GST ITC denial quashed as Madras High Court held that retrospective amendment to Section 16(5) extended ITC availment time limit up to 30.11.2021 for FYs 2017-18 to 2020-21

Case Title: Sri Srinivasa Enterprises v. Assistant Commissioner (State Tax) (FAC), Gummidipoondi Assessment Circle
Court: Madras High Court
Petition No.: W.P. No. 28361 of 2023 with W.M.P. Nos. 27899 & 27900 of 2023
Date of Judgment: 14 February 2025
Category: Input Tax Credit – Time Limit for Availment under Section 16(4)
Relevant Sections: Sections 16(4), 16(5), and 39 of the CGST Act, 2017

Facts (Paras 1–2, 4–5)

The petitioner, Sri Srinivasa Enterprises, a registered dealer under the CGST and TNGST Acts, challenged the order dated 08.06.2023, whereby the Assistant Commissioner reversed its claim of Input Tax Credit (ITC) and levied tax, interest, and penalty.
The reversal was based on the department’s interpretation of the time limit under Section 16(4) of the CGST Act, which restricts ITC availment beyond 30 November following the financial year to which the invoice pertains.
The petitioner contended that the delay in filing GSTR-3B returns arose due to genuine hardship — financial constraints, lockdown, and health issues — and relied on the subsequent retrospective amendment by Finance Act (No. 2) of 2024 and CBIC Circular No. 237/31/2024-GST clarifying extension of ITC availment.

Questions for Determination

Whether ITC claims for FY 2017-18 to FY 2020-21, filed beyond the earlier limitation under Section 16(4), are valid in view of the retrospective insertion of Section 16(5) allowing ITC availment up to 30 November 2021?

Observations (Paras 9–12)

The Court noted that the issue had already been decided in W.P. No. 25081 of 2023 & batch (17.10.2024), wherein it was held that:

• The 53rd GST Council meeting (22.06.2024) recommended extension of the ITC time limit under Section 16(4).

• Finance Act (No. 2) of 2024 inserted sub-section (5) to Section 16 with retrospective effect from 01.07.2017, allowing ITC availment for FYs 2017-18 to 2020-21 in returns filed up to 30.11.2021.

• Consequently, all proceedings denying ITC as time-barred were rendered unsustainable.

The Court also referred to the CBIC Circular clarifying the applicability of the amendment and observed that the department could not rely on the earlier limitation once the statutory extension had come into effect.

Judgment (Paras 5–6)

• The impugned order dated 08.06.2023 was quashed as the petitioner’s ITC claim fell within the extended period under Section 16(5).

• The Department was restrained from initiating any proceedings based on limitation grounds.

• Direction was issued for de-freezing of bank accounts and refund/adjustment of any tax collected pursuant to the invalid order.

• However, the Department retained liberty to proceed against the petitioner for issues unrelated to limitation, such as fake or excess ITC claims.

Between Fine Lines (Trade Takeaway)

This judgment reaffirms that the retrospective amendment to Section 16(5) protects taxpayers who could not avail ITC for FYs 2017-18 to 2020-21 due to procedural delays or genuine hardships.
Tax officers can no longer deny ITC merely on limitation grounds if the return was filed by 30.11.2021.
Businesses facing reversal orders solely based on Section 16(4) time limits for those years can now seek relief citing this ruling.

Table of Cases Referred

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