ITC denial quashed as Madras High Court held retrospective amendment to Section 16(5) overrides limitation under Section 16(4)

Case: M/s. Rajkumar Josphine v. Superintendent of GST & Central Excise

Court: Madras High Court
Petition No.: W.P. No. 22639 of 2025 (with W.M.P. No. 25489 of 2025)
Date of Judgment: 09.07.2025
Category: Input Tax Credit (ITC) – Limitation under Section 16(4)
Relevant Sections: Section 16(4), Section 16(5), Section 39 of CGST Act, 2017

Facts (Paras 1–2)

The petitioner, a registered dealer under GST, had filed GSTR-1 returns on time but could not file GSTR-3B returns within the prescribed due dates due to severe financial constraints, COVID-19 disruptions, and other genuine hardships. Consequently, the department reversed the ITC claimed and demanded tax, interest, and penalty. The petitioner challenged the order dated 27.02.2025, relying on the Court’s earlier ruling in a batch of writs decided on 17.10.2024.

Questions in Dispute

• Whether ITC claims for FYs 2017-18 to 2020-21 filed belatedly but before 30.11.2021 could still be allowed in light of the retrospective amendment to Section 16(5).

• Whether the department’s denial of ITC on the basis of limitation under Section 16(4) remains sustainable after the amendment.

Observations (Paras 9–12 of earlier ruling, applied here)

The Court noted that:

• Section 16(4) imposes a time bar, but Section 16(5), inserted with retrospective effect from 01.07.2017, permits ITC availment for FYs 2017-18 to 2020-21 if claimed up to 30.11.2021.

• The 53rd GST Council meeting recommended such relaxation, and Finance Act (No. 2 of 2024) validated it.

• Consequently, ITC claims made through GSTR-3B up to 30.11.2021 cannot be denied merely due to Section 16(4).

The Court further observed that if any tax had been recovered pursuant to the impugned order, it should be refunded or adjusted against future liabilities. However, liberty was reserved for the department to act on issues like excess/wrong/fake ITC claims.

Judgment (Paras 4–5)

• The impugned order dated 27.02.2025 was quashed to the extent ITC was denied based solely on limitation under Section 16(4).

• The department was restrained from recovery on limitation grounds and directed to defreeze the petitioner’s bank accounts.

• Any recovered tax was to be refunded or allowed as adjustment against future tax dues.

• Department was given liberty to pursue proceedings if the case involved excess, wrong, or fake ITC claims beyond limitation issues.

Thus, the writ petition was allowed, with no costs.

Cases Referred (Summary Table)

Between Fine Lines

For businesses, this ruling reinforces that ITC for FYs 2017-18 to 2020-21 filed through GSTR-3B before 30.11.2021 cannot be denied on limitation grounds. However, taxpayers must still ensure ITC is genuine and not ineligible, as the department retains authority to pursue wrong or fraudulent claims.

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