Kerala High Court Quashes ITC Denial Order — Section 16(5) Protects Assessees Who Filed Returns Before 30.11.2021 Cut-Off
Case Overview: Core Constructions Vs State Tax Officer (Kerala High Court)
In a significant ruling that reinforces the protective scope of Section 16(5) of the CGST Act, the Kerala High Court set aside a demand order issued under Section 73 of the CGST/SGST Act, 2017, which had disallowed Input Tax Credit (ITC) for multiple tax periods spanning November 2018 through March 2019. The core issue before the Court was whether an assessee who filed returns beyond the deadline under Section 16(4) but within the statutory cut-off date of 30.11.2021 under Section 16(5) could legitimately claim ITC for those periods.
The Court answered this question in the affirmative, directing the State Tax Officer to reconsider the matter and extend the benefit of ITC under Section 16(5), subject to the assessee otherwise meeting the conditions for eligibility.
Background and Facts of the Case
The assessee, Core Constructions, is a registered person under the provisions of the CGST/KSGST Act. The dispute arose from an assessment order — referred to as Ext.P6 in the proceedings — passed by the State Tax Officer under Section 73 of the CGST/SGST Act, 2017.
Through Ext.P6, the tax authority denied the ITC claimed by the assessee for the following tax periods:
- November 2018
- December 2018
- January 2019 to March 2019
Reason for Denial by the Tax Authority
The department's basis for rejecting the ITC was straightforward — the assessee had not furnished the relevant GST returns within the time limits prescribed under Section 16(4) of the CGST Act. Under this provision, an assessee is required to claim ITC no later than the earlier of:
- The due date for furnishing the return under
Section 39for the month of September of the following financial year, or - The date of furnishing the annual return.
Since the returns for the disputed periods were filed beyond this statutory window, the department held that ITC eligibility was extinguished and accordingly raised a demand through Ext.P6.
The Assessee's Contention: Section 16(5) as a Saving Provision
The assessee challenged Ext.P6 by filing a writ petition before the Kerala High Court. The central argument advanced was that Section 16(5) of the CGST Act — a subsequently inserted provision — operates as a saving clause that overrides the time restriction under Section 16(4) in specific circumstances.