Facts of the Case

The petitioner challenged an order dated 29th April, 2024 for FY 2018-19, by which demands were raised after denying input tax credit claimed by the petitioner under Section 16(4) of the CGST Act, aggregating Rs.55,19,096/- (tax of Rs.27,14,711/-, interest of Rs.25,30,259/- and penalty of Rs.2,74,126/-), along with a consequential order in Form GST SPL-07 dated 29th July, 2025. The petitioner had, on 13th August, 2025, filed a rectification application on the GST Portal seeking the benefit of Notification No.22/2024, issued pursuant to the newly inserted Section 16(5) of the CGST Act, which extends the time limit for availing ITC for specified financial years.

Issues Involved

  1. Whether the petitioner's rectification application, invoking the retrospectively inserted Section 16(5) of the CGST Act (as operationalised through Notification No.22/2024) to extend the deadline for availing input tax credit, ought to be considered on merits by the adjudicating authority rather than the original demand being contested only through the writ.
  2. What procedural safeguards should attach to such consideration.

Petitioner's Arguments

  • The impugned order and consequential proceedings, denying ITC of Rs.55,19,096/- for FY 2018-19, be quashed; alternatively, the Department be directed to consider the rectification application filed on 13th August, 2025 seeking the benefit of Section 16(5) read with Notification 22/2024.

Respondent's Arguments

  • Counsel for the Department, on instructions received after the earlier hearing, did not resist consideration of the rectification application through the appropriate statutory channel.

Court Order / Findings

  • Since one of the prayers concerned consideration of the rectification application dated 13th August, 2025, the Court directed the Department to consider that application within a period of two months and to pass a reasoned order in accordance with law in terms of Section 161 of the CGST Act.
  • A personal hearing was directed to be given to the petitioner before the reasoned order is passed.
  • The petition was disposed of with all rights and remedies of the parties left open.

Important Clarification

  • Taxpayers denied input tax credit under Section 16(4) for financial years 2017-18 to 2020-21 are entitled to have a rectification application invoking the retrospectively inserted Section 16(5) — as implemented through Notification No.22/2024-Central Tax — considered on merits by the adjudicating authority under Section 161, with a mandatory personal hearing and a reasoned order, rather than being confined solely to challenging the original demand in writ jurisdiction.
  • Courts are inclined to route such disputes back to the rectification mechanism rather than deciding the ITC eligibility themselves in the first instance.

Sections Involved

  • Section 16(4), CGST Act, 2017 — time limit for availing input tax credit.
  • Section 16(5), CGST Act, 2017 — extended deadline (up to 30.11.2021) for availing ITC for FY 2017-18 to 2020-21, inserted retrospectively by the Finance (No.2) Act, 2024.
  • Section 161, CGST Act, 2017 — rectification of errors apparent on the face of the record.
  • Notification No.22/2024-Central Tax — operationalises the special procedure for rectification of orders denying ITC under Section 16(4) where Section 16(5)/16(6) now applies.

Decision – In Favour of

Disposed of with directions — a favourable procedural outcome for the Assessee, whose rectification application must now be decided on merits with a personal hearing.

Case Details

High Court of Delhi at New Delhi; W.P.(C) 15001/2025 & CM APPL. 61615/2025; Coram: Hon'ble Justice Prathiba M. Singh and Hon'ble Justice Renu Bhatnagar; Date of Order: 02.12.2025.

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