In a recent ruling, the Madras High Court has ruled that the Input Tax Credit ( ITC ) claims are permissible in the Goods and Services Tax ( GST ) returns filed on or before 30th November 2021 for the Financial Years ( FYs ) 2017-18 to 2020-21. The court ruled this in light of the Finance Act, 2024.
Justice Krishnan Ramasamy noted the Finance Act ( No.2), 2024 observed that the issue of ITC claims barred by limitation under Section 16(4) no longer holds in view of Section 16(5) of CGST Act.
The court addressed a batch of writ petitions, including the case of Sri Ganapathi Pandi Industries, where taxpayers challenged orders issued by the GST Department reversing their ITC claims.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
The petitioners argued that these reversals were unjust, particularly when delays in filing GST returns (GSTR-3B) were due to exceptional circumstances, such as financial constraints, the COVID-19 pandemic, or other hardships. Despite these valid explanations, the Department imposed penalties and interest, prompting the aggrieved taxpayers to approach the court.
Initially, the court adjourned the case to consider developments arising from the 53rd GST Council Meeting held on June 22, 2024 as submitted by the Additional Advocate General-I before the court.
During the meeting, the GST Council recommended extending the deadline for ITC claims on invoices and debit notes under Section 16(4) of the Central Goods and Services Tax (CGST) Act. The proposed amendment would allow claims for FYs 2017-18 to 2020-21 in returns filed up to November 30, 2021. This amendment was granted Presidential Assent on August 16, 2024, and enacted as part of the Finance Act (No. 2), 2024, with retrospective effect from July 1, 2017, submitted before the bench.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
When the case resumed on 17th October 2024, the petitioners’ counsel presented documents confirming that the proposed amendments had received Presidential Assent and were enacted through the Finance Act (No. 2) of 2024, dated 16th August 2024.
The amendment introduced subsections (5) and (6) to Section 16 of the CGST Act, retroactively effective from 1st July 2017. Notifications and circulars clarifying the implementation of these provisions were also submitted for the court’s reference. The petitioners thus sought to have the impugned orders quashed.
The respondents’ counsel admitted that for claims falling within the amended timeline, taxpayers, including the petitioners, were entitled to ITC if claimed on or before 30th November 2021. However, they requested liberty to pursue any other issues in the impugned orders, such as discrepancies or fraudulent ITC claims, as per the law. The court considered the submissions and reserved its orders accordingly.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
The single bench stated that the amended Section 16(5) of the CGST Act explicitly permits taxpayers to claim ITC in returns filed within the new deadline. This amendment overrides the limitations imposed by the original Section 16(4).
It was observed that the petitioners had filed their GSTR-1 returns on time but faced delays in submitting GSTR-3B due to extraordinary circumstances. Considering the retrospective amendment, the court ruled that denying ITC claims based on the earlier timeline was unsustainable.
Addressing additional concerns raised by the GST Department regarding discrepancies, excess claims, or fraudulent ITC claims, the court clarified that such issues could still be pursued in accordance with the law. However, claims filed within the extended deadline under Section 16(5) could not be disallowed on the grounds of delay.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
The court quashed all impugned orders reversing ITC claims solely on the basis of the earlier limitation period. Further, it prohibited the department from initiating further proceedings against the petitioners for claims filed within the permissible timeframe.
In addition the bench directed the immediate unfreezing of bank accounts that had been blocked due to adverse orders. Additionally, any tax amounts recovered from the petitioners based on the reversed ITC claims were ordered to be refunded or adjusted against future liabilities.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
