Retrospective Applicability Of Extended Time Limit For Availing ITC; Madras High Court Quashes Order Not Condoning 1 Day Delay

The Madras High Court has quashed the order, not condoning the delay of 1 day, on the ground that the extended time limit for availing input tax credit (ITC) is retrospectively applicable.

The bench of Justice Krishnan Ramasamy has observed that the GST Council, in its 53rd meeting, recommended extending the deadline for filing GSTR-3B returns for the financial years 2017-18, 2018-19, 2019-20, and 2020-21, and the said extension applies retrospectively from July 1, 2017.

The respondent department issued a notice for the financial year 2019-2020, raising the demand for tax at Rs. 3,46,866 along with interest, stating that the petitioner filed GSTR 3B for September 2020 with a one-day delay.

The petitioner/assessee contended that due to COVID-19, the delay was caused, and they filed objections to the notice on February 19, 2024. However, on March 22, 2024, the respondent issued a Form GST DRC 01A proposing to levy the very same amount of tax and directing the petitioner to pay the same with applicable interest by April 5, 2024, failing which a show cause notice will be issued under Section 73(1) of the GST Act for reversal of the ITC.

The petitioner filed a Writ Petition, declaring the provisions of Section 16(4) of the CGST/TNGST Act as unconstitutional as they are manifestly arbitrary and pending consideration. The department issued a show cause notice and a notice for a personal hearing on June 26, 2024. While doing so, the petitioner filed its detailed reply on June 29, 2024, which was served on the respondent. Without considering the reply, the department issued another notice directing the petitioner to appear for a personal hearing.

The assessee contended that the demand is raised due to a one-day delay in filing GSTR-3B for September 2020, which, according to the petitioner, was caused by the COVID-19 pandemic. Without condoning the delay, the department initiated the proceedings under Section 16(4) of the CGST/TNGST Act, 2017. Section 16(4) is only procedural, which is a directory and not mandatory. The 53rd GST Council, on June 22, 2024, recommended extending the deadline for availing ITC on any invoice or debit note under Section 16(4) of the CGST Act. This extension applies to any GSTR 3B returns filed for the financial years 2017-18, 2018-19, 2019-20, and 2020-21, with the new deadline deemed to be November 30, 2021. To facilitate this extension, the Council also recommended a retrospective amendment to Section 16(4) of the CGST Act, with effect from July 1, 2017. If the proposed amendment came into effect, the petitioner is entitled to get the statutory benefit under the amended Act, and consequently, the show cause notice issued by the respondent is liable to be set aside.

The department contended that the demand is valid and that the delay in filing GSTR-3B, even if one day, falls squarely within the provisions of Section 16(4) of the CGST/TNGST Act, 2017. The provision is mandatory, not merely procedural, and the petitioner cannot claim input tax credit beyond the statutory period.

The court, while allowing the petition, held that the department refused to condone the delay and also proposed to reverse the ITC under Section 73(1) of the GST Act, which is detrimental to the interest of the petitioner and is hence liable to be set aside.

Counsel For Appellant: A.Thiyagarajan

Counsel For Respondent: Rajendran Raghavan

Case Title: M/s. Ohm Sakthi Blue Metals Versus The Superintendent of GST & Central Excise

Citation: 2024 LiveLaw (Mad) 328

Case No.: W.P.No.19733 of 2024

Click Here To Read The Order