ITC Claims Filed Before 30 November 2021 Cannot Be Rejected on Limitation Ground: Karnataka High Court

The Karnataka High Court has held that Input Tax Credit (ITC) claims rejected as time-barred under Section 16(4) of the Central Goods and Services Tax Act, 2017 must be reconsidered where GST returns for the relevant financial years were filed on or before 30 November 2021, in view of the retrospective insertion of Section 16(5) of the CGST Act.

A Single Judge Bench of Justice S. Sunil Dutt Yadav allowed the writ petition filed by ABE Security Mechanics Private Limited, set aside the show cause notice dated 5 December 2023 and the Order-in-Original dated 22 February 2024, and remanded the matter for fresh adjudication. It observed:

“In light of the provision starting with a non-obstante clause, it could be construed that the provision would enable the claim of ITC, if the returns are filed with respect to the years mentioned in sub-section (5) of Section 16 before 30.11.2021.”

The petitioner had challenged the denial of ITC amounting to Rs. 5,09,467, which the GST authorities disallowed on the ground that the credit was availed beyond the limitation period prescribed under Section 16(4) of the CGST Act.

The Department relied on Notification No. 19/2019-Central Tax and contended that the last date for availing ITC for the relevant financial year had expired on 23 April 2019. It argued that since GSTR-3B returns were filed after the cut-off date, the claim became inadmissible.

ABE Security Mechanics Private Limited contended that the authorities failed to consider Section 16(5), inserted retrospectively by the Finance (No. 2) Act, 2024 with effect from 1 July 2017.

The provision, it argued, overrides Section 16(4) through a non-obstante clause and permits ITC claims for financial years 2017–18 to 2020–21 where returns under Section 39 were filed up to 30 November 2021. The petitioner submitted that it had filed its returns on 30 September 2020 and therefore remained eligible for ITC.

The Court noted that Section 16(5) expressly begins with a non-obstante clause and overrides the restriction under Section 16(4). It also referred to its earlier ruling in W.P. No. 6883 of 2026 and Circular No. 237/31/2024-GST issued by the Central Board of Indirect Taxes and Customs, observing that Parliament had consciously provided a retrospective relaxation of the limitation period.

Justice Yadav held that once returns for the relevant financial years were filed before 30 November 2021, denial of ITC solely on the ground of limitation under Section 16(4) could not be sustained. It further observed that the retrospective amendment effectively revived eligibility for such claims notwithstanding earlier statutory deadlines.

The Bench further recorded that the claim in the present case pertained to financial year 2019–20 and reiterated that ITC would be available if returns were filed within the extended timeline. Since the petitioner had filed returns on 30 September 2020, the Court held that the claim required reconsideration and directed re-adjudication in accordance with the amended legal position.

Accordingly, the High Court set aside the show cause notice and order-in-original and remitted the matter for fresh consideration in light of Section 16(5).

For Petitioner: Advocate, B.G. Chidananda

For Respondent: Advocate, Aravind V Chavan