The Hon’ble Madras High Court in R.K. Enterprises v. Union of India & Ors. [W.P. Nos. 3457, 3465 & 34753 of 2022 dated July 2, 2025] quashed show cause notices and orders disallowing Input Tax Credit for FY 2017-18 to 2020-21 based on Section 16(5) CGST Act insertion, following withdrawal of constitutional challenges.
Facts:
A batch of 36 writ petitions were filed challenging, the Constitutional validity of Sections 16(2)(c) and 16(4) of the CGST Act, 2017, and Rule 61(5) of the CGST Rules, 2017, on grounds that they restrict or disallow Input Tax Credit (ITC) and the issuance of show cause notices and assessment orders disallowing ITC under these provisions.
The assesses contended they had claimed ITC for the relevant financial years (2017-18 to 2020-21) before the deadline of November 30, 2021, allowed under the newly inserted Section 16(5) by the Finance Act, 2024.
Issue:
Whether the disallowance of ITC under Sections 16(2)(c), 16(4) and Rule 61(5) is sustainable after insertion of Section 16(5)?
Held:
The Hon’ble Madras High Court in W.P. Nos. 3457, 3465 & 34753 of 2022 held as under:
- Allowed the writ petitions challenging show cause notices and assessment orders disallowing ITC for FY 2017-18 to 2020-21, quashing those orders in light of Section 16(5), which permits claiming ITC in any return filed up to November 30, 2021.
- Dismissed the constitutional challenges as withdrawn by petitioners.
- Noted that, no refunds will be granted if any demand portion was already remitted, per Circular No.237/31/2024-GST dated October 15, 2024.
Our Comments:
This judgment clarifies the impact of Finance Act, 2024’s amendment introducing Section 16(5) CGST Act, which provides an extended window for assessees to claim ITC for earlier financial years beyond the normal return filing timelines. It underscores that show cause notices and orders disallowing ITC for claims made before the statutory extended date cannot be sustained.
The dismissal of constitutional challenges on withdrawal indicates judicial pragmatism in resolving litigation in light of legislative amendments. Taxpayers who timely filed ITC claims by November 30, 2021, stand protected, which promotes compliance and reduces litigation over legacy credit disputes.
Relevant Provisions:
Section 16(2)(c), CGST Act, 2017
Section 16. Eligibility and conditions for taking input tax credit.-
“(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,-
(c) subject to the provisions of Section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply;…”
Section 16(4) of CGST Act, 2017
“(4) A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the thirtieth day of November following the end of financial year to which such invoice or debit note pertains or furnishing of the relevant annual return, whichever is earlier.
Provided that the registered person shall be entitled to take input tax credit after the due date of furnishing of the return under section 39 for the month of September, 2018 till the due date of furnishing of the return under the said section for the month of March, 2019 in respect of any invoice or invoice relating to such debit note for supply of goods or services or both made during the financial year 2017-18, the details of which have been uploaded by the supplier under sub-section (1) of section 37 till the due date for furnishing the details under sub-section (1) of said section for the month of March, 2019.”
Section 16(5) of CGST Act, 2017
“(5) Notwithstanding anything contained in sub-section (4), in respect of an invoice or debit note for supply of goods or services or both pertaining to the Financial Years 2017-18, 2018-19, 2019-20 and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed up to the thirtieth day of November, 2021.”
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