GST: HC Allows Claim of ITC Barred by Section 16(4) but Within Prescribed Period in Section 16(5)

The present writ petition (W.P.No.22639 of 2025), dated 09.07.2025, is being filed by the petitioner named M/s. Rajkumar Josphine under Article 226 of the Constitution of India. The Superintendent, Ministry of Finance/Department of Revenue, is the respondent. Here in this case, the petitioner is challenging an order (Ref. No. ZD330225286218D) dated 27.02.2025, passed by the respondent.

Background of the Case

M/s. Rajkumar Josphine, Proprietor of Rakshana Cooling Tower (a registered taxpayer under the GST or CGST Act), has filed this writ petition in the Madras High Court, challenging an order passed by the GST Department (specifically, the Superintendent, Ministry of Finance/Department of Revenue), dated February 27, 2025. The order rejected the taxpayer’s claim for Input Tax Credit (ITC) and asked them to pay tax, penalty, and interest. Hence, the petitioner approached the High Court to quash the order.

Respondent’s Argument:

• The department said that the petitioner filed the GSTR-3B returns (used to claim ITC) after the legal due date prescribed under Section 16(4) of the CGST Act. According to this section, ITC cannot be claimed after November 30 of the next financial year or the date of filing the annual return, whichever is earlier.
• Hence, according to the department, the claim was made too late, and that is why it was rejected and asked for tax, interest, and penalty.

Petitioner’s Argument:

• The learned counsel for the petitioner argued that the delay in claiming ITC occurred due to difficult circumstances such as financial problems, the COVID-19 lockdown, or other unavoidable reasons.
• Further pointed to a similar case earlier handled by the High Court (W.P.No.25081 of 2023 & others), where the situation was the same, i.e., late filing of ITC.

Important Legal Development That Helped Petitioner

During the 53rd GST Council Meeting held on June 22, 2024, the Council recommended relaxing the time limit for claiming ITC for earlier years. As a result:

• A change was made in the CGST Act, inserting Section 16(5).
• According to this, ITC can be claimed up to November 30, 2021, for the financial years 2017-18 to 2020-21, even if the previous deadline under Section 16(4) had passed.
• This amendment applies to past cases as well.
• The change became official when the Finance Act (No. 2 of 2024) was passed with Presidential assent on August 16, 2024.
• A CBIC Circular (No. 237/31/2024-GST) and a Notification (No. 17/2024) were also issued to clarify this.
• Therefore, due to this new amendment, numerous of the previous ITC denial orders became invalid.

High Court’s Decision:

Since this current case is similar to the previous cases and the new legal amendments support the taxpayer, both the petitioner’s lawyer and the GST department’s lawyer agreed that the previous judgment applies here also. Therefore, the Hon’ble Justice Krishnan Ramasamy of the Madras High Court releases the following orders:

• The impugned dated 27.02.2025 is quashed because the ITC claim falls within the relaxed deadline as per Section 16(5) of the CGST Act, 2017.
• The GST department (responded) cannot take any further actions against the petitioner on the issue of the late ITC claim.
• If the department had frozen the bank account of the petitioner in furtherance of the impugned order, it must immediately defrost it.
• If the department had started any recovery process (like taking money or issuing demand notices), those must be stopped immediately once the petitioner shows them this Court’s order.
• If any tax/penalty amount was collected from the petitioner in the past on the basis of the impugned assessment order, that amount must either be refunded or allowed to be adjusted against future tax dues.
• However, if the department wants to take action for other issues such as wrong ITC claims, excess or fake ITC, or any other irregularity unrelated to the time limit,
• Then they are allowed to proceed with action under the law.