Retrospective Extension of ITC Availment Period: A Progressive Ruling by Sikkim High Court

[YAGAY andSUN]

M/S A2Z INFRA ENGINEERING LTD., VERSUS THE UNION OF INDIA, GST COUNCIL, CBIC, REPRESENTED BY THE CHAIRPERSON, NEW DELHI, GST NETWORK, COMMISSIONER/JOINT SECRETARY IN THE BOARD CBIC, NEW DELHI, ADDITIONAL COMMISSIONER, CENTRAL GOODS AND SERVICES TAX AND CENTRAL EXCISE, SILIGURI. - 2025 (4) TMI 737 - SIKKIM HIGH COURT

Abstract

In a crucial and welcome judgment, the Sikkim High Court in M/s A2Z Infra Engineering Ltd. vs. Union of India & Others has set aside a demand raised for availing Input Tax Credit (ITC) beyond the statutory deadline. The Court, relying on a recent retrospective amendment to the CGST Act via the Finance (No. 2) Act, 2024 and corresponding CBIC Circular, allowed the writ petition, thereby affirming the petitioner’s right to claim ITC that was previously disallowed.

Factual Matrix

The petitioner, A2Z Infra Engineering Ltd., had claimed ITC amounting to ₹2.95 crore for FY 2018-19 and ₹3.14 crore for FY 2019-20. However, the credits were availed after the cut-off dates prescribed under Section 16(4) of the Central Goods and Services Tax Act, 2017, which originally stipulated:

• 30.11.2019 as the deadline for FY 2018–19
• 30.11.2020 as the deadline for FY 2019–20

The department, considering the delay, treated the claims as irregular and raised a demand against the petitioner via an order dated 21.03.2024.

Legal Twist: Retrospective Amendment

While the impugned order followed the law as it stood at the time, the situation changed dramatically with:

• Notification No. 17/2024 – Central Tax dated 27.09.2024
• CBIC Circular No. 237/31/2024-GST dated 15.10.2024
• Insertion of sub-sections (5) and (6) into Section 16 of the CGST Act via Section 118 of the Finance (No. 2) Act, 2024

These amendments retrospectively extended the timeline for availing ITC under Section 16(4) in specified scenarios, effective from 1st July 2017 itself.

The respondents (Union of India, GST Council, CBIC, and others) acknowledged this change and admitted in their affidavit (dated 25.03.2025) that the petitioner’s claim was now valid under the new legal framework.

Key Observations by the Court

1. Acknowledgment of Legislative Intent:
   The Court took note of the fact that the Government itself had recognized the need for relief in genuine cases where ITC was availed after the deadline due to procedural or technical delays.

2. Binding Nature of Circular and Notification:
   Referring to the CBIC Circular dated 15.10.2024, the Court observed that the law had been clarified and relaxed with retrospective effect, thereby removing the very basis of the impugned demand.

3. No Justification for Continuing Demand:
   Once the respondents agreed that the ITC claim was now within the permissible timeline as per the amended provisions, the Court held there was no further justification for the continuation of the demand.

Judgment

The High Court allowed the writ petition, quashed the impugned demand order dated 21.03.2024, and upheld the petitioner’s entitlement to ITC. The Court’s order restores the claim for ITC previously denied and ends ongoing uncertainty surrounding transitional and delayed claims.

Significance of the Judgment

This ruling has far-reaching implications:

• Taxpayer Relief: Offers immediate relief to businesses that faced denial of ITC due to missed deadlines, especially in the early years of GST implementation when compliance mechanisms were still evolving.
• Clarification on Retrospective Amendments: Reinforces the legal sanctity of retrospective beneficial legislation, particularly where it aims to correct procedural rigidity.
• Judicial Support for Legislative Correction: Reflects the judiciary’s proactive role in upholding relief measures undertaken by the legislature to address practical difficulties under the GST regime.

Closing Note

The A2Z Infra Engineering Ltd. case underscores the evolving nature of GST law in India. It highlights how legislative intent, supported by timely executive clarification, can pave the way for fairness and flexibility in tax administration. This judgment not only benefits the petitioner but sets a positive precedent for others similarly placed.