2025 (2) TMI 464 - HC - GST

Reversal of ITC credit along with penalty and interest - HELD THAT - Considering the fact that the legal issue involved in this Writ Petition has already been dealt with by this Court in a batch of Writ Petitions viz. in SRI GANAPATHI PANDI INDUSTRIES 2024 (10) TMI 1631 - MADRAS HIGH COURT this Court is inclined to dispose of the present Writ Petition on the same lines. The petitioner was entitled to claim ITC for the specified financial years under the amended provisions of Section 16. Petition allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal issue considered in this judgment is whether the petitioner is entitled to the benefit of the extended deadline for claiming Input Tax Credit (ITC) as per the amendments to Section 16 of the Central Goods and Services Tax (CGST) Act, 2017. Specifically, the issue revolves around the applicability of the extended deadline for filing GSTR-3B returns for the financial years 2017-18 to 2020-21, as recommended by the GST Council and enacted through subsequent legislative amendments.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The relevant legal framework involves Section 16(4) of the CGST Act, 2017, which initially set a deadline for claiming ITC. The amendments introduced sub-sections 16(5) and 16(6), allowing an extension for filing returns and claiming ITC for specific financial years. The judgment references a prior decision by the same court, which dealt with similar issues and provided relief based on these legislative changes.

Court's Interpretation and Reasoning

The Court interpreted the amendments to Section 16 as providing a clear entitlement for registered persons to claim ITC for the specified financial years if the returns were filed by the extended deadline of November 30, 2021. The Court emphasized that the legislative intent was to address the practical challenges faced by taxpayers during the specified periods, including disruptions caused by the COVID-19 pandemic.

Key Evidence and Findings

The petitioner had filed GSTR-1 returns on time but faced difficulties in filing GSTR-3B returns due to various constraints, including financial and health issues. The respondent department issued show cause notices and confirmed the reversal of ITC without considering these mitigating factors. The Court found that the petitioner's inability to meet the original deadlines was not deliberate and was covered by the legislative amendments.

Application of Law to Facts

The Court applied the amended provisions of Section 16 to the facts of the case, determining that the petitioner was entitled to claim ITC for the relevant periods due to the retrospective effect of the amendments. The Court quashed the impugned orders that reversed the ITC claims and directed the respondent department to refrain from initiating further proceedings based on the issue of limitation.

Treatment of Competing Arguments

The respondent department conceded that the issue was covered by the prior decision, which was favorable to the petitioner. The Court noted the department's acknowledgment and proceeded to apply the same reasoning and outcome to the present case, thereby resolving any potential competing arguments regarding the applicability of the legislative amendments.

Conclusions

The Court concluded that the petitioner was entitled to the benefits of the legislative amendments to Section 16 of the CGST Act. The impugned orders reversing the ITC claims were quashed, and the department was instructed to take necessary actions to restore the petitioner's financial position, including the de-freezing of bank accounts and refunding any collected amounts.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning

The Court held that "the registered persons shall be entitled to take ITC in any return under section 39 which is filed up to the 30th day of November, 2021," thereby affirming the retrospective application of the legislative amendments to Section 16.

Core Principles Established

The judgment reinforces the principle that legislative amendments can provide retrospective relief to taxpayers facing genuine difficulties in meeting statutory deadlines. It also underscores the importance of considering the broader context and challenges faced by taxpayers when interpreting tax laws.

Final Determinations on Each Issue

The Court determined that the petitioner was entitled to claim ITC for the specified financial years under the amended provisions of Section 16. The impugned orders were quashed, and the department was directed to cease further proceedings based on the limitation issue. Additionally, the Court ordered the de-freezing of bank accounts and the refund of any amounts collected under the impugned orders.