Kerala High Court sets aside ITC denial u/s 16(4) of CGST Act, Orders Reconsideration in Line with M. Trade Links Judgment [Read Order]

The Kerala High Court has overturned a denial of Input Tax Credit ( ITC ) under Section 16(4) of the Central Goods and Services Tax (CGST) Act, 2017 directing a reassessment in line with the principles established in the recent M. Trade Links case.

The petitioner, Govindapurath Meethal Deepak, the proprietor of M/s. D2 Architectural Studio, Kozhikode challenged an assessment order issued for the financial year 2018-19, wherein the petitioner’s claim for ITC was rejected due to the provisions of Section 16(4) of the CGST Act.

Section 16(4) stipulates that ITC can only be claimed within a specified period following the date of the invoice or the date of filing of the return for the year to which the invoice pertains, whichever is earlier.

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The petitioner, represented by R. Jaikrishna, Narayani Harikrishnan, C.S. Arun Shankar and Anish P, contended that the denial of ITC based on this time limit was unfair and did not account for the specific circumstances of the case.

The petitioner also argued that procedural constraints should not preclude the rightful claim of ITC, especially when considering the principles laid out in the M. Trade Links judgment.

The respondent revenue, State of Kerala and others, represented by Smt. Jasmine M.M. contended that the denial of input tax credit (ITC) was justified under Section 16(4) of the CGST Act, which imposes a clear time limit for claiming ITC. They argued that the petitioner had failed to meet this statutory deadline, making the disallowance legally valid.

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In M. Trade Links v. Union of India, the Kerala High Court addressed similar issues, emphasising that procedural lapses should not hinder taxpayers’ right to claim ITC if the claims are valid and supported by appropriate documentation. The judgment underlined that the tax authorities should consider such claims on their merits, ensuring that procedural technicalities do not override substantive justice.

The single bench of Justice Gopinath P agreed with the petitioner’s contention and found merit in the argument that the ITC denial was unjust. The court set aside the assessment order to the extent it denied ITC under Section 16(4) and ordered the authorities to reconsider the claim in light of the M. Trade Links decision.

The bench directed that the proper officer should reassess the petitioner’s claim, providing an opportunity for hearing and take a decision within three months from the receipt of a certified copy of the judgment.

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The court suspended any coercive actions related to the denied ITC until the reassessment is completed. This measure ensures that taxpayers are not unduly penalised while their claims are being reviewed.

The judgment ensures that procedural aspects do not unfairly disadvantage the rights of the taxpayers. By aligning the decision with the M. Trade Links judgment, the court has highlighted the principle that procedural requirements should not overshadow the fundamental rights of taxpayers under the CGST Act. The decision also saves taxpayers from denial of ITC due to procedural constraints.

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In a very similar case, the Kerala High Court issued a similar ruling in favour of Malamal Variamthody Manoj, Proprietor of Kairali Tradelink, Kozhikode, setting aside the denial of ITC on account of the provisions of Section 16(4) of the CGST/SGST Acts, directing the respondents to reconsider the petitioner’s claim in line with the court’s decision in M. Trade Links v. Union of India. Notably, the petitioner was represented by the same team of lawyers in this case.

To Read the full text of the Order CLICK HERE

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