Kerala High Court Holds Section 16(5) Overrides Section 16(4), Bars ITC Denial For Delayed Returns

The Kerala High Court on 19 May held that authorities cannot deny Input Tax Credit (ITC) to a registered taxpayer merely on the ground of delayed filing of returns under Section 16(4) of the CGST Act, where the taxpayer satisfies the conditions prescribed under Section 16(5), a subsequent relaxation provision.

Justice Ziyad Rahman A.A. allowed a writ petition filed by We Match and quashed the assessment order passed under Section 73 of the CGST Act, which had disallowed ITC claims for the assessment year 2018–19. He held:

“This is particularly because, Section 16(5) contemplates a non-obstante clause as regards Section 16(4), and hence if the taxpayer is submitting the return within the cut-off date contemplated under Section 16(5), the timeline fixed in Section 16(4) loses its significance.”

The Department denied ITC on the ground that the taxpayer failed to furnish monthly returns for the period April 2018 to March 2019 within the statutory time limit under Section 16(4).

We Match contended that it qualified for the benefit of Section 16(5), which provides a one-time relaxation allowing taxpayers to claim ITC if they furnish the relevant returns on or before 30 November 2021.

The Court examined the record and noted that We Match had filed the returns for the period April 2018 to March 2019 on 27 November 2019 and 28 November 2019, which fell within the outer limit prescribed under Section 16(5).

Justice Rahman held that Section 16(5) carries a non-obstante clause overriding Section 16(4). It further held that once a taxpayer satisfies the requirements of Section 16(5), authorities cannot invoke the limitation under Section 16(4) to deny ITC.

Accordingly, the High Court directed the State Tax Officer to reconsider the claim and grant the benefit of Section 16(5), if the taxpayer otherwise meets the eligibility conditions.

For Petitioner: Shri K.N. Sreekumaran and Shri P.J. Anilkumar, Advocates.

For Respondents: Shri Arun Ajay Shankar, Government Pleader, for Respondent Nos. 1 to 4; Shri M. Alfred Lionel Winston, Advocate, for Respondent No. 5 (CBIC).