Case Title: M/s. Varshini Lift Tech and Earth Movers v. Assistant Commissioner of Commercial Taxes (Audit)–2, Hosapete & Others
Court: High Court of Karnataka, Dharwad Bench
Petition No.: W.P. No. 106548 of 2024 (T-RES)
Date of Judgment: 22 November 2024
Relevant Sections: Section 16(4), Section 16(5), and Section 107(4) of the KGST Act, 2017
Category: Input Tax Credit / Condonation of Delay
Facts (Para 2–5)
The petitioner, M/s. Varshini Lift Tech and Earth Movers, a proprietary concern engaged in manpower supply and equipment services, was issued a show-cause notice dated 21.12.2023 under Section 73(1) of the KGST Act for FY 2018–19. Despite submitting a reply, an adverse order under Section 73(9) was passed on 27.03.2024, demanding tax, interest, and penalty.
Aggrieved, the petitioner filed an appeal under Section 107 on 31.07.2024, with an application for condonation of delay. The Appellate Authority dismissed the appeal on 08.08.2024 citing Section 107(4), which restricts condonation beyond the statutory limit.
The petitioner argued that Finance (No.2) Act, 2024 had retrospectively inserted Section 16(5) effective from 01.07.2017, allowing ITC for FYs 2017–18 to 2020–21 if returns were filed up to 30 November 2021. Since the petitioner’s returns met this criterion, the disallowance of ITC and subsequent demand were unjustified.
Questions before the Court
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Whether the appellate rejection on delay could stand despite a retrospective amendment conferring substantive ITC rights.
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Whether the assessee was entitled to the benefit of Section 16(5) inserted by the Finance (No.2) Act, 2024, even in respect of concluded assessments.
Observations (Para 6–7)
The Court noted that while Section 107(4) restricts condonation of delay, the right to claim ITC under Section 16(5)—a substantive provision—cannot be defeated by procedural technicalities. Relying on the precedent of M/s. Sadhana Enviro Engineering Services v. Joint Commissioner of Central Tax (W.P. No. 6138/2020, dated 03.09.2024), the Bench held that the newly inserted Section 16(5) had retrospective effect and applied to pending or reopened cases for the relevant years.
The learned AGA also conceded that the petitioner was entitled to benefit under the said amendment.
Judgment (Para 8)
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The writ petition was partly allowed.
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The assessment order dated 27.03.2024 and appellate order dated 08.08.2024 were set aside.
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The case was remanded to the stage of the original show-cause notice (21.12.2023).
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The department was directed to grant the benefit of Section 16(5) after providing reasonable opportunity to the petitioner.
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The petitioner was directed to appear before the Assistant Commissioner on 12.12.2024, without further notice, and may file an additional reply.
Summary of Case Referred
| Case Name | Citation/Date | Held |
|---|---|---|
| M/s. Sadhana Enviro Engineering Services v. Joint Commissioner of Central Tax & Ors. | W.P. No. 6138/2020, decided on 03.09.2024 | Retrospective insertion of Section 16(5) allows ITC claim up to 30.11.2021 for FYs 2017–18 to 2020–21; substantive right cannot be denied due to procedural lapse. |
Between Fine Lines
This ruling reinforces that substantive ITC rights prevail over procedural bars. Even if an appeal is time-barred, the retrospective benefit under Section 16(5) ensures fairness in adjudication. Businesses that filed returns up to 30 November 2021 can claim ITC for prior years, and tax authorities must reopen or revisit earlier orders where this benefit was ignored.
Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”
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