Section 16(2)(d), CGST Act, 2017 lays down the following condition for availment of ITC;
Filing of Return u/s 39
The other four conditions for availment of ITC have been laid down under Section 16(2)(a) to (c) and 16(2)(aa), CGST Act, 2017.
The section 16(2) starts with notwithstanding clause, meaning thereby that it supersedes sub-section 4 of section 16, based on the following cases of Supreme court & High Courts;
Central Bank of India v. State of Kerala (2009) 4 SCC 9 (SC), Synergy Fertichem Pvt. Ltd. v. State of Gujarat (2020) 33 J.K.Jain’s GST & VR 9 (Guj) : Skill Lotto Solutions Pvt. Ltd. v. Union of India & Ors. (2021) 35 J.K.Jain’s GST & VR 167 (SC).
As such, demanding interest u/s 50(1), on Gross Tax Liability from the taxable persons for late filing of return, against whom, any proceedings under section 73 or section 74 have been initiated, under the proviso to S.50(1) passed retrospectively w.e.f. 1.7.2017 by the Finance Act, 2021, is illegal per explicit provision of S.16(2), CGST Act, 2017 for ITC availment. Once the return is filed u/s 39 after paying Late Fee and other conditions stipulated in S.16(2) are complied with, the compliance of S.16(2) is fulfilled for availment of ITC and Interest can not be demanded on Gross Tax Liability from any person.
Moreover, the exclusion clause was not recommended by any GST council meetings.
The Finance Act has been has been passed to legalise the wrong doing by CBIC inspite of;
i) Explicitly clear provision of sub-section (1) to charge interest on Net Tax Liability.
ii) Number of decided cases of various High Courts. To cite some of these;
Prasanna Kumar Bisoi v. Union of India (2020) 34 J.K.Jain’s GST & VR 159 (Orissa), KLT Automotive and Tubular Products Ltd. v. Union of India (2020) 34 J.K.Jain’s GST & VR 423 (Bom), Maansarovar Motors Pvt. Ltd. v. Assistant Commissioner (2020) 34 J.K.Jain’s GST & VR 411 (Mad), Refex Industries Ltd. v. Assistant Commissioner of CGST & C/E (2020) 33 J.K.Jain’s GST & VR 139 (Mad).
No Trade unions have ever raised this crucial issue in the past.