Acceptance GSTR-3B Returns With Late Fee Will Not Condone Delay In Claiming ITC: Andhra Pradesh High Court

The Andhra Pradesh High Court has held that mere acceptance of Form GSTR-3B returns with a late fee will not exonerate the delay in claiming the Input Tax Credit (ITC).

The bench of Justice U. Durga Prasad Rao and Justice T. Mallikarjuna Rao has observed that ITC being a concession, benefit, or rebate, the legislature is within its competency to impose certain conditions, including a time prescription for availing the right, and it cannot be challenged on the ground of violation of Constitutional provisions.

The assessee/petitioner started the new business in the wake of the COVID-19 pandemic. The petitioner could not file returns for March 2020 in time, and with much difficulty, he filed an optional form of GSTR 3B for March 2020 and paid a late fee of Rs. 10,000, which was accepted by the department.

As the return was accepted with a late fee, the petitioner argued that it shall be deemed that the department exonerated the delay, if any, for claiming ITC beyond the period prescribed under Section 16(4) of the CGST Act, 2017.

After scrutiny, the department ought to have allowed the ITC claimed by the petitioner. However, surprisingly, the department, without issuing any show cause notice in proper form and without considering the reply, sent the summary of the order whereunder, while unjustly disallowing the ITC to make a demand for payment of Rs. 11,24,994 towards tax, interest, and penalty under Section 74 of the APGST and CGST Act, 2017.

The assessee argued that Input Tax Credit is a statutory right that an assessee is entitled to claim and that placing stumbling blocks by way of imposing a time limit under Section 16(4) of the APGST and CGST Act, 2017 on claiming the right is tantamount to a violation of Articles 14, 19(1)(g), and 300A of the Constitution of India. Section 16(2) of the APGST Act/CGST Act, 2017, which commences with a "non-obstante" clause, will override Section 16(4). It means that if the conditions mentioned in Section 16(2) are complied with by an assessee, he will be entitled to claim ITC without reference to the time limit prescribed under Section 16(4). Since the department permitted the petitioner to file a return with a late fee, the petitioner cannot be deprived of the right to ITC on the sole ground that the claim was made beyond the period prescribed under Section 16(4).

The department contended that the collection of the late fee is only for the purpose of admitting the returns for verification of the petitioner's taxable turnover and not for consideration of ITC. Such a statutory limitation cannot be stifled by collecting late fees.

The court held that the conditions stipulated in Sections 16(2) and (4) are mutually different and both will operate independently. Therefore, the mere filing of the return with a delay fee will not act as a springboard for claiming ITC.

Case Title: Thirumalakonda Plywoods Versus The Assistant Commissioner State Tax

Citation: 2023 LiveLaw (AP) 38

Case No.: W.P.No.24235 of 2022

Date: 18.07.2023

Counsel For Petitioner: Rama Krishna Kumar Potturi

Counsel For Respondent: Advocate General

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