returns filed on or before November 30, 2021, for FYs 2017–18 through 2020–21.

Decision

  • Applicability of Retrospective Amendment: The retrospective insertion of Section 16(5) permits ITC claims for financial years 2017–18 to 2020–21 provided the returns were filed on or before November 30, 2021.
  • Compliance by Petitioner: Having filed its returns between April and August 2019, the petitioner fully satisfied the statutory timeline set out in Section 16(5).
  • Overriding Effect on Delay: Belated filing of returns cannot defeat the petitioner’s substantive right to ITC in light of the retrospective legislative remedy.
  • Quashing and Restoration: The impugned adjudication order was quashed, and the proceedings were restored to the assessing authority for passing a formal order consistent with this finding. (In favour of assessee)

Key Takeaways

  • Retrospective Relief via Section 16(5): Section 16(5) provides a statutory remedy overriding the limitation restrictions under Section 16(4) for returns filed up to November 30, 2021 (covering FYs 2017–18 to 2020–21).
  • Invalidation of Previous Disallowances: Adjudication orders denying ITC strictly on grounds of delayed return filing for FY 2017–18 are unsustainable if the returns were filed before the November 30, 2021 cut-off.
  • Procedural Restoration: Courts will set aside adverse orders resting solely on old limitation interpretations and direct the tax authorities to issue fresh orders granting ITC benefits under Section 16(5).
HIGH COURT OF KARNATAKA
Shivneel Gas Sales
v.
Assistant Commissioner of Commercial Taxes (Audit)*
B M Shyam Prasad, J.
WRIT PETITION NO. 13471 OF 2026 (T-RES)
SEPTEMBER  30, 2026
Pranay Sharma Y. and Ravi Shankar S.V., Advs. for the Petitioner. Smt. Malavika Prasad, HCGP and Kumar M N., CGC for the Respondent.
ORDER
1. The petitioner’s grievance is with the Adjudication Order dated 01.12.2023 under Section 73 of the Central Goods and Services Tax Act, 2017/Karnataka Goods and Services Tax Act, 2017 [for short, the Act’]. The details of the Adjudication Order and the Summary thereof are as follows.
Sl. No. Particulars Dated Provisions of KGST Act, 2017 Annexure
1 Order of Adjudication 01.12.2023 73[9] A1
2 Summary of the Order 02.12.2023 A2
3 Show Cause Notice 30.09.2023 73 A3
4 Summary of the Show Cause Notice 30.09.2023 A4

 

2. Mr. Pranay Sharma Y, the learned counsel for the petitioner, and Ms. Malavika Prasad, the learned High Court Government Pleader for the respondents, are heard for disposal of the petition with the petitioner placing reliance upon the amendment with the insertion of Section 16[5] of the Act with effect from 01.07.2017.
3. The proceedings against the petitioner, as could be seen from the tabular column that is part of the Adjudication Order, is because the petitioner has filed Returns beyond the due date for filing such Returns. The impugned Order relates to the period between July 2017 to March 2018, and the petitioner, who had to file Returns for the corresponding months, between August 2017 to April 2019 has filed the Returns in the months between April 2019 to August 2019. Whether the delay in filing the Returns could defeat the Registered Taxable Person’s right to Input Tax Credit [ITC] is addressed with the insertion of sub-clause [5] to Section 16 of the Act with effect from 01.07.2017.
4. This amendment reads that the Registered Taxable Person will be entitled to ITC in any Return that is filed upto 30.11.2021 for the Returns pertaining to the years 2017-18 to 2020-21. This amendment was not on the Statute Book when the impugned Order is passed. The petitioner’s case is that this amendment must apply in this case, and undisputedly it is because the subject tax period is between the period mentioned in the amendment.
5. However, this Court is of the considered view that whether there must be any enforcement in the light of this amendment must be reconsidered with opportunity to the petitioner with a formal order because it is shown to this Court’s satisfaction that the petitioner will be entitled to the ITC because the Returns have been filed before 30.11.2021. In the light of the afore, the following.
ORDER
[A] The petition is allowed quashing the impugned Adjudication Order dated 01.12.2023 [Annexure-Al] restoring the proceedings to the first respondent to pass a formal order in the light of this Court’s observation on the petitioner being entitled to ITC in the light of the retrospective insertion of Section 16[5] of the Act.
[B] The petitioner is reserved with liberty to file a certified copy of this Order with the first respondent, who shall communicate the Order in terms of this Court’s observation by 30.10.2026 and the first respondent shall communicate the order in terms of this Court’s observation to the petitioner by 30.11.2026.