R. K. Enterprises Vs Assistant Commissioner of Central Taxes (Madras High Court)
Quashed SCN and Orders disallowing ITC under section 16(4) & 16(2)(c), on the basis of insertion Section-16(5) of the CGST Act
Summary: In the case of R.K. Enterprises v. Union of India, the Madras High Court has quashed show cause notices and orders that had disallowed Input Tax Credit (ITC) for several financial years from 2017-18 to 2020-21. The ruling, delivered on July 2, 2025, in a batch of 36 writ petitions, hinged on the newly inserted Section 16(5) of the Central Goods and Services Tax (CGST) Act. This new provision, introduced by the Finance Act, 2024, extended the deadline for claiming ITC for these specific financial years until November 30, 2021. The petitioners had challenged the constitutional validity of earlier provisions, Sections 16(2)(c) and 16(4), and Rule 61(5), which were used to disallow their ITC claims. However, with the insertion of the new Section 16(5), which provided a statutory extension, the petitioners withdrew their constitutional challenges. The court noted that since the claimants had filed their ITC claims before the new November 30, 2021, deadline, the previous orders disallowing the credit were no longer legally tenable. The court’s decision allows taxpayers who met this extended deadline to be protected from litigation related to these legacy credit disputes, promoting compliance and reducing legal burdens. However, the court also clarified that no refunds would be issued for any amounts already paid by the taxpayers to satisfy the quashed demands.
