ITC Denial Under Section 16(4) Overturned by Kerala High Court — Section 16(5) Saves the Day for Late Return Filers

Case Overview: Med Serve Vs State of Kerala (Kerala High Court)

In a significant ruling, the Kerala High Court addressed a critical dispute involving the denial of Input Tax Credit (ITC) to a registered assessee under the CGST/KSGST Act. The case revolved around an order issued under Section 73 of the CGST Act, which disallowed ITC claims on two distinct grounds. The Court's intervention provides important clarity on the interplay between Section 16(4) and Section 16(5) of the CGST Act, particularly for assessees who filed their returns belatedly but within the extended statutory window.

Background of the Dispute

The assessee in this matter was a registered entity under the provisions of the CGST/KSGST Act. It approached the Kerala High Court by way of a writ petition, challenging an order (referred to as Ext.P1) passed under Section 73 of the CGST Act. The impugned order denied the assessee's ITC claims on the following two grounds:

Ground 1 — Lack of Supporting Documentation Under Section 16(2)(c)

The adjudicating authority concluded that certain ITC claims made by the assessee lacked the backing of appropriate documents. Consequently, those credits were held to be inadmissible in view of the conditions stipulated under Section 16(2)(c) of the CGST Act.

Ground 2 — Late Filing of Monthly Returns Under Section 16(4)

Additionally, the authority found that the monthly returns for December 2018, January 2019, February 2019, and March 2019 had been submitted after the deadline prescribed under Section 16(4) of the CGST Act, thereby rendering the ITC claims for those periods ineligible.

What the Assessee Argued Before the Court

When the matter came up before the Kerala High Court, the assessee made a strategic and clearly defined submission. It expressly stated through its counsel that it was not pressing the challenge concerning denial of ITC under Section 16(2)(c). As a result, that aspect of the dispute was set aside by the petitioner itself and did not form part of the Court's examination.

The assessee restricted its challenge solely to the denial of ITC on account of the alleged delay in filing monthly returns under Section 16(4).