COVID, Health Ailment, Fire Causes Delay in Filing GSTR-3B: Madras HC allows Dealer’s GST ITC citing Prior Ruling [Read Order]

The Madras High Court recently granted relief to a dealer registered under the Goods and Services Tax (GST) Act, 2017, allowing their claim for input tax credit (ITC) which was earlier denied on the ground of delayed filing of GSTR-3B returns.

The present case was instituted before the High Court by the petitioner, News Logistix, against the order of the Superintendent of GST and Central Excise, Karur-II Range, Karur Division challenging the reversal of ITC ordered by the Superintendent on account of delayed filing of GSTR-3B.

When the matter came up before the Madras High Court, both News Logistix, represented by Divya A, and Sai Srujan Tayi and Pooja Jain appearing for the department drew attention to an earlier common order of this Court dated October 17, 2024 in W.P. No. 25081 of 2023- Sri Ganapathi Pandi Industries vs. The Assistant Commissioner (Sri GanapathiPandi).

In Sri Ganapathi Pandi, it was held that registered dealers who were unable to file GSTR-3B returns due to COVID-19 lockdown, health ailments or accidental events such as fires could not be penalised by way of reversal of ITC, especially in light of legislative amendments made thereafter.

In that case, the Court noted that the department had issued SCNs proposing to reverse ITC without taking into account the genuine hardships faced by dealers and confirmed those orders.

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The Court observed that although such dealers had filed GSTR-1 returns in time, they had genuine difficulties in filing GSTR-3B returns, leading to delay in availing ITC.

The Bench of Justice Krishnan Ramasamy also noted the significance of the 53rd GST Council Meeting held on June 22, 2024 wherein the Council recommended extension of the deadline for availing ITC under Section 16(4) of the CGST Act.

Acting on this recommendation, the Government amended Section 16 by inserting Section 16(5) through the Finance Act (No. 2) of 2024, with retrospective effect from July 1, 2017. This provision allowed taxpayers to avail ITC for financial years 2017-18 to 2020-21 if GSTR-3B returns were filed by November 30, 2021. Notification No.17/2024-Central Tax dated September 27, 2024 and Circular No.237/31/2024-GST further clarified the implementation of this provision.

The Court held that, in light of these developments, the impugned order reversing ITC on the grounds of limitation were unsustainable. It accordingly quashed the order to that extent and restrained the department from initiating further proceedings based on limitation.

The Court also directed immediate de-freezing of the petitioner’s bank accounts if frozen pursuant to the impugned order and permitted refund or utilisation of amounts collected from the petitioner’s cash or credit ledgers. However, it made it clear that the department retained the liberty to proceed with action in cases involving allegations of wrong availment, excess claim, or fake ITC.

In effect, the Madras High Court allowed the writ petition and set aside the department’s order to the extent of the bar on availing ITC on the basis of limitation.

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