Kerala HC Quashes ITC Denial as Returns Were Filed Within Section 16(5) Cut-Off Date

Hi-Tech Security Systems Vs Assistant State Tax Officer (Kerala High Court)

The petitioner, a registered taxpayer under the CGST/KSGST Acts, challenged two assessment orders passed under Section 73 of the CGST Act for the assessment years 2018-19 and 2019-20. In both orders, the input tax credit (ITC) claimed by the petitioner was denied on the ground that the relevant returns were not filed within the time limit prescribed under Section 16(4) of the CGST Act.

For the assessment year covered by the first order, the petitioner had not filed returns for the period from October 2018 to March 2019 within the prescribed time. For the second assessment year, the delay related to returns from April 2019 to March 2020. The petitioner relied on Section 16(5) of the CGST Act, which provides that a taxpayer furnishing returns on or before 30.11.2021 is entitled to claim ITC.

The Court examined the records and found that the returns for July 2018 to March 2019 were filed between 25.08.2020 and 30.09.2021, while the returns relevant to the second assessment year were filed on 30.09.2021. Since all returns had been furnished before the cut-off date specified under Section 16(5), the Court held that the petitioner was eligible to claim ITC in respect of those transactions.

The Court observed that Section 16(5) contains a non-obstante clause overriding Section 16(4). Therefore, once returns are filed within the cut-off date prescribed under Section 16(5), the timeline prescribed under Section 16(4) loses significance.

Accordingly, the writ petition was allowed. The assessment orders were quashed, and the assessing officer was directed to reconsider the matter by extending the benefit of Section 16(5) to the petitioner, subject to eligibility.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

The petitioner is a registered tax payer under the provisions of the CGST/KSGST Act. The grievance of the petitioner is against Exts.P1 and P2 orders passed under Section 73 of the CGST Act pertaining to the assessment years 2018-19 and 2019-20. In both the assessment orders, the input tax credit claimed by the petitioner were declined on the reason that the petitioner failed to submit the returns within the statutory period contemplated under Section 16(4) of the CGST Act. To be precise, in the assessment year covered by Ext.P1, the petitioner failed to submit the statutory return pertaining to the months from October 2018 to March 2019, whereas, in the assessment year relevant to Ext.P2, the petitioner failed to submit the returns for the period from April 2019 to March 2020 in time. The challenge is raised by the petitioner against those assessment orders by placing reliance upon Section 16(5) of the CGST Act, where it is provided that, in case the tax payer is furnishing the return on or before 30.11.2021, such tax payer shall be entitled to claim the input tax credit.

2. After carefully going through the records, I find merits in the submission made by the learned Counsel for the petitioner. It is discernible from Ext.P1 that, monthly returns for the month of July 2018 to March 2019 were submitted by the petitioner during the period from 25.08.2020 to 30.09.2021. It is clear from Ext.P2 that, the relevant returns were submitted by the petitioner on 30.09.2021. Thus, it is evident that, all the returns were submitted by the petitioner within the cutoff date contemplated under Section 16(5) of the CGST Act and hence the petitioner is eligible to get the input tax credit in respect of the transactions. Since 16(5) contemplates a non-obtante clause as regards Section 16(4) of the Act, once the tax payer is furnishing the return within the cutoff date contemplated under Section 16(5), the time line contemplated under Section 16(4) for submitting the returns losses its significance. Therefore, the petitioner is entitled to the reliefs sought for.

Accordingly, this writ petition is allowed. Exts.P1 and P2 orders are quashed with a direction to the assessing officer to reconsider the matter by granting the benefits under Section 16(5) of the Act to the petitioner, if the petitioner is otherwise entitled for.