ITC Claim Reinstated; Retrospective Amendment Requires Fresh Adjudication

Issue: Whether an Input Tax Credit (ITC) claim, rejected due to a time limit violation under Section 16(4) of the CGST Act, 2017, should be reconsidered in light of the retrospective amendment inserting Section 16(5), which allows ITC claims for specified financial years through returns filed up to November 30, 2021.

Facts:

The assessee filed a return under Section 39 on November 30, 2021.
The revenue rejected the ITC claim citing a violation of the time limit under Section 16(4).
During the pendency of the petition, Section 16(5) was inserted, with retrospective effect from July 1, 2017, allowing ITC claims for Financial Years 2017-18 to 2020-21 through returns filed up to November 30, 2021.

Decision:

The court held that the matter requires fresh consideration in light of the beneficial retrospective amendment.
The impugned orders were quashed.
The matter was remanded to the Adjudicating Authority for de novo (fresh) consideration.
The petition was disposed of.

Key Takeaways:

Retrospective Amendment: The insertion of Section 16(5) with retrospective effect provides a beneficial provision for assessees who filed returns within the specified timeframe.
Fresh Adjudication: When a retrospective amendment impacts the validity of an order, the matter must be remanded for fresh adjudication.
Beneficial Interpretation: Courts favor interpretations that provide benefits to taxpayers, especially when the legislature intends to rectify past issues.
Compliance with Amendment: The Adjudicating Authority must consider the ITC claim in light of the newly inserted Section 16(5).
Protection of Assessee’s Rights: This decision protects the rights of assessees who relied on the extended time limit provided by the retrospective amendment.
The court is reinforcing the need to consider retrospective amendments, and to provide tax payers with the benefits afforded by those amendments.

HIGH COURT OF GUJARAT

Shiv Construction Company

Additional Commissioner

BHARGAV D. KARIA and D.N. Ray, JJ.

R/SPECIAL CIVIL APPLICATION NO. 14194 of 2024

DECEMBER 11, 2024

Darshan R Patel for the Petitioner. Utkarsh R Sharma for the Respondent.

ORDER

Bhargav D. Karia – Heard learned advocate Mr. Darshan Patel for the petitioner and learned Senior Standing Counsel Mr. Utkarsh Sharma for the respondent.

2. By this petition under Article 227 of the Constitution of India, the petitioner has prayed for the following relief :-

“(A)

Your Lord ships be pleased to admit and allow the present petition.

(B)

Your Lordships be pleased to issue a writ in the nature of mandamus and hold that the order dated 12.88.2024, received on 04.09.2024, annexed herewith at Annexure E, issued by the Responden t is ex-facie illegal and without jurisdiction.

(C)

Pending hearing and final disposal of the present petition, Your Lordships be pleased to stay the order dated 12.08.2024, received on 04.09.2024, annexed herewith at Annexure ‘E’, issued by the Respondent.

(D)

Your Lordships may be pleased to pass any other and further order as this Hon’ble Court may deem fit in interest of Justice;

(E)

Award Costs.”

3. The petitioner is a firm which is registered under the provisions of the Central / State Goods and Service Tax Act, 2017 (for short ‘the GST Act’) w.e.f. 13.02.2020. The petitioner had filed return under Section 39 of the GST Act on 30.11.2021. Order in original was passed on 21.11.2023 under Section 73 of the GST Act for contravention of the provisions of Section 16(4) of the GST Act read with Rule 36 of the Central Goods and Service Tax Rules, 2017, as the assessee has availed ineligible input tax credit in their GSTR-3B return filed after 23.04.2019 for the period from July, 2017 to March 2018 and after 20.10.2019 for the period of April, 2018, May, 2018, June, 2018, November, 2018 & December, 2018 in violation of Section 16(4) of CGST Act.

4. The petitioner being aggrieved preferred the appeal before the Commissioner (Appeals). The Commissioner (Appeals) by the impugned order dated 12.08.2024 dismissed the appeal in view of clear violation of the provisions of Section 16(4) of the CGST Act.

5. Learned advocate Mr. Darshan Patel for the petitioner submitted that after the Commissioner (Appeals) passed the order dated 12.08.2024, there is an amendment by insertion of sub-section (5) in Section 16 by Finance (No. 2) Act, 2024 dated 16.08.2024 w.e.f. 01.07.2017 which provides that notwithstanding anything contained in sub-section (4) in respect of an invoice or Debit Note for supply of goods or services or both pertaining to the Financial Years 2017-2018 to 2020-2021, the registered person shall be entitled to take input tax credit in any return under Section 39, which is filed upto 30^th day of November, 2021.

6. It was submitted that as the petitioner has filed requisite return before 30^th day of November, 2021 as per newly inserted sub-section (5) of Section 16 of the CGST Act, there shall not be any default on the part of the petitioner under the provisions of Section 16(4) of the Act.

7. It was therefore prayed that the matter may be remanded back to the Adjudicating Authority for application of the provisions of Section 16(5) of the Act to the facts of the case of the petitioner.

8. On the other hand, learned Senior Standing Counsel Mr. Utkarsh Sharma for the respondent could not controvert the above submissions in view of the insertion of sub-section (5) to Section 16 of the CGST Act w.e.f. 01.07.2017 giving benefit of filing of return upto 30^th day of November, 2021 for the Financial Years 2017-2018 to 2020-2021 which has to be considered.

9. Considering the above submissions, it would be germane to refer to the provisions of sub-section (4) of Section 16 of the CGST Act, as under :-

“(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.”

10. The Commissioner (Appeals) while dismissing the appeal filed by the petitioner has observed as under :-

“5.7 The appellant have contended various aspects to the instant dispute, which is being discussed hereinafter. They contended that the ITC availment first happens in the records maintained by the taxpayer and the return filing process is merely a reflection of the said ITC for credit in the electronic credit ledger to allow it for utilisation/ refund. Thus it can be said that as long as they have availed the ITC in the books of accounts (which will be a record u/s 35 as far as ITC availment is concerned) before the cut-off date prescribed under Section 16(4), the same can be said to be in order.

I observe that the appellant have failed to understand the scheme of implementation of GST, under which, filing of GSTR-3B return, claiming of ITC and payment of taxes have been made to be simultaneous exercise over GST common portal. Had they understood it tin time, they would not have developed instant dispute.

5.8 Citing the legal maxim “Lex Non Cogit Ad Impossibilla”, they contended that it was impossible to file the GST returns on time as OST registration was not allotted by the department to them owing to teclinical difficulties. So, definitely, they can not be penalised for not doing so.

As discussed above, there is no lota of doubt that appellant have failed to understand the scheme of implementation of GST, and uncer no circumstance does the GST law expect the taxpayer to do the impossible. Section 16(4) is a relaxing provision allowing additional time to claim ITC beyond the limits prescribed vide Section 16(2) read with Section 39(1) and Rule 61, i.e., beyond the twentieth day of the month succeeding such tax period. It is upto a taxpayer to either or not avail the extended time period granted for claiming ITC by way of filing GSTR-33 within the date prescribed under Section 16(4). As such, the maxim Lex Non Cogit ad impossibilia is entirely inapplicable to the cause of the appellant.

5.9 The appellant have also raised objection on GSTR-3B being a valid return.

I notice that the appellant is trying to unsettle a settled dispute encircling the validity of GSTR-3B by way of retrospective amendment to Rule 61(5). Notwithstanding Hon’ble Gujarat High Court judgement dated 24.6.2019 in the case of AAP & Co. v. UoI (SCA No. 18962 of 2018) holding that GSTR-3B is not a valid recurn under Section 39 to fol- low time-limit for claiming ITC of 2017-18, the Union Government has retrospectively amended CGST Rules 2017 w.e.f. 01.7.2017 vide Notification No. 49/2019-CT dated 09.10.2019 by substituting sub-rule (5) of Rule 61 to maintain that either of GSTR3 or GSTR3B is a valid return for the purpose of Section 39 read with said rule. Validity of this retrospective amendment vide Notification No. 49/2019-CT has also been discussed at length by the Hon’ble Apex Court on 28.10.2021 in CA 6520/2021 titled Uol v. Bharti Airtel Ltd. & Ors and found nonchallenged and held in order.

Subsequently, on a Civil Appeal 5978/2021 filed by the Uol against the above cited judgement of the Hon’ble Gujarat High Court in AAP & Co. v. Uol, Hon’ble Su- preme Court first stayed its operation on 06.12.2019 and later even reversed it on 10.12.2021, by relying on its earlier judgement dated 28.10.2021 in CA 6520/2021 men- tioned supra.

In the said CA 6520/2021, Hon’ble Apex Court had held,

“48…..We agree with the submission of the cppellant that any Indulgence shown contrary to the statutory mandate would not only be an illegality but in reality, would simply lead to chaotic situation ana collapse of tax administration of Union, States and Union Territories. Resultantly, assessee cannot be permitted to unilaterally carry out rectification of his returns submitted electronically in Form GSTR3B, which inevitably would affect the obligations and liabilities of other stakeholders, because of the cascading effect in their electronic records.”

In the light of above case laws, appellant’s attempt to challenge the vires of GSTR-3B for implementing Section 16(4) is a futile exercise and has no leg to stand.”

11. Sub-section (5) of Section 16 of the CGST Act inserted by Finance (No.2) Act, 2024 (15 of 2024) dated 16.08.2024 w.e.f. 01.07.2017 reads as under :-

“(5) Notwithstanding anything contained in sub-section (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 personshall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November, 2021.”

12. Considering the above amendment in CGST Act by insertion of Section 16(5) of the Act, the alleged default committed by the petitioners of not complying with Section 16(4) of the Act would now no longer exists subject to verification of the facts by the Adjudicating Authority.

13. In view of such subsequent development which has taken place after passing the impugned order by the respondent authority, the matter is required to be remanded back to the Adjudicating Authority to pass a fresh denovo order considering the provisions of Section 16(5) which has come into operation w.e.f. 01.07.2017.

14. The petition therefore succeeds. The impugned orders dated 21.11.2023 and 12.08.2024 passed by the Commissioner (Appeals) are hereby quashed and set aside and the matter is remanded back to the respondent- Adjudicating Authority to pass a fresh denovo order after giving an opportunity of hearing to the petitioner. Such exercise shall be completed within a period of Twelve weeks from the date of receipt of copy of this order.

15. The petition is accordingly disposed of. Notice is discharged.