Facts of the Case

The petitioner, Parameswaran E.C., proprietor of M/s. Lakshmi Marketing, Palakkad, Kerala, filed a writ petition before the High Court of Kerala at Ernakulam seeking to quash Exhibits P-3 and P-5 orders passed by the Assistant Commissioner, State GST Department, Ottapalam. Exhibit P-3, dated 02.12.2022, finalised the petitioner's assessment for the financial year 2017-18, determining total tax liability of ₹2,22,38,370 under CGST, SGST and Compensation Cess, together with interest and penalty. The demand arose because the petitioner had not availed the entire eligible Input Tax Credit through his returns before the last date for availment under Section 16(4) of the CGST Act, 2017 read with Section 20 of the IGST Act, 2017 and Section 11 of the GST (Compensation to States) Act, 2017 — the deadline for FY 2017-18 being 20.04.2019, later extended to 30.09.2019. The order held the petitioner eligible only for a credit of ₹83,77,861.17 under Compensation Cess, with the rest of the unutilised ITC allowed to lapse. A subsequent rectification application (Exhibit P-4) was rejected by Exhibit P-5 dated 24.05.2023.

Issues Involved

  1. Whether the denial of unutilised Input Tax Credit for FY 2017-18 under Section 16(4) of the CGST Act, as upheld in Exhibits P-3 and P-5, was liable to be interfered with in writ jurisdiction.
  2. Whether the writ petition should be entertained given the availability of a statutory appellate remedy under Section 107 of the CGST/SGST Act.
  3. Whether the extended limitation for filing appeals under Notification No.53/2023-Central Tax applied to the petitioner's case.

Petitioner's Arguments

  • The assessment order finalised an unusually large liability of ₹2,22,38,370 by denying ITC that the petitioner was otherwise entitled to, merely on the ground of delayed availment for FY 2017-18.
  • The subsequent rectification application, which sought correction of this denial, was rejected without adequately addressing the petitioner's grievance.
  • Both the original assessment order (Exhibit P-3) and the rectification-rejection order (Exhibit P-5) were therefore liable to be quashed.

Respondent's Arguments

  • The last date for availing ITC for FY 2017-18 under Section 16(4) of the CGST Act, read with Section 20 of the IGST Act and Section 11 of the Compensation to States Act, was 20.04.2019, later extended only to 30.09.2019.
  • Since the petitioner had not availed the ITC within that extended timeline, only the Compensation Cess credit of ₹83,77,861.17 could be allowed, and the balance unutilised credit was correctly held to have lapsed.
  • An efficacious statutory remedy of appeal under Section 107 of the CGST/SGST Act was available against both impugned orders, and the limitation for filing such an appeal for FY 2017-18 had in any event been extended up to 31.01.2024 by Notification No.53/2023-Central Tax dated 02.11.2023.

Court Order/Findings

  • The Court noted that it was not in dispute that a statutory remedy of appeal under Section 107 of the CGST/SGST Act was available against the orders impugned in the writ petition.
  • Given that the limitation for filing an appeal in respect of financial years 2017-18 and 2018-19 had been extended up to 31.01.2024 by Notification No.53/2023-Central Tax dated 02.11.2023, the Court declined to examine the ITC-denial issue on merits and instead relegated the petitioner to the statutory appellate remedy.
  • The writ petition was disposed of with liberty to the petitioner to approach the Appellate Authority within one month, which was directed to consider the appeal expeditiously in accordance with law.

Important Clarification

  • Notification No.53/2023-Central Tax dated 02.11.2023 extends the limitation for filing appeals against orders concerning FY 2017-18 and FY 2018-19 up to 31.01.2024, and writ courts are using this extended window to decline examining ITC-denial disputes on merits, relegating assessees to the appellate forum instead.
  • Denial of ITC under Section 16(4) of the CGST Act for delayed availment continues to generate significant litigation, but High Courts are increasingly channelling such disputes into the statutory appeal mechanism rather than adjudicating them in writ jurisdiction.
  • Assessees facing similar ITC-denial orders for FY 2017-18 or FY 2018-19 should check whether they can still use the Notification No.53/2023 window before it lapses, rather than assuming a writ petition is the only recourse.

Sections Involved

  • Section 16(4), CGST Act, 2017 — prescribes the time limit within which Input Tax Credit for a financial year must be availed.
  • Section 20, IGST Act, 2017 — applies relevant CGST Act provisions, including Section 16(4), to IGST credit.
  • Section 11, GST (Compensation to States) Act, 2017 — applies corresponding CGST Act provisions to Compensation Cess credit.
  • Section 107, CGST Act, 2017 — provides the statutory appeal remedy against orders of the proper officer.
  • Notification No.53/2023-Central Tax dated 02.11.2023 — extends the appeal limitation for orders concerning FY 2017-18 and 2018-19 up to 31.01.2024.

Decision – In Favour of

The petition was disposed of with directions, granting procedural relief to the Assessee in the form of a fresh, time-bound liberty to appeal, without the Court expressing any view on the correctness of the ITC denial itself; the substantive outcome now depends on the Appellate Authority's decision.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Kerala at Ernakulam
  • Case No.: WP(C) No. 24767 of 2023
  • CNR: Not available on record
  • Coram: Justice Dinesh Kumar Singh
  • Decision Date: 10 November 2023
  • Disposal Nature: Disposed of with liberty to file statutory GST appeal under Section 107

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