M/s Anand Steel (Trade Name) (Pro. Shri Jagdish Kumar Mansukhani), Ratlam, Madhya Pradesh Vs Union of India and Others (Madhya Pradesh High court)
The Madhya Pradesh High Court in Anand Steel Vs Union of India addressed the issue of disallowing Input Tax Credit (ITC) for late filing of GST returns. The petitioner, a proprietorship firm, had duly filed returns for the 2018-19 period but was later served a notice proposing disallowance of ITC due to delayed filing. The petitioner argued that Section 16(4) of the CGST Act, which imposes a time limit on claiming ITC, was arbitrary and violated constitutional provisions, including Article 14 (right to equality). The court discussed how the taxpayer had already paid late fees and interest, and yet, they were being penalized twice, which was seen as disproportionate and unjust. The petitioner further contended that ITC should be allowed once the basic conditions of Section 16(1) and (2) were met, regardless of the delay in filing returns.
The court noted that Section 16(2) of the CGST Act establishes a taxpayer’s right to ITC once the conditions are fulfilled, and Section 16(4), which imposes a deadline for claiming ITC, should not override this. It was argued that a taxpayer’s legitimate expectation of having more time to reconcile accounts should not be hindered by the provisions of Section 16(4). The court observed that the payment of late fees and interest already served as a deterrent, and thus, further denying ITC was excessive and punitive. The State’s response, referencing amendments in the Finance Act of 2024 to resolve such issues, was noted. Ultimately, the court decided to set aside the show cause notices and assessment orders and directed the matter to be reconsidered in light of the Finance Act amendments, reinforcing that procedural lapses should not unduly penalize taxpayers who meet the statutory conditions.
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