Kerala High Court Rules Section 16(5) Prevails Over Section 16(4) Time Restriction on ITC Claims

Case Overview

Chellakudam Varghese Devassykutty Vs State Tax Officer (Kerala High Court)

In a significant ruling on the interplay between Section 16(4) and Section 16(5) of the CGST Act, the Kerala High Court examined whether an assessee registered under the CGST/KSGST Act could be denied Input Tax Credit solely on the basis of a delayed return filing when a subsequently introduced provision specifically addressed such situations with an overriding clause.

Background and Facts of the Case

The assessee, a registered person under the CGST/KSGST Act, approached the Kerala High Court challenging an order issued under Section 73(9) of the CGST Act. The grievance arose from the denial of Input Tax Credit (ITC) pertaining to the month of March 2020.

Reason for ITC Denial

The tax authority disallowed the ITC claim on the ground that the assessee had failed to furnish the monthly returns for the concerned period within the statutory time limit prescribed under Section 16(4) of the CGST Act. The denial was formalized through the impugned order passed under Section 73(9).

Assessee's Position

The assessee mounted a challenge primarily relying on Section 16(5) of the CGST Act — a provision that was introduced subsequent to the original enactment. The assessee's argument rested on the following basis:

  • Section 16(5) specifically provides that where an assessee furnishes returns on or before 30.11.2021, such assessee shall be entitled to claim Input Tax Credit.
  • The returns in question had been filed by the assessee on 31.12.2020, which falls well before the cut-off date of 30.11.2021 prescribed under Section 16(5).
  • Since Section 16(5) contains a non-obstante clause that overrides Section 16(4), the time limit under Section 16(4) is rendered inapplicable in cases where the assessee satisfies the conditions under Section 16(5).

Understanding Section 16(4)