Case Law Details
Manjunatha Exports Vs Deputy Commissioner of Central Tax (Karnataka High Court)
The Karnataka High Court considered a petition seeking the setting aside of an Order-in-Original and an Order-in-Appeal passed under the Central Goods and Services Tax Act, 2017. The petitioner also sought a refund of the statutory pre-deposit made under Section 107(6) of the CGST Act.
The dispute arose in relation to the filing of Form GSTR-3B for the month of March 2019. The petitioner filed the return online on 28.10.2019, though belatedly. Subsequently, the tax authorities issued a show cause notice proposing to demand Input Tax Credit (ITC) amounting to ₹27,21,200. The allegation was that the ITC had been availed in contravention of Section 16(4) of the CGST Act.
The petitioner contended that the Assessing Authority rejected the ITC claim solely on the ground that the credit was claimed beyond the time limit prescribed under Section 16(4) of the CGST Act. According to the petitioner, the Finance (No.2) Act, 2024 introduced sub-section (5) to Section 16 with a non-obstante clause overriding the restriction contained in Section 16(4). Under this provision, the time limit for claiming ITC for invoices or debit notes relating to financial years 2017-18, 2018-19, 2019-20, and 2020-21 was extended until 30 November 2021.
The petitioner submitted that the amendment was given retrospective effect from 01.07.2017 and therefore the ITC claimed through the GSTR-3B return filed on 28.10.2019 for the financial year 2018-19 was within the extended time permitted by Section 16(5). Accordingly, the petitioner argued that the denial of ITC solely on the basis of delay under Section 16(4) was unsustainable.
The Court examined the Order-in-Original and the Order-in-Appeal and noted that the only ground relied upon by the authorities to deny the ITC claim was that the credit had been taken beyond the time limit prescribed under Section 16(4).
The Court referred to the text of Section 16(4) and Section 16(5) of the CGST Act. Section 16(4) restricts the entitlement to claim ITC after the thirtieth day of November following the end of the financial year to which the invoice pertains or after furnishing the relevant annual return, whichever is earlier. However, Section 16(5), introduced by the Finance (No.2) Act, 2024, begins with the expression “notwithstanding anything contained in sub-section (4)”. It provides that for invoices or debit notes relating to financial years 2017-18, 2018-19, 2019-20, and 2020-21, a registered person is entitled to take ITC in any return filed under Section 39 up to 30 November 2021.
The Court also referred to Circular No. 237/31/2024-GST dated 15th October, 2024issued by the Central Board of Indirect Taxes and Customs. The circular clarified the implementation of sub-sections (5) and (6) of Section 16 and confirmed that the amendment introduced through the Finance (No.2) Act, 2024 was given retrospective effect from 01.07.2017. The circular further clarified that the earlier time restriction under Section 16(4) stood overridden in specified cases covered by Section 16(5). It also stated that ITC claims availed through GSTR-3B returns filed up to 30 November 2021 would be permissible for the specified financial years.
The Court observed that Section 16(5) is a non-obstante clause that overrides the earlier time restriction under Section 16(4). In the present case, the petitioner had claimed ITC relating to financial year 2018-19 and had filed the return on 28.10.2019. This filing date fell within the extended time limit permitted under Section 16(5), which allowed ITC claims up to 30.11.2021.
In view of this legal position, the Court concluded that the petitioner’s return had been filed within the extended period allowed under Section 16(5). Therefore, the denial of ITC on the sole ground that the claim was beyond the period specified under Section 16(4) could not be sustained.
Consequently, the Court set aside both the Order-in-Original and the Order-in-Appeal. The matter was remitted to the stage of reply to the show cause notice. The petitioner was directed to appear before the concerned authority on 15.04.2026.
The Court clarified that the authority could examine the factual aspects relating to the eligibility of the ITC claim. However, the authority was not permitted to revisit the issue of the time limit for claiming ITC in light of the extended period provided under Section 16(5) of the CGST Act. All other contentions were kept open.
The petition was accordingly disposed of.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner has sought for setting aside of the Order-in-Original at Annexure-A as well as the Order-in-Appeal at Annexure-B. The petitioner has also sought for refund of statutory pre-deposit made under Section 107(6) of the Central Goods and Services Tax Act, 2017 (for short ‘CGST Act’).
2. The case made out by the petitioner is that the form GSTR-3B for the month of March-2019 came to be filed online by the petitioner though belatedly on 28.10.2019. It is stated that respondent No.1 has issued show-cause notice, proposing to demand Input Tax Credit (ITC) amounting to Rs.27,21,200/- which allegedly had been availed in contravention of the provision of Section 16(4) of the CGST Act.
3. It is the contention of the petitioner that the Assessing Authority had declined to permit the petitioner to claim ITC on the ground that it was belated in light of Section 16(4) of the CGST Act. It is submitted that by virtue of amendment to Section 16(5), which is a non-obstante clause, the time limit prescribed under Section 16(4) stood relaxed for the years of financial years 2017-18, 2018-19, 2019-20 and 2020-21 till 30th day of November, 2021. Accordingly, it is submitted that by virtue of such amendment to the Finance Act with effect from 01.07.2017, though the appointed date is 27.09.2024, the petitioner is entitled for credit to the ITC availed.
4. Perused the Order-in-Original and Order-in-Appeal. The only ground on which steps were taken to deny ITC claim is that it was claimed beyond the period prescribed under Section 16(4). Section 16(4) and Section 16(5) of the CGST Act reads as hereunder:
“16. Eligibility and conditions for taking input tax credit.
(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. (5) Nothwithstanding anything contained in subsection (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 person shall be entitled to take input tax credit in any return under section 39 which is filed upto the thirtieth day of November, 2021.”
5. It is pertinent to note that the Central Board of Indirect Taxes and Customs videCircular No. 237/31/2024-GST dated 15th October, 2024, issued to all Principal Chief Commissioners/Chief Commissioners/ principal Commissioners/ Commissioners of Central Tax (All) and Principal Director General/Directors General (All) has clarified the issues regarding implementation of provisions of sub-section (5) and sub-section (6) in section 16 of CGST Act, 2017. The Circular clarifies that sub-section (5) of Section 16 has been inserted retrospectively with effect from 01.07.2017 vide Finance (No.2) Act, 2024, thereby overriding the earlier time restriction prescribed under sub-section (4) of Section 16 in respect of the financial years 2017-18, 2018-19, 2019-20 and 2020-21. Subsection (5) to Section 16 was inserted by the Finance (No.2) Act, 2024, with retrospective effect from 01.017.2017. In pursuant thereof, the Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes and Customs, issued Notification No.17/2024-Central Tax, dated 27.09.2024, followed byCircular No. 237/31/2024-GST dated 15th October, 2024 providing clarification regarding the implementation of the said provision. The aforesaid legislative development by insertion of sub-section (5) to Section 16 through Finance (No.2) Act 2024, read with the clarification, affirms that claims of Input Tax Credit (ITC) availed through GSTR-3B returns filed up to 30th November 2021 shall be permissible. The relevant extract is reproduced hereunder:
“Reference is invited to sub-section (5) and sub-section (6) of section 16 of the Central Goods & Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”) inserted in section 16 of the CGST Act, with effect from the 1st day of July, 2017, vide section 118 of the Finance (No. 2) Act, 2024, whereby the time limit to avail input tax credit under provisions of sub-section (4) of section 16 of CGST Act has been retrospectively extended in certain specified cases.”
6. It must be noticed that Section 16(5) was inserted by way of an amendment by Finance Act (No.2), 2024. The said clause is a non-obstante clause, as it states, “notwithstanding anything contained in sub-section (4)”. If that were to be so, in light of the petitioner having claimed ITC with respect to the financial year 2018-19, by virtue of Section 16(5), petitioner’s entitlement would be extended till 30.11.2021, whereas the return of the petitioner was filed on 28.10.2019. The return filed is within the extended time prescribed under Section 16(5).
7. In light of the same, the Order-in-Original at Annexure-A as well as the Order-in-Appeal at Annexure-B are set aside. Matter is remitted to the stage of reply to show-cause notice. The petitioner to appear before the respondent No.1 on 15.04.2026.
8. Needless to state, the authority to look into the factual aspects of eligibility of claim of ITC, but not to revisit the permissibility of claiming ITC by virtue of the extended time under Section 16(5) of the CGST Act, in light of the discussion made above. All other contentions are kept open.
Accordingly, petition is disposed of.
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