Facts of the Case

M/s. Svaksha Distillery Limited, engaged in manufacturing and supply of ethanol, had deferred availing Input Tax Credit for FY 2018-19 and 2019-20 to a later period since its output tax liability in those years was negligible, ultimately claiming the ITC collectively in Form GSTR-3B for January-March of FY 2020-21. On scrutiny, the Department issued a show cause notice alleging excess ITC availment for FY 2020-21 (not appreciating it related to earlier years), which culminated in an adverse order later upheld in appeal on 14 June 2024 under Section 107. Meanwhile, sub-section (5) was inserted into Section 16 of the CGST Act with retrospective effect from 1 July 2017, granting a one-time ITC relief for FY 2017-18 to 2020-21, supported by a CBIC notification dated 8 October 2024 under Section 148 prescribing a special rectification procedure. Relying on this, the petitioner sought rectification of the June 2024 appellate order, which was rejected on 30 June 2025, prompting the present writ petition.

Issues Involved

  1. Whether the Appellate Authority was obliged to consider the petitioner's rectification application in light of the newly inserted Section 16(5) of the CGST Act and the CBIC notification dated 8 October 2024 issued under Section 148.
  2. Whether the Appellate Authority's rejection of the rectification application, on the footing that Section 16(4) was not the basis of the original order, was legally sustainable.
  3. Whether the matter should be remanded for fresh consideration, and whether recovered amounts should be eligible for refund pending such reconsideration.

Petitioner's Arguments

  • The petitioner contended that its ITC claim for FY 2018-19 and 2019-20, though claimed collectively in the FY 2020-21 return, was squarely covered by the newly inserted Section 16(5), which grants a one-time extension for availing ITC for FY 2017-18 to 2020-21 where the claim was lodged by 30 November 2021.
  • Since the petitioner had lodged its claim well within the 30 November 2021 deadline, it argued that the Appellate Authority ought to have allowed the rectification request rather than rejecting it by erroneously distancing the case from Section 16(4), the very provision on which the original appellate order had confirmed disallowance.
  • The petitioner also sought liberty to claim a refund of the substantial sum already recovered from it during the pendency of these proceedings.

Respondent's Arguments

  • Counsel for the State-respondents, on instructions, accepted that under Section 16(5) of the Act, registered persons could avail ITC for FY 2017-18 to 2019-20 if the claim had been lodged within 30 November 2021, without seriously disputing the timeline advanced by the petitioner.

Court Order / Findings

  • The Court found no dispute on the legal position that a registered person satisfying Section 16(5) and the CBIC notification would be entitled to claim ITC for any of the specified financial years, provided the claim was lodged by 30 November 2021, and noted that the October 2024 notification specifically provides a procedure for rectifying original or appellate orders passed on account of wrongful ITC availment under Section 16(4), where the person is otherwise entitled under Section 16(5)/(6).
  • The Court held that the Appellate Authority ought to have considered the petitioner's case in light of Section 16(5) and the October 2024 notification, and had erred by bypassing its own earlier reliance on Section 16(4) in the June 2024 order to now hold that the case was unrelated to Section 16(4) — an inconsistency that vitiated the rejection of the rectification application.
  • The impugned order dated 30 June 2025 rejecting the rectification application was set aside, and the matter was remanded to the Appellate Authority to reconsider the rectification application afresh in light of the notification and Section 16(5), with liberty reserved to the petitioner to pray for refund of any sum already recovered, in accordance with law.

Important Clarification

  • Section 16(5) of the CGST Act, inserted retrospectively from 1 July 2017, grants a one-time relief permitting ITC availment for FY 2017-18 to 2020-21 where the claim was lodged on or before 30 November 2021, overriding the ordinary time-bar under Section 16(4).
  • The CBIC notification dated 8 October 2024 under Section 148 provides a specific rectification mechanism for orders passed under Sections 73, 74, 107 or 108 that disallowed ITC under Section 16(4), where the assessee is otherwise eligible under Section 16(5) or 16(6).
  • An appellate authority cannot reject a rectification application by disowning its own earlier reliance on Section 16(4) simply to avoid engaging with the retrospective relief now available to the taxpayer.

Sections Involved

  • Section 16(5) of the Central Goods and Services Tax Act, 2017 – the retrospectively inserted provision granting one-time ITC relief for FY 2017-18 to 2020-21.
  • Section 148 of the CGST Act, 2017 – empowers the Government to notify special procedures, invoked for the October 2024 rectification notification.
  • Section 107 of the West Bengal GST Act/CGST Act, 2017 – governs the appellate order sought to be rectified.

Decision – In Favour of

In favour of the assessee — the rejection of rectification was set aside and the matter remanded for reconsideration in light of the retrospective ITC relief, with liberty to seek refund of amounts recovered.

Case Details

Court: High Court at Calcutta, Constitutional Writ Jurisdiction, Appellate Side
Case No.: WPA 20176 of 2025
Coram: Hon'ble Justice Om Narayan Rai
Date of Order: 17.11.2025

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