2025 (7) TMI 137 - HC - GST

Rejection of partial refund - entitlemnet to the benefit of delayed filing of return on account of its claim for input tax credit for the period upto 2021 provided such return has been filed on or before 30th November 2021 consequent upon insertion of Section 16(5) in the WBGST/CGST Act 2017 - HELD THAT - The scope of application of Section 16(4) of the said Act has since stood altered to a great extent especially having regard to Section 16(5) being inserted retrospectively with effect from 1st July 2017. Consequent upon the insertion of Section 16(5) in the said Act the time for filing of return under Section 39 of the said Act for the tax period 2017-18 2018-19 2019-20 and 2020-21 has been extended till 30th November 2021. The orders issued both by the proper officer and appellate authority cannot be sustained and the matter is remanded back to the proper officer for re-adjudication of the issue having regard to the insertion of Section 16(5) of the said Act in the statute book with retrospective effect from 1st July 2017. The orders passed by the appellate authority on 21st February 2024 and the proper officer on 14th April 2023 are set aside - Petition disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court include:

• Whether the petitioner is entitled to claim input tax credit (ITC) for the tax period July 2019 to September 2019, particularly in relation to supplies pertaining to the financial year 2017-18, despite the initial rejection of refund claims.
• The applicability and interpretation of Section 16(4) and the retrospectively inserted Section 16(5) of the WBGST/CGST Act, 2017, specifically concerning the time limit for claiming ITC.
• Whether the appellate authority and proper officer erred in disallowing the refund claim by relying on the proviso to Section 16(4) without considering the retrospective insertion of Section 16(5).
• The procedural correctness and legal validity of the orders passed by the appellate authority and the proper officer rejecting the refund claim.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Input Tax Credit for the Tax Period July 2019 to September 2019 for Financial Year 2017-18 Supplies

Relevant Legal Framework and Precedents: The key statutory provisions at issue are Sections 16(4) and 16(5) of the WBGST/CGST Act, 2017. Section 16(4) originally prescribed a deadline for availing ITC, limiting it to the earlier of the 30th November following the end of the financial year or the filing of the relevant annual return. The proviso to Section 16(4) provided a limited extension for certain invoices for the financial year 2017-18. Subsequently, Section 16(5) was inserted retrospectively effective from 1st July 2017, extending the time limit for filing returns under Section 39 and thereby extending the period within which ITC could be claimed for financial years 2017-18 through 2020-21 until 30th November 2021.

Court's Interpretation and Reasoning: The Court recognized that the appellate authority and the proper officer had proceeded on the basis of Section 16(4) and its proviso, which limited the ITC claim period. However, the Court emphasized that the insertion of Section 16(5) had materially altered the legal landscape by providing a retrospective extension for filing returns and claiming ITC up to 30th November 2021 for the relevant financial years.

Key Evidence and Findings: The petitioner had filed returns claiming ITC for inward supplies in September 2019 relating to the financial year 2017-18. The refund claim was partially rejected on the ground that the claim was barred by the time limits under Section 16(4). However, the petitioner relied on the extended deadline under Section 16(5).

Application of Law to Facts: The Court found that the proper officer and appellate authority failed to consider the retrospective effect of Section 16(5), which effectively extended the time limit for claiming ITC beyond the deadline prescribed in Section 16(4). Since the petitioner had filed the return within the extended timeline under Section 16(5), the rejection of the refund claim was not legally sustainable.

Treatment of Competing Arguments: The State authorities relied on the proviso to Section 16(4) to justify the partial disallowance of the refund claim. The petitioner argued for the benefit of Section 16(5), which was inserted later but with retrospective effect. The Court gave precedence to the later provision, holding that the retrospective insertion of Section 16(5) overrides the earlier limitation under Section 16(4).

Conclusions: The Court concluded that the petitioner is entitled to the benefit of the extended time limit under Section 16(5) for claiming ITC, and the orders disallowing the refund claim on the basis of Section 16(4) are unsustainable.

Issue 2: Validity and Correctness of the Orders Passed by the Appellate Authority and Proper Officer

Relevant Legal Framework: The orders under challenge were issued pursuant to the GST refund claim process, with the appellate authority reviewing the decision of the proper officer. The statutory provisions guiding the refund claim and appeal process include the WBGST/CGST Act, 2017 and related procedural rules.

Court's Interpretation and Reasoning: The Court noted that both the proper officer and appellate authority had failed to apply the correct legal position arising from the retrospective insertion of Section 16(5). Their reliance solely on Section 16(4) and its proviso was erroneous.

Key Evidence and Findings: The orders dated 14th April 2023 (proper officer) and 21st February 2024 (appellate authority) disallowed the refund claim partially. The Court found that these orders did not take into account the extended time limit for filing returns and claiming ITC under Section 16(5).

Application of Law to Facts: Given the retrospective effect of Section 16(5), the Court held that the orders were legally flawed and could not be sustained. The matter required reconsideration in light of the correct legal framework.

Treatment of Competing Arguments: The State contended that the orders were valid under the original Section 16(4) framework. The petitioner challenged this, urging the Court to apply the retrospective Section 16(5). The Court sided with the petitioner.

Conclusions: The Court set aside the impugned orders and remanded the matter to the proper officer for re-adjudication in accordance with law, specifically considering Section 16(5).

3. SIGNIFICANT HOLDINGS

The Court held:

"The aforesaid orders issued both by the proper officer and appellate authority cannot be sustained and the matter is remanded back to the proper officer for re-adjudication of the issue having regard to the insertion of Section 16(5) of the said Act in the statute book with retrospective effect from 1st July, 2017."

Core principles established include:

• The retrospective insertion of Section 16(5) of the WBGST/CGST Act, 2017, extends the time limit for filing returns and claiming input tax credit for financial years 2017-18 through 2020-21 until 30th November 2021.
• The proviso to Section 16(4) cannot be applied to disallow ITC claims where Section 16(5) applies retrospectively to extend the claim period.
• Orders rejecting refund claims without considering the retrospective effect of Section 16(5) are legally unsustainable and liable to be set aside.
• Matters involving statutory interpretation of retrospective amendments must be adjudicated afresh in light of the correct