Case Law Details
Selva Vilas Jewellery Vs Superintendent of GST and Central Excise (Madras High Court)
The writ petition was filed by a registered taxpayer challenging an order passed by the GST Department under the Goods and Services Tax Act, 2017 / Central Goods and Services Tax Act, 2017, by which the petitioner’s claim for Input Tax Credit (ITC) was reversed and the petitioner was directed to pay tax, penalty, and interest. The reversal was on the ground that the ITC claim was barred by limitation under Section 16(4) of the CGST Act.
At the hearing, both the petitioner’s counsel and the respondent’s counsel submitted that the issue raised in the present writ petition was squarely covered by an earlier common order of the Madras High Court dated 17.10.2024 passed in a batch of writ petitions. The Court, in that earlier decision, had considered cases where registered dealers had filed GSTR-1 returns in time but were unable to file GSTR-3B returns within the prescribed period due to difficulties such as financial constraints arising from COVID-19 lockdowns, health-related issues, and fire accidents. Because of these delays, the ITC claims were not raised within the original statutory timeline.
In those cases, the Department had issued show cause notices proposing reversal of ITC and had confirmed the proposals by passing assessment orders directing payment of tax, penalty, and interest, without considering the reasons for delay or the subsequent statutory developments. The Court noted that after the filing of those writ petitions, significant legislative and administrative developments took place.
The 53rd GST Council Meeting held on 22.06.2024 recommended an extension of the deadline for availing ITC under Section 16(4) of the CGST Act. This extension applied to GSTR-3B returns for the financial years 2017-18, 2018-19, 2019-20, and 2020-21, with a deemed new deadline of 30.11.2021. These recommendations received Presidential assent on 16.08.2024 through the Finance Act (No. 2) of 2024. Pursuant to this, Notification No.17 of 2024-Central Tax dated 27.09.2024 and Circular No.237/31/2024-GST were issued by the Central Board of Indirect Taxes and Customs, clarifying the implementation of amended provisions.
The Court examined Section 16(4) of the CGST Act and the newly inserted sub-sections 16(5) and 16(6). Section 16(5), introduced with retrospective effect from 01.07.2017, expressly provides that notwithstanding Section 16(4), registered persons are entitled to take ITC for invoices or debit notes pertaining to FYs 2017-18 to 2020-21 if the relevant return under Section 39 was filed up to 30.11.2021. In light of this statutory amendment, the Court held that ITC claims which were earlier treated as time-barred under Section 16(4) but fell within the extended period under Section 16(5) could not be denied.
Applying the ratio of the earlier common order, the Court held that the impugned order dated 02.04.2024 in the present case was no longer sustainable insofar as it related to denial of ITC on limitation grounds. Accordingly, the Court quashed the impugned order to the extent it reversed ITC that was within the period prescribed under Section 16(5). The Department was restrained from initiating proceedings against the petitioner based on limitation.
The Court further directed that any freezing of the petitioner’s bank accounts pursuant to the impugned order be lifted by issuing intimation to the concerned bankers. If any recovery proceedings had been initiated during the pendency of the writ petition, such proceedings were to be dropped upon production of the Court’s order. Any tax amounts already collected from the petitioner’s cash or credit ledgers pursuant to the impugned order were directed to be refunded, or alternatively, permitted to be adjusted or utilized for payment of future tax liabilities.
Liberty was expressly reserved in favour of the Department to proceed in accordance with law if there were issues unrelated to limitation, such as discrepancies in availing ITC, wrong or excess ITC claims, or fake ITC claims. The writ petition was allowed on these terms, with no order as to costs, and connected miscellaneous petitions were closed.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This Writ petition has been filed by the petitioner/taxpayer, who is registered dealer on the files of the respondent-Department under the provisions of the Goods and Service Tax Act, 2017 (GST Act)/ Central Goods and Services Tax Act ( CGST Act) as the case may be, challenging the orders passed by the respondent-Department, whereby, their claim of ITC was reversed/negatived and consequently, the petitioners have been directed to pay tax/penalty/interest.
2. When this Writ Petition is taken up for hearing, the respective learned counsel for the petitioner and learned counsel for the respondent, would submit that the issue involved in the present Writ Petitions, has been squarely covered by the common order of this Court, dated 17.10.2024 passed in W.P.Nos.25081 of 2023, etc., batch, wherein, this Court has categorically held in paragraphs 9 to 12 as under:
“9. The petitioners in all these Writ Petitions are registered dealers on the files of the respondent-Department under the provisions of the Goods and Service Tax Act, 2017/CGST Act 2017. Though the petitioners have filed GSTR-1 returns in time, however, insofar as claim of ITC is concerned, since the petitioners were faced with certain difficulties, such as Financial constraints (as there was complete lock down due to outbreak Covid-19) health related ailments, fire accidents, they were unable to file GSTR-3B returns, which prompted them not raising their claim ITC in time before the prescribed date. Whereas, the respondent-Department without considering such vital aspects and that reasons for the delay is not deliberate, issued the show cause notices to the petitioners, proposing to reverse the ITC availed and went to the extreme level of confirming the proposals contained in the show cause notices by passing the impugned orders, whereby, the claim made by the petitioners for ITC was reversed and the petitioners have been directed to tax/penalty/interest. Aggrieved against the impugned orders, the petitioners are before this Court by way of present Writ Petitions seeking for setting aside the impugned orders.
10. After the filing of these Writ Petitions, certain development took place, i.e. that 53rd GST Council Meeting was held on 22.06.2024, and during the said Meeting, the GST Council recommended for extension of the deadline for availing ITC on any invoice or debit note under Section 16(4) of the CGST Act and this extension would be applicable to any GSTR-3B returns filed for the Fys 2017-18, 2018-19, 2019-20 and 2020-21 with a new deadline deemed to be as “30.11.2021”, to which, the Presidential Assent was also obtained by the Government of India on 16.08.2024, whereby, the financial proposals of the Central Government for the Financial Year 2024-25 was given effect to vide Finance Act, (No.2) of 2024, and in view of the aforesaid enactment, the Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes and Customs, issued a Notification, bearing No.17 of 2024-Central Tax, dated 27.09.2024, pursuant to which, a Circular No.237/31/2024-GST was issued by the Central Board of Indirect Taxes and Customs, which was addressed to all the Principal Chief Commissioners /Chief Commissioners/Principal Commissioners/Commissioners of Central Tax (All), thereby, clarifying the issues regarding implementation of provision of sub-section (5) and sub-section (6) in Section 16 of CGST Act, 2017, the impugned orders are no longer sustainable and liable to be quashed. In this context, it would be apposite to refer to both Section 16(4) of the CGST Act, 2017, as well as amendment made to Section 16 (4) by interpolations of sub-sections 16 (5) and (6), and by insertion of sub-section (5) to Section 16, which are extracted herein under:-
Section 16 (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.”
Section 16 (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 persons shall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November, 2021.“
10.1 Thus, a perusal of above Section 16 (5) makes it clear that ‘notwithstanding anything contained in sub-section 4, referred to above, in respect of any invoice or debit note for supply of goods or services or both pertaining to the Fys 2017-18 to 2020-21, the registered persons shall be entitled to take ITC in any return under section 39 which is filed upto the 30th day of November, 2021.
10.2 Thus, this Court considering the fact that the issue involved in all these Writ Petitions is only with regard to the availment of ITC, which is barred by limitation in terms of Section 16 (4) of the CGST Act, and in the light of the subsequent developments took place, whereby, Section 16 of the CGST Act was amended and sub-section (5) was inserted to Section 16, which came into force with retrospective effect from 01.07.2017, the petitioners are entitled to avail ITC in respect of GSTR-3B filed in respect of FYs 2017-18, 2018-19, 2019-20 and 2020-21 as the case may be, on or before 30.11.2021, is inclined to quash the impugned orders.
11. Accordingly, this Court passes the following orders.
i) The orders impugned in all Writ Petitions are quashed insofar as it relates to the claim made by the petitioners for ITC which is barred by limitation in terms of Section 16 (4) of the CGST Act, 2017 but, within the period prescribed in terms of Section 16 (5) of the said Act.
ii) Therefore, the respondent-Department is restrained from initiating any proceedings against the petitioners by virtue of the impugned orders based on the issue of limitation.
iii) In view of the fact that the impugned orders are quashed, the respondent-Department is directed to take immediate steps towards de-freezure of the concerned petitioners bank accounts, which have been freezed in furtherance of the impugned orders, by sending intimation to the concerned bankers.
iv) In the event, in the interregnum, i.e. during the pendency of these Writ Petitions, if any orders are proposed to be passed towards recovery, same shall be dropped immediately upon production of the order copy by the petitioners, in whichever case, where, there is no interim order.
v) It is also made clear that if at all, if there is any tax amounts were collected from the petitioners based on the impugned assessment orders from the cash ledgers/credit ledgers of the petitioners concerned, the same shall be refunded to them or by means of orders of this Court or even in the absence of any order from this Court, if any amount is deposited either in the cash ledgers/credit ledgers of the petitioners concerned, the same is permitted to be utilized/adjusted by the petitioners towards payment of future tax.
vi) Insofar as the apprehension expressed by the learned Additional Advocate General for the respondent-Department that in certain Writ Petition apart from the issue on limitation, challenges have also been made to the order related to issues such as discrepancies in availing the ITC/wrong availment of ITC/excess claim of ITC/Fake ITC claim, as the case may be, or such other issues, liberty is be granted to the respondent-Department to proceed against the assessees/petitioners in furtherance of the impugned orders in accordance with law.
12. In the result, all the Writ Petitions are allowed on the aforesaid terms. No costs. Consequently, connected Miscellaneous Petitions are closed.”
4. Therefore, the learned counsel for the petitioner would submit that the above said order will hold good for the present Writ Petition also and hence, prayed to dispose of the Writ Petition. The learned counsel appearing for the respondent would fairly accede to the same.
5. In view of the above, this Court passes the following:
i) The impugned original order dated 02.04.2024 is quashed insofar as it relates to the claim made by the petitioner for ITC which is barred by limitation in terms of Section 16 (4) of the CGST Act, 2017 but, within the period prescribed in terms of Section 16 (5) of the said Act.
ii) Therefore, the respondent-Department is restrained from initiating any proceedings against the petitioners by virtue of the impugned order based on the issue of limitation.
iii) The liberty is granted to the petitioner to move a separate application for refund, if any, and the respondent-Department shall consider and decide the same on its own merits and in accordance with law.
iv) In view of the fact that the impugned order is quashed, the respondent-Department is directed to de-freezure of the concerned petitioner bank account, if any, which have been freezed in furtherance of the impugned order, by sending intimation to the concerned bankers.
v) In the event, in the interregnum, i.e. during the pendency of this Writ Petition, if any orders are proposed to be passed towards recovery, same shall be dropped immediately upon production of the order copy by the petitioners, in whichever case, where, there is no interim order.
vi) It is also made clear that if at all, if there is any tax amounts collected from the petitioner based on the impugned assessment order from the cash ledgers/credit ledgers of the petitioner concerned, the same shall be refunded to them or by means of orders of this Court or even in the absence of any order from this Court, if any amount is deposited either in the cash ledgers/credit ledgers of the petitioner concerned, the same is permitted to be utilized/adjusted by the petitioners towards payment of future tax.
vii) If there is any challenge related to issues such as discrepancies in availing the ITC/wrong availment of ITC/excess claim of ITC/Fake ITC claim, as the case may be, or such other issues, liberty is be granted to the respondent-Department to proceed against the assessee/petitioner in furtherance of the impugned order in accordance with law.
6. Accordingly, the present Writ Petition is allowed on the aforesaid terms. No costs. Consequently, connected Miscellaneous Petitions are closed.
i) The impugned original order dated 02.04.2024 is quashed insofar as it relates to the claim made by the petitioner for ITC which is barred by limitation in terms of Section 16 (4) of the CGST Act, 2017 but, within the period prescribed in terms of Section 16 (5) of the said Act.
ii) Therefore, the respondent-Department is restrained from initiating any proceedings against the petitioners by virtue of the impugned order based on the issue of limitation.
iii) The liberty is granted to the petitioner to move a separate application for refund, if any, and the respondent-Department shall consider and decide the same on its own merits and in accordance with law.
iv) In view of the fact that the impugned order is quashed, the respondent-Department is directed to de-freezure of the concerned petitioner bank account, if any, which have been freezed in furtherance of the impugned order, by sending intimation to the concerned bankers.
v) In the event, in the interregnum, i.e. during the pendency of this Writ Petition, if any orders are proposed to be passed towards recovery, same shall be dropped immediately upon production of the order copy by the petitioners, in whichever case, where, there is no interim order.
vi) It is also made clear that if at all, if there is any tax amounts collected from the petitioner based on the impugned assessment order from the cash ledgers/credit ledgers of the petitioner concerned, the same shall be refunded to them or by means of orders of this Court or even in the absence of any order from this Court, if any amount is deposited either in the cash ledgers/credit ledgers of the petitioner concerned, the same is permitted to be utilized/adjusted by the petitioners towards payment of future tax.
vii) If there is any challenge related to issues such as discrepancies in availing the ITC/wrong availment of ITC/excess claim of ITC/Fake ITC claim, as the case may be, or such other issues, liberty is be granted to the respondent-Department to proceed against the assessee/petitioner in furtherance of the impugned order in accordance with law.
6. Accordingly, the present Writ Petition is allowed on the aforesaid terms. No costs. Consequently, connected Miscellaneous Petitions are closed.
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