Adjudication order set aside as Calcutta High Court directed re-adjudication in light of new Section 16(5) allowing ITC for FY 2017-21

Case Details

Title of Case: Adhiraj Distributors Limited & Anr. v. The Additional Commissioner of Revenue, Chowringhee Circle, Govt. of West Bengal & Ors.
Court: High Court of Judicature at Calcutta, Civil Appellate Jurisdiction (Appellate Side)
Petition Number: M.A.T. 693 of 2025 with I.A. CAN 1 & CAN 2 of 2025
Judgment Date: 21.05.2025
Category of Dispute: Input Tax Credit (ITC) – Section 16(4) CGST Act; challenge to adjudication order.
Relevant Sections: Section 16(4) & Section 16(5) CGST Act (as amended by Finance Act, 2024), Section 73, Section 74, Section 107, Section 108, Section 168A CGST Act, Notification No. 22/2024-Central Tax dated 08.10.2024, Section 118 Finance (No. 2) Act, 2024.

Facts (Paras 1–7)

The appellants challenged an interim order dated 29.07.2024 in W.P.A. 14737/2024, which required them to deposit ₹25 lakhs to obtain protection against coercive recovery. They complied but later appealed against the condition and subsequent adjudication. Their writ petition originally sought to strike down Section 168A of the CGST Act and set aside the adjudication order dated 22.01.2024. During hearing, they gave up the constitutional challenge to Section 168A, restricting their plea to the adjudication order.

Questions/Dispute (Paras 6–8)

The central dispute was whether the adjudication order disallowing ITC for late filing could survive in light of subsequent statutory amendments, particularly insertion of Section 16(5) by Finance Act, 2024, which retrospectively permitted ITC for FY 2017-18 to 2020-21 if claimed up to 30.11.2021.

Observations (Paras 9–13)

The Court noted Notification No. 22/2024-Central Tax prescribing a rectification procedure for ITC disputes. Importantly, Section 16(5) was inserted retrospectively with effect from 01.07.2017, widening ITC eligibility for past years. The Delhi High Court in I C Electricals Co. (P) Ltd. v. UOI and ASP Microsys v. UOI, as well as Jharkhand High Court in Singh Construction Co. v. State of Jharkhand, had directed fresh adjudication in similar circumstances.

Although in this case, the show cause notice had matured into an adjudication order, the statutory change mandated reconsideration.

Judgment (Paras 14–19)

The Calcutta High Court allowed the appeal and writ petition, set aside the adjudication order dated 22.01.2024, and restored the show cause notice for re-adjudication. The authority must grant the appellant another chance to reply and a personal hearing, applying Section 16(5).

The Court directed refund of ₹25 lakhs deposited with the Registrar General (after deducting commission). However, the interest accrued on the deposit was ordered to be credited to the West Bengal State Legal Services Authority.

Table – Cases Referred

Between Fine Lines

For taxpayers, this judgment clarifies that past ITC claims from FY 2017-21 cannot be denied merely on limitation under Section 16(4), as Section 16(5) now validates such credits retrospectively. Any adverse adjudication orders passed earlier must be reopened and re-adjudicated, ensuring relief for businesses caught in procedural cut-off disputes.

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