Time Limits in GSTR 3B for Late Input Tax Credit Claims

Applicability of The Time Limits Specified In Section 16(4) To Take Input Tax Credit In GSTR 3B of A Particular Month Filed After The Due Date For Filing GSTR 3B For The Month of September/November of The Next Financial Year

Introduction: The eligibility for Input Tax Credit (ITC) has been a contentious issue in indirect tax laws. Despite promises of seamless credit flow in the GST regime, disputes have arisen, particularly regarding the interpretation of Section 16(4) of the CGST Act, 2017. This article delves into the complexities surrounding the time limits for claiming ITC in GSTR 3B, filed after the due date for September/November of the subsequent financial year.

The eligibility to Input Tax Credit (ITC) has always been a matter of dispute between the taxpayers and the Revenue under the indirect tax legislation. The GST regime promised to transform the indirect taxation landscape by ensuring a seamless flow of credit at each stage of the supply chain across the nation thereby giving the slogan of “One Nation One Tax”. However, the reality appears to be a quite different, considering the restrictions prescribed through various Notifications and amendments. It has been almost 7 years since the GST was implemented and we have already seen a barrage of litigation mainly revolving around eligible GST credit, ranging from GSTR-2A vs. GSTR-3B reconciliation and credit eligibility vis-à-vis Section 17(5), to the interpretation and constitutional validity of the time limit prescribed under Section 16(4) of the CGST Act, 2017.

One of the scenarios for which credit is being denied for not complying with the condition mentioned in Section 16(4) i.e late filing of a particular return. For example filing of GSTR-3B for any period pertaining to FY 2017-18 or FY 2018-19 filed on a date after the due date for filing return for September 2018 or September 2019. In such scenarios, entire ITC availed in the return is proposed to be denied.

As per Section 16(4) of the CGST Act, 2017, availment of ITC for a particular financial year is restricted beyond the 30th day of November of the subsequent financial year (earlier it was limited up to the “due date of furnishing of the return under Section 39 for the month of September”).

The main question of Law here is “What Constitutes the Availment of ITC….?” Getting the answere to this question will itself resolves the above mentioned dispute.

Section 16(1) allows taking the ITC subject to few conditions, whereas Section 16(2), 16(3) and 16(4) are the restrictive clause.

Sub-section 16(2) of the Section 16 is the non-obstinate cause which itself starts with “Notwithstanding anything contained in this section” i.e Section 16.

Section 16(4) being a restrictive/limitation clause states the time limit for availing the credit.

Now what actually constitutes the “availment of ITC…? Whether taking credit/availing credit in book of accounts or disclosure in the returns….” Owing to such limitation clause, the taxpayers availing ITC in the GSTR-3Bs filed beyond the November/September timeline, as the case may be, received notices u/s 73 of the CGST /SGST Act for reversal of ITC on the ground that the same is not availed in accordance with the law.

The most of the notices issued based on above restriction are based on mis-interpretation by the department regarding the event “which constitutes the availment of ITC”. As per the departmental interpretation, the disclosure of the ITC amount in GSTR 3B constitutes availment of ITC. The filing of GSTR 3B beyond the due date as mentioned in Section 16(4) is in contravention of time limits mentioned in section 16(4) and hence notices under section 73 are being issued for reversal of ITC along with interest and penalty. However all the notices seem to be issued based of the Artificial Intelligence used in the GST regime, without independent application of mind by the issuing proper officer. Further, the notices are issued in standardised pattern with standard language without outlining the legal grounds for issuing such notice.

The Show Cause Notices and decisions by the jurisdictional authorities have been challenged before various High Courts by filing writ petition under article 226 of the Indian Constitution on following grounds:

1. That the provisions of Section 16(4) are in violation of Articles 14, 19(1)(g) and 300A of the Constitution of India.

2. That sub-section 4 of section 16 is in conflict of the sub-section 2 of section 16 because Section 16(2) begins with non-obstante clause i.e “notwithstanding anything contained in this section…….” so section 16(2) overrides all other sub-sections of section 16 and hence ITC shall be allowed once all the conditions mentioned in various clauses of sub-section 2 of section 16 have been satisfied, which are as follows:

Clause (a): The taxpayer of in possession of Tax Invoice and Debit Note

Clause (aa): The details of above Tax Invoices and Debit Notes has been filed by the supplier in their GSTR-1 and recipient has received it in its GSTR 2A/2B

Clause (b): Taxpayer has actually received the Goods or Services or both

Clause (c): Tax charged on the inward supply has been duly paid by the supplier to the government.

Clause (d): Taxpayer has filed the return under section 39 i.e submitted GSTR 3B, whether on-time or belated return…..? subject matter of discussion.

3. The taxpayers have accorded an alternate interpretation to Section 16(4), which would restrict ITC only for invoices received after the prescribed timeline.

In the recent times, may writ petitions were filed before various High Courts and four High Courts have given negative verdict thereby disallowing the ITC where GSTR 3B has been filed after the due date as mentioned in Section 16(4) of the CGST Act’ 2017. The decision of various courts is summarised as under:

The Honorable Calcutta High Court in the case of BBA Infrastructure Ltd. v. Senior Joint Commissioner of State Tax [MAT No. 1099 of 2023 dated December 13, 2023] dismissed the writ petition and held that Section 16(1) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) is an enabling provision allowing Input Tax Credit and Section 16(4) of the CGST Act, imposing restriction on the filing belated returns for availing credit is valid in nature. The Honorable Calcutta High Court relies upon the judgment of the Honorable Supreme Court in the case of ALD Automotive Private Limited v. Assistant Commissioner and Ors. [Civil Appeal No. 10412-10413 of 2018 dated October 12, 2018] observed that the conditions under which the concessions and benefit is given are always to be strictly construed and the time under which a return is to be filed for the purpose of assessment of tax cannot be dependent on the will of the dealer. Therefore, the time limit prescribed under Section 19(11) of the Tamil Nadu VAT Act is mandatory in nature. The Honorable Court relies upon the judgment in the case of M/s. TVS Motor Company v. State of Tamil Nadu and Ors. [Civil Appeal No. 10560-10564 of 2018 dated October 12, 2018] Taking into consideration the aforementioned judgment, further observed that the ITC is a form of concession provided under the CGST Act which cannot be availed as a matter of right but only as per the terms of the statute, therefore the conditions mentioned has to be fulfilled by the dealer. The Hon’ble Court further Observed that the eligibility criteria prescribed under Section 16(2) of the CGST Act, are mandatory in nature, and in the absence of fulfilment of the eligibility criteria the dealer will not be entitled to avail ITC.

The Honorable Andhra Pradesh High Court in case of Thirumalakonda Plywoods on conspectus of facts and law holds as under:

Point No.1: The time limit prescribed for claiming ITC U/s16(4) of APGST Act/CGST Act, 2017 is not violative of Articles 14, 19(1)(g) and 300-A of the Constitution of India.

Point No.2: Section 16(2) of APGST/CGST Act, 2017 has no overriding effect on Section 16(4) of the said Act as both are not contradictory with each other. They will operate independently.

Point No.3: Mere acceptance of Form GSTR-3B returns with late fee will not exonerate the delay in claiming ITC beyond the period specified U/s 16(4) of APGST/CGST Act, 2017.

Point No. 4: With regard to these contentions, a perusal of impugned Assessment Order dated 14.02.2022 passed by the 1st respondent shows that the present contentions that the notice was not issued in proper form and that no opportunity was granted for hearing etc., which were taken in objections 1 to 10 of the reply by the petitioners were vividly discussed and rejected by the 1^st respondent. Hence we see no force in the present contentions.

Gobinda Construction v. Union of India and Others [CWJC No. 9108 of 2021 dated September 8, 2023] Honorable Patna High Court further noted that, there is no ambiguity in the language of Section 16 which clearly stipulates that the grant of ITC is subject to the condition stated in the CGST Act. Further, it is stated that the provision under Section 16(4) is one of the conditions making the registered person eligible to take ITC and is not violative of Article 300 A of the Constitution of India. The Hon’ble Court opined that there is no ground to grant the relief sought by the Petitioner in the writ petition and dismissed the writ petition filed.

There is no doubt that the legislature is empowered to impose such conditions and restrictions on the eligibility of ITC as it may deem fit. Such comprehensive analysis and validation of Section 16(4) highlights the importance of adhering to the statutory prerequisites of ITC. In fact, these two decisions reinforce the notion that ITC is not an absolute entitlement but must be claimed in strict accordance with the conditions and restrictions thereto availed in accordance with the law.

FURTHER ARGUMENTS WHICH COULD BE CONSIDERED WHILE DECIDING THE ALLOWING OF ITC BEYOND THE TIME LIMIT MENTIONED IN SECTION 16(4) ARE AS UNDER:-

1. What constitutes the availment of ITC..?

To answered this, reference should be taken from the Supreme Court Judgement in Bharti Airtel Limited case where SC is of the view that it is the responsibility of the taxpayer for maintenance of books of accounts and records within the meaning of Chapter VII of the 2017 Rules, which are primary documents and source material on the basis of which self-assessment is done by the registered person including about his eligibility and entitlement to get ITC and of Outstanding Liability.

As regards the eligibility and utilization of ITC, there is a statutory duty fastened on every registered person governed under various regimes and presently under the GST law, to pay output tax liability and a corresponding right to avail and utilize ITC, subject to eligibility and conditions specified therefore. The right to claim ITC, being a statutory right, is circumscribed by conditions and restrictions, subject to which a registered person is entitled to take credit.

For easy understanding, the crux of the law settled by the Supreme Court in Bharti Airtel judgement is that, the ITC is said to be available as it is standing in the credit of your books subject to its genuinety.

2. Grant of Input Tax Credit under section 16 of the CGST Act’ 2017 is a concession or relaxation and nobody can claim it as a matter of vested right:

Question is ITC is a Concession or a Right..? Concession v/s Right:

Main objective of enacting Goods & Service Tax law was majorly to avoid the double taxation by eliminating the cascading effect and to have seamless flow of ITC for each point of taxation till the end consumer. As per the Supreme Court of Judgement in Eicher Motors Ltd. vs. Union of India[1999(106) ELT 3] which states that provision for facility of credit is as good as tax paid till tax is adjusted on future goods on the basis of the several commitments which would have been made by the assesses concerned.

We all know well that the credit earned is because of the tax paid, which the government has already got and must have spent. The government is not going to go broke, just by granting this credit, but disallowing ITC many taxpayers will become broke.

The Statement of Objects and Reasons accompanying the 122nd Constitution Amendment Bill stated that the GST regime intends to remove the cascading effect of indirect taxes and streamline the indirect taxation framework. Furthermore, the Ministry of Finance has claimed mitigation of cascading effect of taxes and reduction in prices of goods and services as one of the benefits of this law. This is achieved by the implementation of ITC. The GST is a value-added tax wherein the excess tax paid by a taxpayer on the inputs he uses is credited to his account, in effect levying tax only on the value addition made by this particular taxpayer. This also avoids double taxation on the same goods or services and reduces their final prices.

It is logically apparent that ITC is an integral component of the scheme of GST without which the intention behind the reformed regime would be incomplete and unfulfilled. In order to effectuate this legislative intent, ITC under Section 16 must be characterized as a statutory right which the taxpayer is entitled. The rationale of GST is dependent on ITC being an uninterrupted flow of credit. The court terming it as a concession brings its status down to that of a favour or benefit the government is granting out of generosity which may be taken away or its scheme modified. Instead, if it is characterized as a conditional statutory right, the taxpayer can claim the ITC upon compliance with all the requirements as a matter of right.

M/S. SAFARI RETREATS PRIVATE LIMITED AND ANOTHER VERSUS CHIEFCOMMISSIONER OF CENTRAL GOODS & SERVICE TAX & OTHERS [2019 (5) TMI 1278 – ORISSA HIGH COURT]. So any interpretation which frustrates this main objective is required to be avoided. Section 16(4) if interpreted in line with notices being issued would frustrate the main objective of preventing the multi-taxation and providing seamless credit.

Hence the main objective of the GST Act is the Free Flow of Input Tax Credit which can-not be restricted based on time limit as mentioned in section 16(4).

Conclusion: Characterizing ITC as a right does not have the repercussion of it being an unbridled right out of the control of the legislature that the courts and the government caution against. The requisite criteria for availing ITC will remain intact while its nature is construed as a conditional statutory right vested in the taxpayer upon fulfilment of the same. The biggest implication of terming ITC as a concession lies in the extent of entitlement a taxpayer has and the government acknowledges. If ITC continues to be termed as a concession, it might turn into ammunition for the government in the form of an argument for eliminating ITC from the scheme of GST or significantly altering its framework.

3. Form GSTR 3B was replaced in place of Form GSTR 3 retrospectively and Doctrine of Impossibility:

Sub Rule (5) of Rule 61 was inserted with retrospective effect from 01.07.2017 vide Notification No. 49/2019 dated 09^th October’ 2019 as under:

“Where the time limit for furnishing of details in FORM GSTR-1 under section 37 or in FORM GSTR-2 under section 38 has been extended, the return specified in sub-section (1) of section 39 shall, in such manner and subject to such conditions as the Commissioner may, by notification, specify, be furnished in FORM GSTR-3B electronically through the common portal, either directly or through a Facilitation Centre notified by the Commissioner: Provided that where a return in FORM GSTR-3B is required to be furnished by a person referred to in sub-rule (1) then such person shall not be required to furnish the return in FORM GSTR-3.”;

This amendment should have also challenged in the various writ filed before the High Courts for better understanding and substantiate our view.

That the government has the power to amend provisions of the law, particularly related to taxation matters, retrospectively, is a well-established fact. Such retrospective amendment laws have also been subjected to legal scrutiny. The Vodafone-Hutchison case is one such prime example.

Retrospective amendments are usually carried out for the removal of doubts to bring in more clarity or to align with or to overcome the judgments of the Supreme Court (SC), High Courts (HC), or Tax Tribunals on a particular issue. There are two ways in which retrospective amendments are generally carried out:

One, where it is explicitly provided in the Amended Act itself that the amendment to a particular provision/provisions of the law will be effective from a retrospective date, and second, whereby the amendment, usually, is by way of an insertion of an explanation, which begins with the words ‘For removal of doubts,’ giving it a colour of being clarificatory in nature, justifying it to be effective retrospectively.

It is a settled law that, even otherwise, for any amendment to be effective retrospectively, it has to be clarificatory in nature.

On the other hand, if it is bringing about any substantive changes in the law or is adversely affecting the taxpayers rights and claims, then the amendment has been held to be prospective in nature.

Under the CGST Act of 2017, Sections 11 and 168A provide the government with the power, on the recommendations of the Council, to issue notifications or orders with retrospective effect in specific circumstances, subject to the limitations and conditions outlined therein. Section 164(3) also grants the authority to apply retrospective effect to rules established under the Act, provided it is not earlier than the date on which the CGST Act came into force.

Earlier, when the GST was first launched, 3 returns in the form of GSTR-1, GSTR-2 and GSTR-3 were implemented and according to this ideology statutory provisions were framed. However, due to lack of government infrastructure, GSTR-2 and GSTR-3 were suspended and GSTR-3B, a summary return, was introduced with retrospective effect from 01.07.2017 vide Notification No. 49/2019 dated 09^th October’ 2019 . However, suitable amendments to law were not carried out to make provisions workable after introduction of GSTR-3B.

Section 38, which deals with furnishing details of Inwards Supplies, governs the filing of GSTR-2, a return to avail the ITC. The said section has no restriction that return of inwards supplies in Form GSTR-2 can only be filed if complete tax payable for the previous month is deposited. Unlike section 37, the said Section 38 also doesn’t prescribe that GSTR-2 for a particular month cannot be filed if return in form GSTR-2 for previous periods are not filed. When return was suspended, no alternative option was made available to file details of ITC. The only option left with the taxpayer to furnish figures for ITC was through GSTR 3B.

Through 3 returns system (GSTR 1, GSTR 2 and GSTR 3) one was enabled to avail ITC within time limit through GSTR-2 although he was not in a position to file GSTR-3. But same is not the case with GSTR 3B as GSTR 3B can be filed only after making full payment of tax liability.

When the GSTR-2 was suspended without making any alternate arrangement was made, the restriction in Section 16(4) becomes unworkable. When the basic framework to secure compliance itself is suspended, the law should have been suitably amended to make the restriction workable or alternate options should have been provided to ensure compliance. In the absence of both, a liberal interpretation in line with statutory intent is bound to be adopted.

Further, as we all know that GST Department’s machinery is itself very slow and they themselves do not complete their work and responsibilities on time, therefore Government increases the time limit for issuing SCN u/s 73 by issuing a Notification empowered by Section 168A without even mentioning the “Force Majeure” due to which they were compelled to increase the time limit for passing order u/s 73 of the CGST Act’ 2017. But, on the other hand when taxpayers questions Government/GST Department with regards to the unconstitutionality of time limits for taking ITC as per Section 16(4) and contest that the Notices related to A.Y 2017-18, 2018-19 and 2019-20 are bared by the time, GST Department/Government/Courts give some absurd reasons upholding the constitutionality of the said provisions of Section 16(4) of CGST Act’ 2017. Violation of Article 14 “Equality before the Law”.

Here, it is very important to mention that the various High Courts has admitted the writ petition filed by the tax payers against the notices sent by the GST Authorities u/s 73 in shelter of the notification for extension of time limit for vide notifications (Notification No. 09/2023 dated 31^st March 2023 and Notification No. 56/2023 dated 28^th December’ 2023) taking benefit of Section 168A of the Central Goods and Services Act’ 2017. The High Courts have stayed the adjudication on the proceedings till its final order.

4. Violation of Article 21 of the constitution of India was not contested.

The Impugned disallowance of the ITC violates the Fundamental Right provided vide Article 21 “Protection of Life and Personal Liberty” as guaranteed by Constitution of India.

Disallowing the huge amount of ITC in cover of the provisions of the Section 16(4) will result in equal amount (amount of ITC disallowed) of Tax Demand with Interest and Penalty. This huge amount of demand by the department might be life threatening to the taxpayer and even seeing such a huge demand, taxpayer might go into depression and result in ending his/her life.

5. It is important to understand that Section 16(4) is violative of Article 14 and 19(1)(g) of the Constitution of India for the following reasons-:

Article 14 “Equality before Law”: The various judgements upholding the constitutional validity for Section 16(4) and disallowing the ITC with regards to the time limit for availing ITC mentioned therein are actually in violation of the Article 14 of the Constitution of India. The Hon’ble High Courts while delivering the impugned judgements, disregards the fact that the Central Board of Indirect Taxes and Customs i.e CBIC itself extends the time limit specified under sub- section (10) of section 73 for issuance of order under sub-section (9) of section 73 of the said Act, for recovery of tax not paid or short paid or of input tax credit wrongly availed or utilized because GST Department’s machinery is itself at fault, their officers lack competence on completing work and issuing notices on time.

Article 19(1)(g) “Freedom to practice and profession, or to carry on any occupation, trade or business”: The impugned order of the various Hon’ble High Courts upholding the constitutional validity for Section 16(4) and disallowing the ITC with regards to the time limit for availing ITC mentioned therein are actually in violation of the Article 19(1)(g) of the Constitution of India. The Hon’ble High Courts upheld the disallowance of ITC and thereby the registered dealers are required to pay the amount equal to the ITC disallowed along with tax and 10% penalty. These high pitched assessments would lead to generation of huge demand on the registered dealer which again affects the very viability of the business. Hence the registered dealer is supposed to shut down his business or profession. The said disallowances will certainly result in taxpayers getting broke and thus dis-courage the businessmen to carry of any business or profession.

As per the judgement of Hon’ble Chattisgarh High Court in case of M/s Jain Brother vs Union of India & Ors. states that;

Para no. 40. As such, in view of the aforesaid legal provision flowing from Article 19(1)(g) of the Constitution and the principles of law laid down by their Lordships of the Supreme Court, the petitioner herein, which has filed the present writ petition, is only a proprietorship firm and not a citizen and therefore cannot claim protection of Article 19(1)(g). It is held accordingly and this ground claiming protection of Article 19(1)(g) is not available to the petitioner, which is a proprietorship firm.

Section 137: “Offences by Companies”:

This section deals with the persons who will the held responsible in case the offence/default has been committed by the Company/LLP/HUF/Trust etc. The basic understand to make Citizens liable for any default/offence.

(1) Where an offence committed by a person under this Act is a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any negligence on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

(3) Where an offence under this Act has been committed by a taxable person being a partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a trust, the partner or karta or managing trustee shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly and the provisions of sub-section (2) shall, mutatis mutandis, apply to such persons.

(4) Nothing contained in this section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.

Explanation.––For the purposes of this section,––

(i) “company” means a body corporate and includes a firm or other association of individuals; and

(ii) “director”, in relation to a firm, means a partner in the firm.

On reading of Section 137, we can conclude that where any offence is done by the any Company or Hindu Undivided Family or Partnership Firm or LLP or any trust, then statute give power to lift the corporate veil and find out who are the real persons/citizens responsible for committing any offence so that they can be punished in accordance with the Law.

We have studied the concept of lifting of Corporate Veil to hold the individual accountable for commission of an offence. Even in the Central Goods and Service Tax Act’ 2017, section 137 deals with the “Offences by Companies”. Where corporate veil can be lifted to check individual/citizen accountable, then why corporate veil can-not be lifted to see who are the persons/citizens who will be ultimately suffer from this section 16(4).

If this fact had been considered by the Hon’ble High Courts, then the courts will be able to know that there with be only Citizens of the India who will be badly affected by the impugned judgement of the Hon’ble High Courts.

6. Why benefit of Article 300-A was denied..?

Article 300A: “Persons not to be deprived of property save by authority of law” should be given?

As per the judgement of Hon’ble Chattisgarh High Court in case of M/s Jain Brother vs Union of India & Ors. states that;

Para 09: The learned amicus curiae would contend that challenge on ground of Article 300A of the Constitution is also equally not available to the petitioner against an act of legislature as it can only be challenged on two counts; being it lacks legislative competence and that it infringes on Part XIII of the Constitution of India.

Para 41: Article 300A of the Constitution of India, is also not at all made out, as Article 300A is ‘right to property’ which is the constitutional right and clearly provides that it cannot be taken away except in accordance with law.

Para 24: The Input Tax Credit is a nature of benefit or concession extended to the dealer under the statutory scheme. The concession can be received by the beneficiary only as per the scheme of the statute.

As per the Gobinda Construction Company vs Union of India & Ors, Bihar High Court:

Para 26: At the cost of repetition, we note here that ITC is not unconditional and a registered person becomes entitled to ITC only if the requisite conditions stipulated therein are fulfilled and the restrictions contemplated under sub-section (2) of Section 16 do not apply. One of the conditions to make a registered person entitled to take ITC is prescribed under sub-section (4) of Section 16. The right of a registered person to take ITC under sub-section (1) of Section 16 of the Act becomes a vested right only if the conditions to take it are fulfilled, free of restrictions prescribed under sub-section (2) thereof. In order to invoke Article 300-A of the Constitution by a person, two circumstances must jointly exist:-

(i) Deprivation of property of a person

(ii) Without sanction of law

Expression ‘property’ was explained by Supreme Court in case of Jilubhai Nanbhai Khachar vs State of Gujarat in para no. 42. crux is as under:

The exclusive right of possessing, enjoying, and disposing of a thing is property in legal parameters. Therefore, the word ‘property’ connotes everything which is subject of ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal; everything that has an exchangeable value or which goes to make up wealth or estate or status.

Author’s View:

In order to invoke Article 300-A of the Constitution by a person, two circumstances must jointly exist:-

(i) Deprivation of property of a person: As per the law laid down by above judgement, the core ingredient is the exchangeable value. Not as per the above definition, Input Tax Credit can come under intangible or invisible, but still it can-not be exchangeable with anyone. Taxpayer can-not sell its ITC to anyone for any consideration.

(ii) Without sanction of law: The Input Tax credit was disallowed by inserting provisions in the GST Act. But according to author’s understanding, no law can give sanction to any provision which adversely affect the rights of the people at large thereby again adversely affect the very existence of the business. This again infringe the fundamental right guaranteed by article 19(1)(g) i.e “Freedom to carry on any Business or Profession”.

The input tax credit is allowed in the following instances even though there is no saving clause for these instances in section 16(4) of CGST Act 2017, namely:-

1. Clubs and Associations that have filed their first GSTR-3B returns for the period from 1 Jul 2017 to 31 Jan 2022 on 20 Feb 2022 due to retrospective amendment to section 7(1) (aa) of CGST Act notified from 1 Jan 2022 and have been allowed an input tax credit for fifty-four (54) months since the retrospective amendment;

2. The input tax credit is allowed under section 18(1)(d) to eligible taxpayers even though they have not claimed credit within the time limit in section 16(4) of the CGST Act;

3. The input tax credit is allowed to IRPs in respect of Corporate Debtors who are undergoing the CIRP process under the Insolvency and Bankruptcy Code vide notification 11/2020-Central Tax dated 21 Mar 2020;

4. The input tax credit is allowed on the restoration of registration in appeal in cases where registration was cancelled and login credentials blocked due to the action of Proper Officer which came to be overturned by Appellate Authority, and all outstanding returns were filed in one go. Applying a different treatment to Section 16(4) cases compared to the above-listed instances is illegal and without the authority of law.

Further, the Honorable Madras High Court in the case of Tvl. Kavin HP Gas Gramin Vitrak v. The Commissioner of Commercial Taxes &Ors [W.P.(MD). Nos.7173 and 7174 of 2023 dated November 24, 2023] allowed the filing of belated returns for availing ITC in cases where the taxpayer was unable to file GSTR-3B when the registered person is not able to pay taxes on outward supply due to financial hardship.

The Honorable Madras High Court in the case of M/s Sri Shanmuga Hardwares Electricals Versus The State Tax Officer, Attur, Salem held that Deniel of Input Tax Credit (ITC) cannot be solely based on the absence of such claim in GSTR 3B, especially when these claims are documented in GSTR 2A and GSTR 9.

Para 6. When the registered person asserts that he is eligible for ITC by referring to GSTR-2A and GSTR-9 returns, the assessing officer should examine whether the ITC claim is valid by examining all relevant documents, including by calling upon the registered person to provide such documents. In this case, it appears that the claim was rejected entirely on the ground that the GSTR-3B returns did not reflect the ITC claim. Therefore, interference is warranted with the orders impugned herein.

Para 7. For reasons set out above, the orders impugned herein are quashed and these matters are remanded for reconsideration. The petitioner is permitted to place all documents pertaining to its ITC claims before the assessing officer within a maximum period of two weeks from the date of receipt of a copy of this order. Upon receipt thereof, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue fresh assessment orders within a maximum period of two months from the date of receipt of documents from the petitioner.

Means, if the dealer has missed the dead line of filing the GSTR-3B for the Month of March of the Financial Year, he can still claim the input through filing annual return in GSTR-9 and GSTR-9C.

SPECIAL LEAVE PETION BEFORE THE SUPREME COURT OF INDIA, NEW DELHI

In a recent development, the Hon’ble Supreme Court of India issued notice in the Special Leave Petition (SLP) filed by Mrityunjay Kumar challenging the constitutional validity of Section 16(4) of the Central Goods and Services Tax Act, 2017 (CGST Act). The case stems from the judgment of the Hon’ble Patna High Court in Gobinda Construction v. Union of India, wherein the constitutional validity of Section 16(4) was upheld.

Case Details:

Note: Recently on Tuesday 16^th April’ 2024, Hon’ble Finance Minister Smt. Nirmala Sitaram has participate in a seminar in which president of ICAI was also present and the concern related to disallowance of ITC u/s 16(4) was raised. In response to this, the assured that GST Council will take a good call on it as it is very much on this matter.

Approach to be followed by the tax payer when any notice disallowing any Input Tax Credit due to non-filing of GSTR-3B within the time limit specified in Section 16(4) of the Central Goods and Services Tax Act’ 2017 and corresponding State Goods and Services Tax Act’ 2017.

A lot of notices are being encountered by the various tax payers based upon the subject matter as mentioned above. All most all the High Courts of India had given judgements in favour of the revenue thereby confirming the disallowance. To deal with these types of notices, following approach is to be adopted by the taxpayer:

1. First of all, never challenge the subject matter of the notice i.e Section 16(4) being ultra vires etc… Better challenge the notice as time barring because many High Courts has admitted the writ petitions challenging the Show Cause Notice u/s 73 issued in the extended period vide notification for extension of time limit (Notification No. 09/2023 dated 31^st March 2023 and Notification No. 56/2023 dated 28^th December’ 2023) taking benefit of Section 168A of the Central Goods and Services Act’ 2017. The High Courts have stayed the adjudication on the proceedings till its final order.

According to my opinion, tax payer is even not required to file a fresh writ petition if the High Court of the state in which is business is registered has already stayed its proceeding in any other case where SCN u/s 73 is issued taking the shelter of notification for extension of time limit for vide notifications (Notification No. 09/2023 dated 31^st March 2023 and Notification No. 56/2023 dated 28^th December’ 2023) taking benefit of Section 168A of the Central Goods and Services Act’ 2017.

2. Further, if the writ petition is filed to challenge the SCN u/s 73 with respect to very subject matter of Section 16(4) only, then there is a fair chance that the High Court may not entertain the Writ Petition and if entertains the writ petition, then will give the adverse judgement. In that case, the SCN will be adjudicated by the State or Central GST Authorities and will pass an order against the taxpayer. In that scenario, the taxpayer should not loose heart and file and appeal before the first appellate authority and soo on. I assure you all that at some point of time, Government will definitely come with some amnesty scheme and accept all the GSTR-3B filed after the due date mentioned in Section 16(4) of the Central GST Act’ 2017 or respective State GST Act’ 2017.

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Disclaimer: The legal information provided in this article is just that – legal opinion and not a legal advice. It asserts that no warranties or representations are given in relation to the legal information. And it seeks to exclude any liabilities that may arise out of the use or misuse of the information.

By CA TUSHAR JAIN | Email Id: catusharjain@gmail.com