Kerala High Court on ITC Claim Validity When Returns Filed Before Section 16(5) Deadline

Background of the Dispute

The Kerala High Court in Rakesh Krishnan Vs Deputy State Tax Officer examined whether Input Tax Credit (ITC) could be denied to a registered assessee on the ground of delayed filing of returns, when those returns were nevertheless filed before the extended statutory cut-off date prescribed under Section 16(5) of the CGST Act.

The dispute arose from Ext.P2 Order-in-Original, issued under Section 73 of the SGST Act, through which the department rejected ITC claims relating to February 2020 and March 2020. The rejection was premised on the alleged violation of the time limit under Section 16(4) of the CGST Act. The assessee approached the High Court challenging this order.

Provisions Involved

  • Section 16(4) of the CGST Act
    This provision prescribes a time limit for availing ITC in respect of any invoice or debit note, typically linked to the due date of furnishing the return for September following the end of the financial year or the date of furnishing the relevant annual return, whichever is earlier.

  • Section 16(5) of the CGST Act
    This provision introduced a special extended time frame for furnishing returns and claiming ITC for specified tax periods, by prescribing a cut-off date of 30.11.2021 for certain returns impacted by the COVID-19 related relaxations and amendments.

  • Section 73 of the SGST Act
    This section empowers the proper officer to determine tax not paid or short paid, or input tax credit wrongly availed or utilized for reasons other than fraud, wilful misstatement, or suppression of facts, and to pass an order-in-original pursuant to such proceedings.

Facts Considered by the Court

The assessee in this case was a registered person under the CGST Act and SGST Act. The controversy revolved around ITC claims for the months of:

  • February 2020, and
  • March 2020.

Through Ext.P2 Order-in-Original, the department denied ITC for these months solely because:

  • According to the officer, the assessee did not file the relevant returns within the time limit contemplated under Section 16(4) of the CGST Act.

However, the assessee contended that:

  • Though the returns were not filed within the original time contemplated under Section 16(4),
  • They were filed before the extended deadline stipulated in Section 16(5) of the CGST Act i.e., 30.11.2021.

The assessee therefore sought the benefit of Section 16(5) and argued that ITC could not be refused in view of the extended statutory cut-off date.

Assessee’s Main Contention

The core argument put forward on behalf of the assessee was:

  1. **Entitlement under Section 16(5)😗*
    Since Section 16(5) of the CGST Act expressly allowed returns to be furnished up to 30.11.2021 for the purpose of availing ITC for the relevant periods, any return filed prior to this date should be treated as being within the permissible period.