GST ITC Claim of FY 2017-2021 Calcutta HC orders Dept to Examine matter in light of S. 16(5) [Read Order]

The Calcutta High Court exercising writ jurisdiction has set aside the order rejecting a rectification request under Section 107 of the West Bengal Goods and Services Tax Act, 2017 (W.B. GST Act) and the Central Goods and Services Tax Act, 2017 (CGST Act).

The Court held that with the introduction of retrospective Input Tax Credit (ITC) relief under Section 16(5) of the CGST Act, 2017, the Appellate Authority was required to reassess the taxpayer’s claim in accordance with the updated legal framework.

M/s. Svaksha Distillery Limited, a manufacturer and supplier of ethanol, had deferred its ITC for the Financial Years (F.Y.) 2018-2019 and 2019-2020 due to negligible output tax liability. The accumulated credit was later claimed in the GSTR-3B return filed for the January-March quarter of the F.Y. 2020-2021.

The respondent authorities scrutinised the return and issued a pre-show cause notice alleging excess ITC claim for that year. The appellant explained that the credit pertained to earlier financial years and was duly reflected in GSTR-2A. This explanation was not accepted, and a formal show cause notice was issued proposing reversal of credit with interest and penalty.

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Counsel Ankit Kanodia, appearing for the appellant, contended that Section 16(5) of the CGST Act, 2017 extended the time limit for availing ITC for the F.Y. 2017-2018 to 2020-2021, subject to the claim being lodged by 30.11.2021. Since the appellant had filed the claim within this statutory limit, it was eligible for the relief.

Further, argued that the Notification dated 8.10.2024 issued under Section 148 of the CGST Act, 2017, mandated a special rectification mechanism for taxpayers whose orders were affected by the earlier bar under Section 16(4) of the CGST Act, 2017. Therefore, the Appellate Authority was obligated to re-examine the earlier order under the revised statutory and procedural regime.

A single Judge Bench of Justice Om Narayan Rai held that the Appellate Authority had failed to apply the amended legal provisions and the special notification issued under Section 148 of the CGST Act, 2017.

The Court noted that Section 16(5) of the CGST Act, 2017 and the corresponding notifications provided a clear statutory right enabling eligible taxpayers to claim ITC for F.Y. 2017-2018 to 2020-2021, provided the claim was filed within the required time.

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The Court observed that while the Appellate Authority had relied on Section 16(4) of the CGST Act, 2017 to affirm the adjudicating order). The Court held the Authority failed to consider the rectification plea in accordance with the updated legal provisions and the special procedure introduced by the Notification dated 8.10.2024.

Accordingly, the order rejecting the rectification request was set aside, and the matter was remanded to the Appellate Authority for fresh consideration in accordance with law and specifically in light of Section 16(5) of the CGST Act, 2017 and the special notification. The appellant was also permitted to seek refund of any amount already recovered, as per law.

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